The income tax system of the United States of America is progressive in nature. It is designed in a way that citizens with higher income have to pay more tax and vice-versa. Moreover, the country follows a marginal tax structure wherein not all citizens’ income is taxed at the same percentage. When individuals’ income reaches a specified limit set in the bracket, the government levies tax only on their extra income in the bracket. To reduce their taxable income, taxpayers often use tax credits, exclusions, and deductions.
The federal tax system may seem to be cumbersome for many citizens. This is why this tax prep service suggests you should hire professionals to do the required calculations and deal with tax filing every year. Tax professionals have a good understanding of income tax rules, and they save you from the complex processes of filing returns.
Everyone’s tax return is different, which is why it is essential to know the advantages and disadvantages of hiring a tax professional before making a final decision.
Advantages Of Hiring A Tax Professional
Tax Filing Can Be Time-Consuming
According to the IRS, an average person takes approximately 24.2 hours to complete their tax returns. For individuals who wish to file Schedule E for rented holdings or Schedule C for a business, it usually takes 52.2 hours. To save time, citizens generally hire a tax professional to efficiently and quickly file their tax returns.
Tax Filing Is A Cumbersome Process
The federal tax rules are adjusted every year, making it difficult for an average taxpayer to remember all the amendments and apply them while filing a return. It is advised to hire a tax professional if you are claiming any of the below-mentioned transactions. These transactions make your tax return complex.
The claims may include transactions, such as capital assets, trust funds, real estate, huge investments, gains, or losses.
Assistance In Audit
In the unfortunate event of being audited, it is highly advised to hire a tax professional (tax attorney, CPA, or an enrolled agent) who can organize all the necessary paperwork and represent your case in front of the IRS. Hiring an experienced tax professional is an excellent idea because they streamline the auditing process effectively and efficiently.
Eliminate Any Chance Of Mistakes
Even if you are confident about your ability to file tax returns correctly, there is the slightest chance that you can make a mistake. To avoid any errors, hire a tax professional. They use commercial software and help to eliminate the stress of filing returns as per the guidelines.
Disadvantages Of Hiring A Tax Professional
Cost Of Hiring A Tax Professional
The fees of a tax professional vary based on the complexity of your income tax return. An average tax professional charges around $100 to file a return. The costs increase if you have more items in your returns to claim. A professional can even charge up to $300 if you wish to file Schedule A, Schedule D, and Form 1040 for capital gains and losses.
The cost of hiring a professional may further vary based on the state you are residing in and the complexity of the paperwork needed in your tax return.
Professional Software For Tax Preparation
If your tax return doesn’t contain several itemized exclusions and uncommon transactions, you can use certified programming software to file your returns. Tax filing software is not costly, and it makes the process of filing a return much easier. Some of the most popular tax preparation software include H&R Block, TaxAct, and TurboTax.
Aspirants have to appear in two competency exams under IRS to become a licensed CPA or tax attorney. They are also required to have mandatory levels of education and pass other specialization exams. So while choosing a tax professional for yourself, it is vital to check if they are registered under IRS and have the license and experience to file complex returns, if required.
Hiring a tax professional isn’t as convenient and cost-effective as it may sound. But if your returns are complex, they not only lend an expert hand but also save you from audits and cumbersome tax filing processes. So before hiring a professional, be sure to refer to all the points mentioned above.