Should You Hire a Tax Professional This Year? (2024)

I used to love filing my own taxes back in the day. Yeah, I know… I’m a nerd! But beyond the numbers and paperwork, it was an opportunity to review my overall finances and find little nuggets and insights on how I could improve. (Plus, back then I usually got decent sized refund checks — the icing on the cake!)

But, as the years went on, my filings got more complex. I got married, bought some rental properties, started earning various 1099 contractor income, and got really confused about which legitimate deductions I was eligible for. I decided i was time to bring in the big guns and hire a tax professional. And I haven’t looked back since!

You might be in a similar situation as your financial life grows more complex. Is it time to hire a tax professional and let them file your return? Or should you continue to tackle taxes yourself each year and save the fee cost?

Why filing yourself usually makes sense…

For the most part, we almost always recommend people try filing taxes themselves. And that’s because the majority of folks have “simple” tax situations. By simple, we mean you have W2 income, a small amount of dividends or interest to claim, and take the standard deduction.

1. 90% of people take the standard deduction

Whether you file yourself or with a professional, there’s a 90% chance you will take the standard deduction instead of itemizing Individual deductions.

This means the overwhelming majority of folks don’t need to track, keep, and upload individual receipts for tax deductions. This alone solves most people’s headaches when DIY filing each year.

The standard deduction for 2023 is $13,850 ($27,700 for married filing jointly). So unless you have a huge amount of legitimate expenses that are near or over this amount, you will most likely take the standard deduction too.

**One note, the standard deduction doesn’t take into account tax credits you might qualify for. For example, the Child Tax Credit for qualifying dependents. If you’re confused about what you qualify for in regards to tax credits, sometimes hiring a professional still might make sense and we’ll discuss those scenarios below.**

2. Tax software is very smart (and cheap/free!)

The best thing about tax filing software is how user friendly it is these days. It gets smarter each year, incorporating any federal or state law changes, and knows the exact questions to ask to maximize your return.

Using DIY tax software is just like taking a really long online survey. It asks you simple yes or no questions and refers to supporting documents if you are confused at any point. Pretty impressive, actually.

Most tax software also remembers the bulk of your information from year to year. This streamlines the process, so if not much has changed in your financial situation since the previous year, filing is usually fairly quick!

As for which software we recommend:

• IRS FreeFile: Available for folks who make less than $73,000 AGI
• Cash App Taxes: If you make more than that, it’s probably the absolute best free filing option in existence.
• FreeTaxUSA is another great site for free Federal filing and $15 for state filings.

3. Annual finance review and long-term planning

Probably the biggest benefit to filing your own taxes is the opportunity to review and possibly learn more about your overall money situation.

When you outsource financial tasks, you’re trusting that whoever handles your money is doing what’s in your best interest, both over the long-term and short-term. Sadly, the majority of tax advisors play a simple game of trying to score you the biggest refund check in a given year. Many don’t necessarily take into consideration your lifelong financial journey.

So even though it might be a massive pain in the butt, preparing your own taxes keeps you in the driver seat. Looking at all the numbers yourself helps you be more aware of the direction you’re headed at a high-level.

Related: Check out our podcast interview with Sean Mullaney on Episode 758. He delves into how thinking long-term usually benefits you more in the long run, versus taking a year by year approach to tax filing.

When hiring a tax professional makes sense:

The national average cost to hire a tax professional to file your taxes is about $220. But that’s for the most basic of returns. Usually, if you’re enlisting the help of a professional, it’s because your return is more complex. If that’s the case tax pros will charge a bit more.

But the decision to hire help to file is not just about the cost. You should also carefully consider your time, knowledge, and maybe even some potential risks involved with self filing.

Here are some common circ*mstances when hiring a professional is usually a good choice…

1. If you absolutely loathe filing taxes

A close friend of mine hates (with a capital H!) talking about money. She gets very anxious and starts hyperventilating just thinking about tax planning. (Ironically, she’s crushing it financially due to having a hefty annual income and natural frugal tendencies!)

Anyway, each year around March, she sets an appointment with the same “tax guy” she’s been using for the last decade. She dumps all of her forms, receipts, and tax letters onto his desk, writes him a check for $550 and lets him figure out the rest.

Funny thing is, she knows she’s being ripped off — but she doesn’t care. To her, paying someone she trusts and keeping the same routine every year gives her peace of mind. Rocking the boat is too upsetting, so she happily pays for tax help and never has to stress about it.

Regular HTM listeners will know we are big fans of spending money on the things that make your life better and provide you peace. If that’s paying a few hundred dollars every year to hire a tax professional, we won’t argue with that!

2. If major life changes happened last year:

If you fostered, adopted, or brought a child into your family last year, you may be eligible for additional deductions and/or credits on your tax return. Seeking out a quality professional to guide you through exactly what you qualify for might make sense.

Similarly, if you had a complex Roth rollover, sold large assets with big capital gains, or received a massive inheritance, a tax pro might be able to help you navigate any tax consequences which could be far better than going at it alone.

While a lot of info can be found online, this takes time to carefully research and maybe even a handful of phone calls to confirm. But if you hire a tax professional, they’ll save you all that headache.

3. You have multiple streams of 1099 income

Being a self-employed contractor is kind of like owning your own small business. As such, there are a bunch of business expenses that you might be able to claim to offset your income.

It’s really important to claim and itemize business expenses correctly. Not only because the IRS will catch any phony deductions, but you want to make sure you’re taking advantage of every legitimate deduction available to you.

For example, let’s say you drive for Uber on the weekends, and also do freelance writing as a side hustle. For each of your jobs there’s a bunch of little expenses you can claim to offset your tax burden in a meaningful way. Your car expenses are most likely deductible because of your Uber job, and possibly much of the home office set-up that you use for freelance writing.

This is a great reason to hire a tax professional and have them file for you. They’ll make sure you’re claiming the most deductions possible for your situation.

4. You own a lot of real estate

Real estate tax laws can get fairly complex. Not to mention, they can change fairly regularly! So finding a tax professional (ideally with heavy real estate experience) is best if you own multiple properties. And definitely if you own properties across different states!

Fun fact… When I first switched to using a tax pro, they asked me to send in my tax returns for the prior 2 years. After reviewing them, they actually found some errors – real estate expenses and deductions I hadn’t claimed properly! Long story short, they helped file an amended return, and I got some additional money back!

If you’re building a real estate empire, is usually makes sense to hire a tax professional. They may charge you a bit extra based on the size of your portfolio, but usually the time savings offsets the cost!

5. If you have low risk tolerance

Most IRS audits are triggered because someone made an honest mistake while filing. Clerical errors, fat fingering numbers, or forgetting to claim small bits of income.

No matter the reason, an IRS audit is a headache you definitely don’t want.

So, if you’re not very confident that you can file a 100% accurate and correct return, it might be a good idea to hire a tax pro. While it is still very possible to get audited even if you do file with a professional, your odds are lower because of their familiarity and expertise of the filing process.

6. If you started a small business

Small businesses often face myriad tax complexities, including business expense deductions, depreciation on company assets, and potential for various credits.

If you’re new to all this stuff, hiring a tax professional will help you navigate these intricacies. It’s really important to ensure compliance with business tax regulations for your state and city!

7. Significant investment income or capital gains

If you’re involved in investments that have complex financial structures you may benefit from professional guidance. Hiring a tax pro can help optimize tax strategies, manage investment-related deductions, and address the tax implications of different decisions or scenarios.

For example, when I sold a couple of rental properties a few years back, I was on the hook for some decent sized capital gains taxes. In my head I estimated the overall tax burden, taking into account the major deductions I was eligible for. But when it came time to file, my tax advisor was able to find even more things that I could deduct and lessen the final amount of taxes I owed.

The value of a tax professional’s experience in processing (and helping offset) large investment gains is incredible. If you recently sold large investments or have a significant amount of investment related income, hire a tax professional!

Finding the right tax professional for you:

Ideally, you’ll want to find a filing service that’s inexpensive, has good customer service and reviews, and is available when you need them!

Beyond that, you’ll also want a company that suits your individual needs. For me, it was really important to find a tax pro that was knowledgeable about rental properties. For you, you might prioritize something else to match your situation.

Here are a few things to consider as you reach out and start looking for tax help:

1. Start asking your network

Getting referrals is a great place to start. If you’re in need of a real estate tax pro, ask your investing buddies who they use and if they can make a referral. Friends and family might have good recommendations too.

It might be a good idea to collect 3-4 different potential options. Don’t just go with the first referral. Speaking to a handful of different tax professionals will give you a better understanding of the landscape and typical scope of work.

2. Schedule interviews and introduction calls

The goal in interviewing tax professionals is to make sure their services match your needs. So during the phone calls, be sure to tell them everything you are looking for and an overview of your particular situation. Then, ask about their expertise in those areas.

Also, pay attention to their communication style. Ideally, you’re looking for someone to build a long term relationship with. Someone who will be on your side every single year.

3. Clear fee structure:

Always ask about their fee structure upfront. Some tax professionals charge a flat fee, while others may bill by the hour. Whatever you decide, just make sure you understand all the costs involved and if there are any additional charges for specific services.

4. Check reviews and look out for red flags:

It never hurts to do a quick Google search and look at online reviews of the people you’re about to jump into bed with. If you’re doing business with a reputable tax firm, it shouldn’t be too hard to find!

Also, when talking with any tax professional, keep an ear out for red flags. If they promise to get you a huge return check, or hint at skirting the laws, stay away. You want to find someone that is 100% legit so you can sleep well at night.

5. Licensing, credentials and qualifications

Make sure to hire a tax professional with the appropriate credentials. Being a Certified Public Accountant (CPA), Enrolled Agent (EA), or tax attorney is always a good start! These folks are generally well-versed in tax laws and regulations.

It never hurts to make sure firms have the correct licensing in place and are registered tax preparers!

The Bottom Line:

We typically recommend most folks use DIY tax filing platforms like Cash App Taxes or FreeTaxUSA. They are cheap and easy for those with simple financial situations and who are taking the standard deduction. But if you had a major event last year that triggers tax consequences, or confuses your eligibility for certain deductions, it makes more sense to hire a tax professional!

Tax pros are more familiar with the ever-changing tax code, small business compliance, real estate deductions and they can save you massive amounts of time if you are new to all that stuff.

Lastly, remember that it’s OK to spend money hiring a professional to do your taxes. Even if it’s just for peace of mind, knowing that your filing is as correct as possible can be worth it.

Related posts:

• Do you need a financial advisor?
• 8 biggest tax myths, busted!
• Is it time to break up with your financial advisor?