Rarely do people like preparing their taxes. One group that tends to be an exception is the do-it-yourself investor. The frugality and willingness to learn that leads them to manage their own investments also increases the probability they will prepare their own tax return. For disciplined, detailed oriented people, this is perfectly fine but there will come a time they should have professional assistance. When is the right time for the do-it-yourselfer to pay someone else to take the reins on their yearly tax filing?

The niche in our practice is the do-it-yourself investor who realizes they need comprehensive financial planning and know they have become too complicated to do it themselves well anymore. Giving up managing investments is hard enough for this crowd, but giving up tax return preparation is even harder. Maybe they think a tax return is just filling in boxes and software makes it seem easy.

As a financial planner, I go deep on tax planning for our clients but I don’t prepare tax returns. If there are K1 forms, self-employment income, or any oddball events, I know there are little potholes if the boxes aren’t filled in correctly. The best part of having a real accountant? The assurance they will step in if the IRS sends the client a nastygram for something that was overlooked.

Signs you should hang up doing your taxes

There is no specific trigger on when you should turn over your taxes to an accountant but there are many signs. Repeated mistakes are a big signal. As a financial advisor, I look at our clients’ returns to compare the results on the tax return to what we expected to happen from our tax planning. Invariably, I catch mistakes. The most common mistakes for do-it-yourselfers include the following:

· Forgetting a tax form

· Incorrectly entering IRA qualified charitable distributions (QCD)

· Not entering bond income correctly

· Missing deductions on self-employment income, such as health insurance

We have one client who for three years in a row did not enter his QCDs correctly. Thankfully, after the first year and the need for filing an amended return, he now lets me review the return before he files it. Last year I began asking when he would consider getting an accountant. This year he said that he would use an accountant soon.

If you are lucky, you will become an older person. About one-third of the population has a lifetime risk of dementia, but two out of three Americans will have cognitive impairment. You can get along fine with mild cognitive impairment as you age, but complex tasks such as preparing tax returns will be very difficult. With the risk of dementia doubling every five years after age 60, it is smart to get a good accountant in place before you begin to have problems.

If your taxes are easy, I recommend having someone else prepare your return by age 70. Yes, you could still be perfectly fine to do your taxes at that age; however, the risk of decline or illness increases significantly the older you get. Having someone in place before an event is smart planning.

If you have many moving parts on your tax return, such as a business or self-employment income, I recommend an accountant no matter how old you are. You don’t know what you don’t know, and an accountant keeps up with all the deductions to save you money and knows the rules that can keep you from receiving IRS nastygrams.

How to find a good accountant to do your taxes

The first step to finding a good accountant is to ask your network. Who has done a good job and has reasonable prices? After you collect a few names, send the potential accountants your prior return and ask for a quote based on your situation. Realize that if your situation changes, your fees will change.

Does the accountant only do the tax return or do they do proactive tax planning too? Many are just happy to do the return, and this is all you may need. If you want additional advice such as tax planning, you should expect to pay more for that service.

Accounting firms have been consolidating and independent accountants are selling to large regional and national firms. In my experience, these firms tend to be more costly and lose personalization. It doesn’t mean they are bad, but the independent firms seem to be a better fit for our clients.

Don’t wait until tax season has started to find an accountant. It is likely you won’t find a good one to take you. Wait until summertime after they have finished all the extended returns and have had a well-deserved break. This gives them plenty of time to learn your situation and put you in their work flow for the next tax year.

A do-it-yourselfer’s biggest risk to their financial security is doing everything on their own long after they should be getting help. Having an accountant can be invaluable in providing the protection you need from your own mistakes.

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