Filing Taxes On Your Own? 5 Times You Should Ask For Help
Filing income taxes can be difficult, but many Americans successfully prepare their own taxes each year. With modern software and guides, it's a task that you may feel you can accomplish on your own. But while this may be true in most years, there are a few circumstances in which even a seasoned self-preparer should hire professional help. Here are 5 life changes that warrant at least temporary help preparing your taxes.
The first year (or two) after a divorce comes with a lot of changes. You may be sharing custody, splitting up assets and changing income levels. All these are things that will likely affect your taxes. In addition, many divorcees haven't been involved in filing taxes for the couple in the past, so they could use some help understanding how it all works.
Moving between states is more than a big hassle. It also forces most people to file taxes in two separate states. Since each state is entitled to tax the income earned while you were a resident, it can be difficult to separate who is owed what. Not dividing your state income correctly can result in overpaying or underpaying each state. In addition, the new state's tax forms and rules will be unfamiliar to you, which can easily result in errors.
Becoming a high earner is a great problem to have, but it can come with new tax rules that you haven't encountered before. You may begin to reach the limits in tax credits or deductions you've taken in the past. You may also need to figure out how to reduce your taxable income to avoid falling into higher tax brackets (higher percentages of tax) -- using things like itemizing deductions, contributing to tax-advantaged accounts and harvesting investment losses. Hiring professional help can save you a lot of money.
Starting a Business
Whether you are running an intentional business or just receiving a Form 1099 from a company, you need to avoid thinking that it will be the same as being a wage worker. For the first few years that you have to fill out a Schedule C for your business, income can be expensive if you don't understand such things as the following:
- What expenses you can or should claim
- How to depreciate assets
- What travel or meals can be deducted
- When to pay quarterly payments
- How to claim mileage
Get help with your new status as an independent contractor or business owner -- at least until you're comfortable with the routine of filing a Schedule C.
Whether you're a college student who's graduated or you have just gotten your first full-time job, if you've reached the point where you are no longer considered a dependent, it's good to ask for help with the adjustment. As a dependent, most people's taxes are simple and they often get parental help with them. But claiming yourself or no longer being a student usually means new access to money savers like the Earned Income Credit, Retirement Saver's Credit and Student Loan Interest Deduction. Not knowing about these new rules can cost you money if you're not careful.
Even if you have one of the events above, it doesn't necessarily mean you won't be able to return to filing your own taxes in the future. But seeking out a qualified income tax preparation service during those crucial transitional years is the best way to ensure you have success, save money and make wise choices about your financial future.
For more information and help, talk with a tax service, such as Rainbow Tax Service Inc, directly.