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A tax professional, such as a certified public accountant (CPA), may be able to help you prepare and file your tax return. However, you don't necessarily need an accountant, and some CPAs don't specialize in personal tax returns. If you are going to hire an accountant, you may want to verify that they have experience with situations like yours and compare their fees with other tax preparation options.
When You Might Need a Tax Accountant
You might want to hire a CPA who specializes in personal taxes to prepare and file your tax return if you have a complicated tax situation. For example, if you own a business, an accountant may be able to help you identify and properly claim business tax deductions that can lower your taxable income and save you money.
Even if you've done your taxes before, hiring a professional tax preparer could be a smart choice after a major life event, such as when you:
- Get married or divorced
- Buy or sell a home
- Have a rental property
- Had or adopted a child
- Sold investments, such as stocks or cryptocurrencies
A CPA may also be able to offer tax planning advice and strategies with these major events in mind. Often, tax planning requires making moves during the same tax year—not right before you prepare and file your tax return.
If you plan to hire a CPA, you can reach out to several prospects to see which may be the best fit. You can also use CPAverify.org to verify their credentials.
It's best to contact tax professionals during less busy times of year, as many may be completely booked as the tax deadline approaches. While you may be able to request a tax extension, that only extends how long you have to file your return. You may still have to pay any taxes you owe by the tax filing deadline to avoid penalties and fees.
When You Might Not Need a Tax Accountant
If you have a simple tax situation, you may be able to save money by preparing your own tax return. Simple can be relative, but that could mean you if:
- You don't have a business or side hustle
- You don't own a home
- You're single and don't have children
- You use the standard deduction
Whether you should hire a tax preparer can also depend on how much time you have and how comfortable with (and interested in) taxes you are.
Even if you have a simple tax situation, you might prefer paying someone to do the work for you. Completing a nonbusiness tax return takes an average of eight hours—three for completing and submitting the return, and another four for record-keeping and tax planning—according to the IRS.
On the other hand, even if you have a complicated situation, you might want to prepare your own tax return if you're familiar with taxes and your finances. You won't necessarily be on your own, either. The IRS has guides on its website and you can purchase tax preparation software, which can help you accurately prepare and file your taxes.
How Much Does an Accountant Cost?
The National Society of Accountants' national Income and Fees survey for 2020 to 2021 found that the average fee to prepare a 1040 (your individual tax return) was $220 for returns with a standard deduction and $323 for returns with itemized deductions.
But your cost can depend on the complexity of your situation. If you have a business, rental income or investment income, or claim the earned income tax credit, each of those forms may come with an additional fee.
CPAs may also use different fee structures: Some charge an hourly rate, while others charge a flat rate per form. The IRS suggests avoiding preparers who charge based on your tax return or promise to get you a large refund.
If you're considering preparing your own taxes, you may be looking at tax software to help you do so. Tax software is often much less expensive than hiring a preparer, but the cost can still vary depending on when you purchase the software, the type of software and which forms you need. You may also be surprised by additional federal or state filing fees, which isn't always included with software.
Consider Your Options Before Hiring a Tax Accountant
Accountants aren't the only people who can help you prepare and file your tax returns. You could also get help from enrolled agents or tax attorneys, and there are certified tax preparers who don't have other professional credentials. Whether the person is a good fit may depend more on their experience and your tax situation than their title.
If you're considering the DIY route, look into the IRS' FreeFile program, which offers free tax software and federal e-filing to taxpayers who have an adjusted gross income of $73,000 or less―that's about 70% of all taxpayers. The tax software can help guide you through the process, and some options may come with free state tax preparation and filing as well.
Additionally, many low- and moderate-income households qualify for free tax preparation and filing with the help of IRS-certified volunteer tax preparers. You can look for a local Volunteer Income Tax Assistance or Tax Counseling for the Elderly site where you may be able to drop off your forms or meet with someone one on one.