When Is It Worth It to Hire an Accountant to Do Your Taxes?

When tax season rolls around, it’s easy to entertain the idea of hiring someone to do your tax return for you. Rather than spending a frustrating afternoon filling out forms and trying to wrap your head around complex tax terminology, how nice would it be to hire an accountant this tax season and call it a day?

While you certainly could do that — and if you have the money, I won’t try to stop you — there’s a good chance that hiring an accountant to do fill out your tax return would be like hiring a construction crew to help you build a dog house. In other words, you’d be wasting your money.

But there are circumstances — like when you need tax preparation for your business taxes or when you have failed to file your taxes in a previous year — where hiring a tax accountant isn’t just a smart idea – it could actually save you hundreds and even thousands by having a pro prepare your taxes. In that case, working with an accountant, instead of using tax prep or accounting software is actually the frugal choice.

Here’s what you need to know about when it makes sense to hire an accountant to file your taxes.

When you don’t need an accountant

The truth is, most of you probably don’t need to hire an accountant to file your taxes. If you have a traditional job that sends a W2 and you don’t itemize deductions, hiring an accountant would probably be overkill and you can file taxes for yourself.

Software like TurboTax or TaxAct should be more than adequate to handle a tax return for an individual or couple with only the basic tax forms. This type of software also tends to be much more affordable than a professional accountant when it comes to filing to pay income tax, which can cost between $200 and $500 on average. Software usually costs less than $60. If you earn under a certain amount, you may even get it for free.

If you can’t afford tax software or still want to talk to someone one-on-one about your taxes, you can often find free help. Many local libraries offer free tax assistance from qualified volunteers. It’s also important to remember that tax laws vary by state and if your return is complicated you may want to hire a CPA who can also help with tax planning.

When you should hire an accountant

Hiring an accountant is worth the extra cost when you run your own business, itemize deductions, own a rental property or have another complicated situation. Anyone who went through a divorce adopted a child or sold a business within the past year may have a radically different tax situation than most. This is where an accountant can help.

Some people say using tax software is the same as an accountant because the tax software will use the same deductions. The difference is that an accountant will poke around and ask questions to figure out which deductions you’re eligible for. The tax software assumes you know which deductions apply to you.

Even though accountants can be expensive upfront, hiring one could save you hundreds or even thousands of dollars. This is one instance where paying a premium is well worth the cost.

Here are some situations an accountant could help you with:

If you’re a business owner

Consumers who are self-employed or run their own small business should hire an accountant to avoid missing out on key deductions. For example, if you’re a yoga instructor, you may not realize you can deduct mileage to the yoga studio. This is just one example of many significant deductions you could be overlooking.

A qualified accountant will know how to ask the right questions. If you rent out a room on Airbnb, the accountant may ask if you buy cleaning supplies, extra sheets or toiletries just for that room.

These may be items you’d never think to include on a tax return.

Even if your business is only a side hustle, you may still benefit from hiring an accountant.

If you own rental property

Landlords will also benefit from a professional accountant. There are several deductions applicable to those who own real estate, and an accountant can help you identify which deductions apply to you.

An accountant may also recommend different ways to structure your rental property to maximize your tax deductions and add more legal protections. This will benefit you not just for this tax season, but for every tax season to come.

If you itemize deductions

About 30% of taxpayers in 2016 itemized their taxes, according to the Tax Policy Center. Itemizing taxes mostly applies to high earners or those with unusual circumstances.

If you’re having trouble deciding between itemizing or taking the standard deduction, a professional can help you choose the best course of action. If you do itemize, you want to make sure it’s done correctly.

If you want audit protection

The IRS audits about 1 in 140 people. The more money you make, the more at risk you are of getting audited. If you and your spouse make more than $500,000 a year, it may be worthwhile to hire an accountant just for the audit protection.

Audit protection means the accountant or the accounting firm will pay for any fees and interest owed if you’re audited by the IRS. They’ll also represent you in talking to the IRS about the audit.

This will be an extra cost on top of preparing your return, so make sure to buy audit protection before the accountant is done preparing your taxes. Most accountants won’t let you buy audit protection once they’ve submitted your return.

How to hire an accountant

The key to hiring an accountant is to find someone with experience in your particular area who can help with federal and state tax preparation as well as things that may apply to you including the self-employment tax. Whether you’re a business owner, a landlord with 10 properties or someone who recently inherited a large estate, you should be able to find an accountant who specializes in people like you. They’ll be more qualified to find the right deductions that apply to your specific circumstances.

Ask other people in your industry or those in a similar situation for their accountant or CPA recommendations. If they don’t have any recommendations, find an organization or association related to your occupation, and email them. They may have a list of referrals or a forum where you can pose the question and get the help you need in filing taxes to maximize your tax refund.

Before you decide on an accountant or firm, do some research of your own and schedule a phone call or in-person meeting. You want to be completely confident in your choice, and even something like a clash of personalities can make the experience more stressful than it has to be.

–By Zina Kumok

Source: pennypinchinmom.com

How Much Will Cutting the Cord Save You?

Cord-cutting will save you money but for many people, that’s only part of the equation. Yes, you want to spend less on cable, but you want to do that without sacrificing too many shows you enjoy watching. So, before you rip the Band-Aid off, look at the facts, and find out exactly what cord-cutting would look like for you.

The cord-cutting decision is a big one. You need to weigh how much you’ll save vs. how much you’ll miss out on. What price do you put on being excluded from conversations about the latest shows and sports on cable? Are we talking about significant savings or significant pain here?

To start, let’s take a look at the numbers to figure out what you’re really paying per month for movies and TV shows.

What are you really paying for your viewing pleasure?

If your family is like 78% of U.S. households, you are spending an average monthly payment of $107 to subscribe to a pay-TV service (either traditional cable television, a satellite service, or a streaming option. That’s a number which has steadily inched up year after year.

When you have a family like mine, you may have also committed to several online streaming services. It’s hard to say no when friends on social media gush about must-see programs like The Marvelous Mrs. Maisel on Amazon Prime, The Great British Baking Show on Netflix, and The Mandalorian’s baby Yoda on Disney+.

Together an average family entertainment package — cable plus streaming services — can add up to over $140 per month, and that doesn’t include games.

How much are you spending?

And with so many cable options and a new “must-have” streaming service popping up seemingly every day, it’s easy to zoom past the average, if you’re not paying attention. Even if you stick to “the basics,” the amount you can spend can pile up fast.

Entertainment payments per month:

  • Cable bill: $107. U.S. average (according to a 2018 study by Leichtman Research Group)
  • Netflix for two H.D. streams: $12.99 (assuming you’re not borrowing a friend’s password!)
  • Amazon Prime: $12.99 (or a bulk bargain at $119 per year)
  • Hulu: $11.99

Pro tip: You can cut and paste this information into a spreadsheet to start your family budget for the new year.

Why not call and cancel cable right now?

Heck, you could save yourself $100 if you just cut the cord right now. But before you spend that money on last-minute holiday gifts, you should find out how much more your cable provider (which is generally also your internet provider) will charge you for broadband once you drop cable.  It’s generally at least $10 more a month without a bundle discount but, in some cases, the cost increase to get internet alone can be much higher, so, you have to weigh your actual savings.

Those fancy streaming subscriptions need a high-speed internet connection. Your cable/internet provider knows that and intends to make as much money off you as possible even if you cut the cord — this is especially true if you live in a market with only one provider (that also happens to be the cable company you just jilted).

I live in a rural area with broadband available only via Comcast. So, for us, it’s pay up or get ready to listen to the cows and the crickets. Our introductory rate was about $50 per month, not including setup and fees. Find out if you have a choice. Search for broadband and DSL providers in your zip code. The vast majority will offer service that’s fast enough to stream on multiple devices but be careful to read the fine print as what speeds the company promises to deliver. You will need service that’s 25 to 50 Mbps (megabits per second) in order to stream video well.

Before you cut the cord, do your research! If there’s competition in your area for internet service, try to negotiate a discount. It costs nothing to try, and you could save real money.

Pro tip: Some cable companies will offer you a “skinny” bundle with the major broadcast networks for just a few dollars more than getting internet alone. Ask before you fully cut the cord.

Prioritize your happiness

Cutting the cord almost certainly means losing access to some programming. That makes it a hard decision even when the savings will be significant. It’s important to look at your personal and family viewing habits before you make any decisions.

If you watch a lot of network television and live sports, then keeping cable might make sense for you. Or, if you prefer the content on streaming services, then go in that direction.

Consumers have more choices when it comes to television than ever before. That can be daunting – it’s easy to buy more than you can consume.

The good news is that most streaming services don’t penalize you for joining, watching what you want, and then leaving. Mix and match in order to find the right blend for you. That may mean leaving cable or opting for a smaller package.

Your options are plentiful and the choice is in your hands…though you’ll probably want to talk it through with all the other TV viewers in your home so you don’t accidentally inflict significant pain for relatively insignificant savings.

–By Nic DeSmet

Source: pennypinchinmom.com

How to Plan a Vacation as a Family

Summer means many things.

School is out; the kids get to splash in the pool and go to summer camp. It is also the time when most families take a vacation.

Well, or they would like to.

The reality is you may dream of a vacation where you can spend your days relaxing on a beach or a porch in the mountains. But, the truth is you can’t go anywhere. Or can you?

Ask your family if they want to take a vacation, and my guess is yes.

If they want it, then they need to help pay for it.

No, I am not asking anyone to break open a piggy bank. Not at all.

You need to get your family involved in the planning and saving process. After all, if they want to do something fun, they should be involved!

There are some fun tricks you can use to get your kids to want to save as well.

When we took our kids to Disney a few years back, we were able to instill their help.

Even though they did not know Disney was happening when it was (we surprised them), they got in on the fun of saving to make it happen.

Show them the costs

Kids usually don’t know how much vacations cost. Show them!

Go to the site where they want to go and show them the price of the tickets, the hotel, airfare — everything it takes to make the trip happen.

Once they see the numbers, it helps them better understand that if they want to go, that it is going to cost money!

We do this often with our kids. They say they want to go somewhere (my youngest thinks a Disney cruise would be awesome).

I pull up the site and show them the exact cost per person.

They know that we can’t afford to go places — or that if they want to go, we have to save up for it.

Visualize the savings

As adults, we see numbers increase in our savings accounts.

We don’t need to see the coins or paper money to know we are working towards a goal.

Kids aren’t like that.

They need to see the money.

Get a jar and start adding your savings to it! Switch to a cash budget and put the savings into the pot!

If you budget $50 to dine out and skip it for the week — put the $50 into the jar.

Make coupon-clipping a family affair

If you use coupons or apps to save at the store, get the kids involved!

Have them search for and print the coupons you need.

Ask your teen to use their phone to add apps to save and ask them to

find the offers to save.

There is no reason mom and dad have to find the coupons or online offers when it comes to saving (because let’s face it – teens are better at tech than many of us).

Make cuts as a family

If your child wants to go on that dream vacation, it may mean making short-term sacrifices. They may have to forgo that big birthday party or not get to go out to dinner as often. It could even involve canceling a streaming service or app that they love.

Decide as a family where your priorities lie and what you are each willing to give up to find extra money to pay for the vacation.

Start doing odd jobs

Kids can make money too!

In the winter, they can shovel driveways.

Summer may be an opportunity to take care of the neighbor’s dog when they go on vacation. Get them involved in finding ways they can make money so they can add to the savings.

Have them find an affordable option

That fancy theme park may be the dream vacation, but the reality is that it is out of reach. Decide as a family where you can go instead.

Want to do a theme park? Find a smaller one closer to home.

Looking to spend time on a beach? Maybe you can go to a local lake and rent a boat and get out on the water.

Some options will work within your budget limitations and make sure your kids understand that too.

Be reasonable

A vacation can be a lot of fun, but it should never cause you financial stress. Your family wants to enjoy the trip, so they should be involved in the planning and saving process.

–By Tracie Forbes

Source: pennypinchinmom.com