Tax Insight: For Tax Year 2014 and Beyond, 3rd ed. Edition (2015)

Part VII. Other Important Things to Know

Chapter 33. Do It Yourself, or Hire a Professional?

Either Way, This Chapter Will Help You Get the Best Results

As you have read through this book, you have followed me into the brambles of your taxberry bush as I’ve held up the branches and showed you some of the available fruit. There are surely more berries available in your unique situation, but you are now, I hope, much more familiar with some of the better clusters and how to pick them without getting caught by the thorns.

As you read you may have felt the stirrings of a newfound passion for taxberry picking. Or perhaps what I have done is help you recognize the need to hire a professional picker. Whether you choose to prepare your taxes yourself or to hire a professional, the knowledge you acquire from this book will help you nurture and develop your taxberries and thus enjoy the fruits of a more plentiful harvest.

No exact formula will determine whether you need to hire a professional or do it yourself. I can say, though, that certain tax situations can become very complicated, very quickly. For these, you would probably benefit from professional help. You should seriously consider hiring a professional picker if:

·     You own a business.

·     Your Adjusted Gross Income (AGI) is near some of the thresholds that limit or eliminate deductions and credits.

·     You are (or are close to being) subject to the Alternative Minimum Tax (AMT).

·     You are able to take advantage of some of the strategies in this book but are uncertain of how they work or don’t have time to learn more about them.

·     You itemized deductions and they are very close to the standard deduction.

·     You have multiple sources of income (this is especially significant if you have several business-related sources of income).

The greater the number of items in this list that apply to you, the greater the likelihood that you would benefit from the help of a professional tax preparer.

If you decide to hire a professional, you’ll want to maximize your return on investment. To do so, it is critical that you understand your professional preparer’s work circumstances.

The Limits of the Harvest

One of my family’s frustrations during berry-picking season is the scarcity of time. The best berries can be picked only during three to four weeks in a season. This means we must either devote all of our spare time to getting as many berries as possible or sacrifice the number of berries we pick in order to have a life apart from the harvest. This decision becomes difficult because we know that to harvest enough berries to make jam, syrup, and frozen fruit for the year will take a tremendous amount of time—but we really do want those results.

The professional taxberry picker faces the same obstacle: the amount of time available for the harvest. Tax preparers have a very narrow window of time to harvest all of the fruit they can. In most cases that window comes in a 10-week period between February 1 and April 15. It is in this window of time that they have to pick berries for all of their clients. It is also the window of time in which many professional tax preparers make between 80% and 90% of their income.

Because many tax preparers are paid a set price per return, or per hour, and they have two and a half months to prepare as many returns as they can, they have a great incentive to turn their tax preparation business into a well-oiled assembly line of tax returns. They work as many hours as humanly possible in those 10 weeks, and by the end of the season they are physically, mentally, and emotionally exhausted—unable to look at another taxberry bush for weeks. They have picked a lot of bushes, but they have likely missed some of the hidden berries along the way.

The sincere desire of most tax preparers is to do the best job they can for each client. But in the heat of the season they simply don’t have time to “dig deep into the thorny bush.” Because they’re experienced, they will almost certainly harvest more berries and avoid more thorns than you would doing it alone, but unless you climb into the brambles yourself, and know where to look, there is no way for you to know if they have gotten everything or if they have cleaned off only the visible fruit. This is a significant problem, but I offer a solution.

Step One: Know Your Taxberry Bush

Study this book and others to become as knowledgeable as you can about your personal taxberry bush. Become familiar with the main components of your tax return so you can understand the relative benefit of each strategy. Then, familiarize yourself with each of the strategies and determine which ones apply to you.

Taking this first step will help you recognize the berries on your own bush and know which will be of greatest worth. This will help you better prepare and cultivate your harvest in coming years since you can enhance so many tax strategies by paying close attention to them throughoutthe year. Your knowledge will also help you point out those berries to the picker before the harvest season.

Step Two: Use the Off Season

Work with your tax preparer in the off season. Ask for an analysis of your individual situation and a search for the hidden fruit. Bring up ideas you have gathered from studying this book, and let your tax preparer crunch the numbers. If you don’t expect a large refund (or need it soon), ask your preparer to file an extension so he/she can spend more time preparing your return carefully. Great things can come from this.

To continue with the berry bush analogy, an expert in blackberry plants can do many things in the off-harvest season to improve the quantity and quality of the fruit on the bush. He can ask questions about your habits and practices. He can show you where to prune, which branches to lift or tie, and how and when to water. What is more, as he is doing this, he will become very familiar with your taxberry bush. Yours will no longer be one of many that all look the same. He will have studied your taxberry bush and seen exactly where the berries are growing and be ready to quickly gather all of them at harvest time.

So it is with taxes. When I have had the opportunity to analyze and plan for an individual’s tax situation, I know exactly what to do when I prepare the return. During the year I am able to spend all of the necessary time to find and cultivate the hidden fruit. I can make recommendations on how to structure financial affairs in a way that will make a significant difference at harvest time.

Enjoying Your Harvest’s Bounty

In summary, study this book to understand your taxberry bush better. If you decide to hire a professional, consult with him or her in the off season on how to prepare and cultivate your fruit. Then, when the harvest comes it will be plentiful. It will be worth far more than the price paid for the advice, and the fruit will be very sweet. Happy picking!