Why Freelancers Should Consider Hiring a Tax Preparer
I hired a tax preparer the first year I earned extra income on the side. I had never seen a 1099 before, so I figured my return was better left to a professional. Unfortunately, the experience was less than desirable. He filled out all the forms and put together everything beautifully in a nice packet. I sent off the taxes I owed in a check and figured everything was right with the world. I was wrong.
A few months passed and I got a letter from the IRS saying the tax return was never filed. They had my money but no documents to attach to the money received. Basically the tax preparer did all the work and forgot to e-file it. Because of this experience I’ve been hesitant to put my tax return into anyone else’s hands again until this year.
Ultimately, there are tons of opportunity for savings if you get your information to the right person.
It’s Worth the Cost
Giving over your return to a professional who’s organized and reliable can save you quite a bit of money.
Experienced tax preparers have likely done hundreds if not thousands of tax returns. They’re familiar with the tax rules and can find opportunities that you could miss. A tax return for business income will likely cost you a little more than a standard tax return because it requires additional forms. But again, what the tax preparer may save you in taxes can cover the cost.
What you should always do is micromanage the process to avoid the problem I experienced. Ask your tax preparer for the receipt when they file. This is something I should have done. We both would have known he mistakenly forgot to file it when he couldn’t produce the receipt. Also, look for someone who’s reputable. Ask for referrals to help you find a qualified person to handle your taxes.
You Learn the Tricks of the Trade
Hiring someone this year or next year doesn’t mean you have to pay for one every year. You can always learn from what the tax preparer does and do it yourself the next time around unless you have a more complex situation.
Being a freelancer feels like it complicates your taxes but it’s not as complicated as you think. You just need to keep detailed records of your income and expenses. The tax preparer can make recommendations for tax savings based on your home office, vehicle, expenses, dependents, and much more. They can even make recommendations about your filing status. If you’re a sole proprietor maybe it will be smarter financially for you to form an entity.
Go through your return with a fine-tooth comb after they complete it to understand what they did. It’s even worthwhile to double-check for errors.
Paying quarterly taxes and keeping everything organized to file at the end of the year is my least favorite part about running a business. The one bright spot is that we can write off many of our expenses. Don’t hesitate to seek help if you’re not sure what you can write off.