1.An accountant is cheaper than a therapist
Life is not simple which of course means that finances are not simple. When it comes to taxes, there are so many things to remember. You have properties to think about as well as dependents and if you have more than one income that has to be accounted for too. Having your own business can be complicated because there is a 1099 form for each of them. And what about education? So many adults continue education and have loans and grants, all of which have their own forms.
Regardless of how organised you are, there are so many forms and instructions and rules when it comes to taxes, that anyone can feel like they are losing control. When you add up the time it takes to organise and prepare all the documents as well as even attempt to understand what you are doing, it is more beneficial to have an accountant do it. Their fees are reasonable, and as a long-term client, they tend to discount their services. The alternative is to prepare them yourselves, which can cause great distress, and it is not guaranteed that a therapist bill will be cheaper when they are called to help your situation.
2. Accountants can save time and money
Given that I only have to think about taxes once a year, accountants live and breathe taxes so are better at them. Accountants have the training and expertise to process the taxes of any person with much greater speed and precision than the taxpayer. Staying up to date on tax codes and all the possible deductions and forms is the very reason they are to be trusted over trusting yourself.
My own father-in-law who is a rocket scientist even outsources his tax preparation to professionals because it frees up his time and money to do things he enjoys. So because accountants stay on top of their game, tax preparation is not rocket science. It is much more simple than that, so long as you hire a professional.
3. They know about legal loopholes
The loophole I get to enjoy each year is a cheap trip to London. As a guest lecturer at a university there my accountant helps me to schedule the trip so that it can be written off as a legitimate business expense. The university pays me a small amount per class I teach, but it only covers the travel expenses. Although it would be better for the university to pay for the travel and the reimbursement comes later in the year through my tax return, it is still a positive knowing that I get a cheap trip to London with my accountant’s help.
4. They know what is not deductible
With the recent surge in people working from home, the IRS has started to crack down on those that mix their business and personal spaces. Screenwriters who get to type from the comfort of their living room and software designers developing apps in their garages now have to be careful since the IRS is aware of this once popular loophole.
It seems that claiming a home office deduction raises red flags for potential audits, and if this occurs, the IRS will expect proof that your home office has supporting evidence of business. If personal effects such as movie downloads or your child’s English paper are in your office or on your office computer, then they will label the office and equipment as multi-use which means they cannot be written off as business expenses.
Accountants will usually advise that since the threshold is $1500 for home office deductions, then it makes more sense to write off all the items in the home office as business expenses instead of deducting for floor space alone. Computers, printers, staplers and tape dispensers are all included.
The problem with home office deductions occurs when trying to sell your home. Even the most equipped home office is considered a business by the IRS, so when it comes time to sell the home, you may be subject to Section 1250 costs. Your capital gains will be negatively impacted by the depreciation of the home office. For an explanation of the 1250 costs, ask your accountant, because the lay person usually doesn’t even know these exist.
5. They know what is deductible
So long as items in the house are correctly labelled, and there is supporting evidence that they are business tools, the IRS will consider it as a work-related tax deduction. The downloaded games on the computer are work related if you happen to be a software designer or game engineer. That also means that the game console and controller are also work-related, which means, they are deductible.
There will be deductions you are not even aware of, but your accountant can go through everything and can identify deductions. The benefit of them doing your tax preparation is that they know the way to identify and label the tax-deductible items, whereas you think you are just looking at a room full of household items.
6. A good Accountant is like a truffle pig, but for money
An accountant is trained to find you money, not only in the form of deductions but other hidden opportunities. One such example is the selling of your home. We had asked our accountant to look through the finances of selling our previous house, and she was able to find $8000 in deductions and another missed opportunity. It was discovered that we might have been owed payment from a petroleum company because of mineral rights from the property.
Los Angeles sits on top of the country’s third largest oil field, which is something most locals are not even aware of. This means that oil companies and natural gas companies are drilling and working on the land which happens to be below many residential areas. Houses in these areas may have mineral rights that they are not aware of, $3000 as an example.
So when you look at the numbers, paying $550 for tax preparation is not bad when you get an $11000 gift in return.
7. They help you plan for your future
With most people looking towards their retirement, saving for this is a very important part of financial planning. If you plan to retire at a certain age and have a savings plan in place, such as I did, accountants can offer suggestions such as health savings accounts. These offer triple tax advantages to help in reaching your final goal along with retirement funds and IRAs.
8. They can pull you out of the fire
Every tax paying citizen dreads an audit, and the longer you do your taxes, the more likely you think your chances of an audit are going to increase. Knowing you have a good accountant is a safety blanket for the anxiety-causing audits. They will work directly with the IRS for you and give you peace of mind since you know they are professionals at this and know how to handle the IRS.
Even when you are a little behind in your taxes, even more than a little, an accountant can work through all the papers and get you back on track. Even though there will be fees to pay, you will be back on the IRS’s good list which is more than worth it. Having an accountant as your ally during tax time saves money, time and removes stress.
9. Never miss a deadline
No matter how bad you are at time keeping and organisation, your accountant will keep things moving to a schedule for you. Even when you do not hold up your end of the deal and paperwork is going to be late, they will get an extension for you, so you will not have to worry about any late fee penalties.
10. Stop giving the government an interest-free loan
Most people think the best part of taxes is getting a huge refund each year. However having an accountant around will help you redesign your finances so that you no longer overpay all year, and instead keep the money in your account earning interest. By looking through the numbers, they can find a happy medium between paying and getting a refund so that you can keep your money.
11. They are trusted, advisers
Although your accountant ends up being someone you trust, they are not part of your circle. This being said, they can look objectively at your details, housing and financial plans and offer suggestions that benefit you based only on numbers. They will give you advice on moves such as refinancing and aggressively saving for retirement strictly based on the numbers and no emotions or personal preferences.
12. They can teach best practices
Accountants will be honest with you whether they are delivering good or bad news, so you can always be sure that at the very least you are getting real advice and direction. Knowledge is one the best assets they can provide. They will steer you in the right direction for the next year and help with bookkeeping and organisation of your finances. Since most people truly value their money, accountants are good to have around as they provide the best guidance in handling financial situations and moving forward. To avoid any pitfalls from the previous year, listen to your accountant’s advice for the year to come.
13. They prevent you from accidental criminal behaviour
There are many sources of income that people tend to forget about; the eBay and Craigslist sales you made that year or the money that sits in your PayPal account. These all count towards income and if forgotten can be deemed a crime. The IRS will consider them as miniature businesses, and your accountant can point these out to you when you completely overlooked them.
14. Not everyone, every year, needs an accountant
When life is at its simplest such as having one job, and little to no assets completing a 1040 EZ is most likely the better option for you. It is cheaper to file this way, and there are not likely to be hidden deductions and a need for a fine tooth tax comb. The more assets you acquire and the more income that comes in, then it is better to get the professional assistance and guidance. Plus, some people actually like going through their books and reconciling their numbers. To each his own in reality, however, the benefits of an accountant are worth noting for those times when the complication just seems too much.