How & when an expert can help on your taxes

It's never been easier to do your taxes completely on your own, but getting help from a tax expert is still invaluable for many filers.

Whether you've got a complicated tax situation, questions about one particularly thorny issue, or just want the reassurance of a skilled eye looking over your return before you file, we look at when you might want to seek an expert's assistance and why it could help.

Who is considered a 'tax expert,' anyway?

There are 2 main considerations when looking for a tax expert, Casey says. The first is to look for a professional certification that indicates someone knows their stuff about taxes. 
 

• Certified Public Accountant: "CPAs have training in all things accounting, including preparing tax returns," Casey says.
• Enrolled Agent: "Being an Enrolled Agent requires special study and passing multiple exams to get certified by the IRS," Casey says. "It's not a certification to prepare tax returns per se, but it does encompass that. It is the highest credential that the IRS awards and also allows you to represent your clients in front of the IRS."
• Tax attorney: "Tax attorneys would also obviously be qualified to file tax returns."

All 3 of these professionals have to take continuing education to stay up to date on the latest changes to tax law, according to Casey, and all 3 can represent you in front of the IRS if something goes wrong. You can check the Directory of Federal Tax Return Preparers on the IRS website to see a tax preparer's credentials or find an expert near you. 

The second consideration is to watch out for red flags. Casey says this could include promising you a higher refund without knowing your tax situation, not requesting copies of your previous years' returns, refusing to sign your return, not providing a preparer tax identification number (PTIN), or charging excessive fees. "You want somebody who's certified, trustworthy, and who passes the sniff test," he says.

Having an expert do your taxes vs. doing your own taxes with expert help

There are 2 ways an expert can assist you with your tax return, Casey says. The more comprehensive option is to have an expert take your tax documents and prepare your taxes for you. "You're pretty much hands-off for the most part, unless you're answering questions or providing follow-up documentation," he says. This is more common for filers with complex tax situations and is more expensive.

Most filers don't need that much help. They have relatively simple returns and can do their own taxes—usually with tax prep software. But "if a question arises that leaves you scratching your head or questioning what you should do," Casey says, "that's where a tax expert can come into play." Many tax prep companies and software products offer this kind of assistance, where you prepare your own taxes but can consult a specialist to answer questions or review your work.

Common situations where an expert can help

• You have a lot of investments: If you're a heavy stock trader, Casey says, you could benefit from consulting an expert for compliance and planning assistance. For example, "you could you run afoul of some wash sale rules for selling assets at a loss and buying a substantially similar asset within a certain amount of time," Casey says.
• You own a business: Business owners typically have more documents to handle and forms to fill out. An expert can also help determine when to time purchases and asset depreciation, and which expenses are eligible for deductions.
• You have rental property income: An expert can help you figure out whether rental property expenses are improvements or repairs and calculate depreciation. "Filers with a lot of rental properties that maybe have losses, they might be subject to the passive activity loss limitations, which gets a little more complicated," Casey says. "Always good to have expert eyes on that."
• You've recently retired: New retirees sometimes misunderstand how their taxes work in retirement. If it's your first time filing as a retiree or with Social Security income, working with an expert can ease the transition.
• You've had a major life event: Getting married, getting divorced, having a baby, adopting a child—all of these can affect your tax situation. In a divorce, Casey says, you may have lots of tax questions: "What are the implications for separating your income, your investments, your home sale? Do you file together if you're still married but living apart? Are you able to claim dependents? Who gets to claim the tax credits?" Even something as simple as a student moving away to college can raise questions about whether you're better off claiming them as a dependent or having them do their own taxes.
• You moved to another state: Casey points out that if you have lived and worked in multiple states during the year, you may need to file separate returns in each of them. As with all things state taxes, the rules and processes vary between states: "The state may have a part-year or non-resident schedule, they might have a separate tax return in general, or they might have a separate schedule that you have to file based on what income you earned and what's the source of that income."

AAA and affiliated AAA clubs do not provide tax, legal or accounting advice. The above article is for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.