We’re all about self-reliance, but we’re also realists. Deciding whether or not to DIY depends on your skills, interests, free time and life situation. The questions can be far-ranging: Should you try to cut your own bangs? Hem your own work slacks? Caulk your own tub? Do your own taxes?
In our new series, “DIY or Not,” we ask the professionals, from stylists to plumbers, to tell us when not to hire them.
To kick it off in honor of tax season, we sat down with Lori Davis, CPA, Managing Partner at Grant Thornton LLP and a 2010 "Woman to Watch," according to the Kansas Society of CPAs, for the inside scoop on when you need to go to an accountant—and when it’s simply not worth the cost.
Note that, in addition to plugging numbers into your tax return, accountants can also help you plan out your investments, savings, estate planning, and life choices from a tax perspective. So, while a financial planner might advise you on investments to buy or sell, an accountant would advise you on how those transactions affect your taxes. Those services make more sense for some people than others.
Here’s how Davis broke it down:
Don’t call me if:
- You have simple taxes, don’t have your own business, and feel confident that you understand what’s being asked of you (even if it’s just TurboTax that’s doing the asking).
- You don’t itemize your deductions.
- The things you itemize are relatively standard, like mortgage interest, cash contributions to charity, or state income tax deductions.
- You have investment income from things like stocks, but you’re not part of any complicated business partnerships and don’t have stock options.
- Your taxes don’t involve anything that you find terribly intimidating or unusual. (Even if you need to report alimony, tax software like TurboTax will usually do the trick.)
- You aren't planning any big life changes right now that might affect your taxes, like marriage, kids, buying a home, starting a business, or planning your estate.
- You are a standard, salaried employee without fancy stock options or partnerships, you don't freelance on the side, and you plan to stay that way.
Do call me if:
- You’re self-employed or run a small business. An accountant can help you make sure that you’re getting all of the deductions you deserve, including the ones for home offices.
- You have any complex investments. Beyond a regular 1099 from your broker, I’m talking about complicated situations like publicly-traded partnerships or lots of gain/loss transactions during the year.
- You do business across state borders.
- You do any international business. For example, if your company transfers you to work in London for two months, you’ll need someone who understands all of the complicated rules to make sure that you do everything right and aren’t double-taxed.
- You have executed stock options. As a rule of thumb, the need for an accountant only applies after you’ve exercised your options, but always check with human resources and read through the terms of your company’s agreement.
Maybe call me if:
- You’ve made a large non-cash charitable contribution. You’ll need to attach an appraisal of the items you’ve donated (like computers or clothes) in order to earn this deduction. An accountant can help make sure that you’ve got the necessary documents in order.
- You qualify for significant tax deductions. If you end up forgetting anything, you may wind up paying more in taxes than you need to.
- You have investment income from mutual funds and choose to reinvest your dividends. If you do this instead of getting a payout for your dividends, then you might want an accountant to look at your cost basis to make sure you're reporting everything correctly--this will depend in part on how convenient your brokerage's reports are.
- You’d like someone to hold your hand and be your advocate. For example, a firm like Grant Thornton can help you dispute a tax penalty because it has easier access to contacts within the IRS. That said, you’ll have to pay for the privilege. If you’re cool with being the one who waits on hold for a representative, you do have the power to resolve any disputes on your own.
Prices for tax services can vary widely: A regular tax-preparer like your dad’s guy Steve might charge a few hundred dollars to take care of all of your returns, whereas a firm like Grant Thornton—one of the largest in the country—could charge anywhere from about $120 per hour to more than $500 per hour, depending on how complex your taxes are. For the most part, unless you have incredibly complicated finances or are the head of a giant international corporation, good ol’ Steve will probably do the trick.