Hiring a paid tax preparer can provide you with expert advice and save you time, but doing your own taxes with the help of software can save you money. Certified Public Accountants (CPAs) are approved by the federal government to represent you in all matters before the IRS and tend to be more business-focused. If you're just looking for someone versed in tax reporting and compliance, an enrolled agent may be a more cost-effective option. Slightly less than half of electronically filed tax returns are self-prepared; paid tax preparers fill out the rest.
A professional will also advise you on future credits and deductions, or changes you can make to your company to reduce future tax payments. If your financial or personal situation hasn't changed much year after year, you're likely able to process your next tax return on your own. However, the more complex your tax situation, the more advantageous it is to hire a tax professional. Tax preparation software such as TurboTax is an economical and efficient way to address tax compliance, but it is severely limited when it comes to tax planning.
A tax professional can help identify credits and deductions you qualify for in order to increase your refund and lower your bill. They are also familiar with obscure forms, understand recent changes in the tax code, and know how to solve unexpected problems. Proofreading your books before filing your taxes could increase the tax preparer's fee, but it will most likely be less expensive than filing an inaccurate return with the IRS. Tax planning is about planning transactions before they occur and making decisions that minimize taxes owed.
Rates for tax professionals vary depending on qualifications, complexity of return, software used, and geographical location. They can also help determine your tax base if it doesn't appear otherwise in investment documents. Ultimately, if you need help planning your long-term taxes or have a new type of business, it's best to consult a CPA. But if you're just looking for someone versed in tax reporting and compliance, an enrolled agent may be a more cost-effective option.