If you are a freelancer or own a small business, it can be tempting to do everything yourself to save money. Tax time can be especially daunting because of changes in tax laws, deductions, sending out tax forms to contractors and more. There are loads of software programs available and a free IRS website for DIY tax prep as well, which may also prompt you to do it on your own.
Are you wondering if you should hire a professional to do your taxes instead? Consider the following:
Do you know what you're doing?
If you have the time and you're ready to do research and spend undivided attention on your taxes, then by all means. A simple tax situation with no dependents, no major deductions, no business income or expenses can definitely be tackled properly. Even if you are doing freelance work or own your own business, you can attempt to do your taxes with tax preparation software. When you begin to get confused or unsure, you may want to hire a professional.
Did you have a major life change in the past year?
Did you get married? Divorced? Buy a new house? Have any children? Start a new business or sell your previous business? Hire employees? Any of these life or work changes can change how your taxes are filed. You may need to change your filing status, determine who is claiming dependents, pay more in taxes or get more tax credits. If you've experienced any big changes this year, you may want to hire a professional.
Do you have business, freelance or consulting income?
Working full-time, you likely have already paid federal or state taxes. If you have received payments for other work, freelance, consulting or a new business, those payments didn't have any withholding. You will have received a 1099-MISC form for the miscellaneous income and will need to pay taxes. You may also have home office deductions or have purchased your own health insurance. Recent tax reform laws also include new changes for those who are self-employed or own businesses. When you owe taxes and want to itemize your business deductions, you may want to hire a professional.
Do you need to write off accounts receivable?
If you have clients who haven't paid their bills, you have the option to write off those accounts as bad debt, under certain accounting methods. When you write off the account, it lowers your gross income (under accrual accounting) and therefore, your tax liability. If you have complicated accounting, you may want to hire a professional.
You may also want to hire a professional to help collect that bad debt. If you're consistently faced with unpaid accounts or clients who are unable to pay, you may need to take a closer look at your credit and collections policies. Here's how third-party collections and accounts receivable clean-up is available to help you get paid what you're owed.
It can be challenging to run your own business in addition to all of the administrative work it takes to be successful. There are professionals to help you! Then you can get back to what you love to do.