As income tax filing season gets underway, many Americans must decide if they can tackle their taxes on their own or if they need the help of a professional. Even if you have handled your income tax forms yourself in the past, there are a number of times when your best path is to hire a CPA (certified public accountant) when big changes occur in your life. Here are five of the most important.
1. When You Marry. Marriage is more than just becoming a legal couple. You and your partner will also experience some large tax consequences that could either help your finances or make your tax situation more challenging. You also have choices as to how to file and with whom, so you need someone to help guide you through these decisions.
2. When You Divorce. Divorce can be an even bigger hit to your finances than marriage was. Issues like alimony, child support, splitting of assets and debts, bankruptcy, and investment account reporting all often have large effects on your taxes both during the divorce and in the following few years.
3. When You Start a Business. Any business owner should work with a CPA to get their books started and to learn how to maintain good financial records. If you haven't engaged an accountant for your business already, work with one during tax time. Business taxes get very complex and have different rules than individual taxes. Misplacing income and expenses or misunderstanding how to use certain items on your taxes can cost you and your enterprise a lot of money.
4. When You Have Kids. Children will always affect multiple elements of your income tax obligations. For the most part, using children on your taxes is a benefit, but you must follow the right rules to do so. Parents who are adopting should consult with an accountant during the adoption process to learn about not only the standard benefits of claiming their new child but also the unique rules about adoption and its tax credits.
5. When You Retire. Are you thinking about retiring in the near future? Are you retiring now? An accountant can help you plan for this dramatic change in your income and expenses. They will also help plan for things like required minimum distributions, rollover rules, and tax law changes involving retirement accounts.
Are you contemplating any of these life-altering events? Start working with a qualified accountant now in order to protect your finances in the best way and ensure the lowest tax obligation.