Should I Have a Tax Professional Review My Tax Return?
In a little under a month, most of us will have filed our 2021 state and federal income tax returns. Perhaps you are the kind of person who likes to prepare and file your taxes to get it over with (and maybe get a refund sooner). Or maybe, like many people, you try to put tax preparation off as long as possible. Either way, there is an undeniable relief when you click that “file now” button on your computer or hear the mailbox clink shut on the envelope containing your signed return. You are done thinking about taxes for another year. But…should you be? Should you have a tax professional review your income tax return?
With the advent of easy-to-use tax preparation software, and recent tax law changes, many people are doing their own taxes, where they might not have in the past. People who previously took shoeboxes full of receipts to accountants are finding it easier and cheaper to just do their taxes from the comfort of their home computer.
Sometimes, that’s just fine. But often, there is no substitute for the eye of a tax professional. Let’s talk about when you should consider having a professional review your return, what we mean by a “tax professional,” and what the advantages of a professional income tax review can be.
When to Have a Professional Review Your Tax Return
It’s not necessarily a bad idea to prepare your own tax return, especially if you have a relatively straightforward tax situation. For example, if you spent the entire year working at the same salaried job with a regular paycheck and didn’t have any major life changes or events, it might be fine to file your own taxes.
But these days, few people’s lives are so simple, especially during the pandemic. People lost jobs, or left them. The ability to work remotely caused many people to pick up and move to a different state. Plenty of enterprising people picked up a second job or side hustle. And, as always, people married, divorced, had children, and lost loved ones. All of those things can complicate tax filings.
In light of those changes, here are several situations in which you should consider having a tax pro review a tax return you have already filed.
You Own Rental Property
Whether you own a string of apartment buildings or a basement suite you occasionally rent out to vacationers, rental income and expenses add a layer of complexity to your taxes. There are special rules regarding losses from rental activity and the depreciation of rental property. A tax professional can review your return to ensure that you didn’t leave any deductions on the table.
Being your own boss is a part of the American dream for many people. But the tax hassle that goes with it can be more of a nightmare, especially in the early years. Without an employer who withholds taxes from your paycheck every pay period, the responsibility of calculating and tracking income and expenses is on you. So is the obligation to make estimated tax payments on a quarterly basis.
If you’re better at running your business than calculating depreciation, deductible expenses, and estimated taxes, it’s time to have a tax pro check your numbers.
You’ve Had a Major Life Change
If you’ve started or left a job, married or divorced, or welcomed a child (or dependent adult) into your family, your tax picture has changed. Likewise, if you’ve received an inheritance, bought or sold a home or investment property, or started a business, you can expect that your tax profile will be different than in years past. For example, you may need to include forms with your return that you have never used before. It’s worth having a tax professional look over what you’ve filed to make sure you didn’t miss anything critical or accidentally misrepresent a fact.
You Own Foreign Assets
You don’t have to be a business mogul or a millionaire to have foreign assets. Simply earning money from a foreign country, or being an authorized signer on the bank account of a family member who lives abroad can trigger tax requirements.
What’s more, the penalties for failing to follow reporting rules can be severe: tens of thousands of dollars, and possible criminal charges. If you have any foreign bank accounts, income, or investments, it is worthwhile to have a tax pro look over your return to make sure you have made all required disclosures. You want to find and correct any errors and omissions before the government discovers them.
You’ve Made Mistakes or Been Audited in the Past
If you have a history of making errors on your tax return, or have had your tax return audited in the past, you are at higher risk of an audit in the future. It’s smart to be proactive and have a tax professional prepare your return. If you prepare your own return, at least have a trusted tax pro check your work.
Advantages of Having a Tax Professional Review Your Taxes
Once your taxes are filed and accepted, why not just let things be? We’ve alluded to some of the reasons above. For many people, the motivation to get a professional tax review is the prospect of getting a refund. And indeed, that is a good reason: often, the amount of refund a tax professional can help you claim will more than make up for the fee you paid the professional in the first place.
But there are other reasons to have a qualified tax professional review your tax return. If you are concerned not only about your most recent filing, but the previous ones, a tax professional can review several returns at the same time, potentially resulting in even more refunds for which you are eligible. Of course, a tax pro might find errors that are not in your favor. In that case, it is to your advantage to amend your return and resolve the issue before the IRS becomes aware of it.
Having a professional tax review can also help you in the event that you are audited — IF you work with the right professional. A CPA who prepares or reviews your tax return may represent you in an audit. An employee of the franchise with the green logo? Probably not.
Many people don’t realize that it takes very little in the way of training to be able to act as a paid tax preparer. Just because someone is legally able to hold themselves out as a professional tax preparer does not mean that they have the extensive training and certification of a CPA or even a financial professional who deals with tax issues year-round. If you are going to go to the effort of having a professional review your taxes, make sure you work with someone experienced, respected, and qualified.
The Bottom Line
Having a tax professional review your taxes before or after filing can save you money and trouble. To learn more, schedule an appointment today with the accounting and tax preparation professionals at Gudorf Tax Group.