Income taxes are as complicated as ever in 2022 -- pandemic-related changes to the tax code like the expanded child tax credit, the increased standard deduction and the end of the unemployment income tax break may cause frustration for even experienced tax filers.
Top-rated tax software can help us navigate the ins and outs of our tax return, but the tax help in those programs can't replicate the services and expertise you'll get from a professional tax preparer. IRS enrolled tax agents must pass a rigorous three-part exam and also complete 72 hours of continuing tax education every three years.
And even with the best tax software, filing your tax return can be a lot of work. Read on to learn which tax situations might be best handled by a tax pro, as well as how to find an enrolled tax agent and some red flags to watch out for.
For more on taxes in 2022, see the latest deals for filing your taxes, read about the best free tax software and learn how to track your tax refund into your bank account.
When should you consider hiring a tax pro?
You bought (or sold) a home
Real estate is a major life change, whether you bought into it or sold some of it. You might have to calculate capital gains if you sold some property. In other instances, you might have to itemize your deductions. If you're unsure about your numbers -- or where to find them -- try talking to a pro.
You got married or your family grew
If you've tied the knot, had a baby or adopted one, you'll need to update your tax filings. You might need to change your filing status to "married filing jointly," which might net you a hefty bonus. Yes -- extra money just for being married. Also, if you've gotten divorced, your tax filings will change as well. You should consider talking to a tax professional in either case.
Along with that, having children can earn you tax credits. The expanded child tax credit now lets you claim up to $3,600 for every child under 6 and $3,000 for each kid 6 to 17 -- including adopted children. There's also a separate adoption tax credit.
You started a business
Whether a side-hustle or a full-fledged company, working for yourself can be lucrative. But it could also mean different tax implications.
For one, how you classify your business, like an LLC or a sole proprietor, can determine how your taxes are handled. Self-employment tax is hefty, and many have to file quarterly taxes while those working for others only need to file annually. A tax pro will let you know how to prepare for taxes, putting money away, and every detail about how your business impacts your tax filings.
Your assets grew
Owning a property might be reason enough to find a professional. But if you have other assets, including investments, it could be time to find someone who knows what they're talking about.
If a loved one passed away and left you something valuable, including money, you're going to need to know how to handle it. Sometimes, estate lawyers can be helpful, but understanding how taxes play a role will be important.
You're stressed about doing it wrong
Tax laws change every year, even if a change is minor. Sometimes we don't have the right mindset to handle our taxes on our own so we could miss something vital. And if the IRS finds out we didn't do it right, it could result in a penalty or you can get audited.
If you filed and underpaid what you owe, you could face up a 0.5% penalty, plus interest. If you don't file at all and owe the government money, there's a 5% penalty.
The added stress of making mistakes is reason enough to find someone to do it right the first time.
How do I find a qualified tax professional?
If you don't qualify for free tax help, you can still enlist the services of a tax professional.
Tax season can bring in a slew of scammers who just pop up to earn your business and disappear after they've got it. Don't fall for tax scams and instead, find the right person or group to help you get on track.
- National Association of Enrolled Agents -- The NAEA lets you browse through more than 10,000 enrolled agents broken down by specialty, location and other criteria.
- American Institute of CPAs -- The AICPA has over 429,000 members worldwide. Certified Public Accountants (or CPAs) are licensed to provide accounting services. There are different searches based on your needs.
- Internal Revenue Service -- The IRS has a directory of tax preparers where you can search by location and credentials.
What should I watch out for when hiring a tax pro?
Qualified professionals should have no problem detailing their expertise, how long they've been in business and sharing their certifications. Some red flags to watch out for:
- They don't have a PTIN. Ask your potential tax pro to provide you with their preparer tax identification number (PTIN). If they prepare or assist taxes for money, they are required to have a PTIN.
- They don't e-file. The IRS also recommends electronically filing your tax return. Preparers who handle 10 or more returns are required to e-file through the IRS. Be cautious if your preparer suggests an alternative.
- They request you to sign a blank return. If you sign a return without details, it means anyone can put whatever they want on your file. Also double-check to see where the money from your return is going. If your bank details aren't listed, that's a major red flag.
- They talk about "cheating the IRS" or push you to take deductions you don't qualify for. This red flag might seem obvious, but steer clear of agents promising to take advantage of the IRS to get you a bigger tax refund.
- They don't sign your return. The IRS requires all tax pros to sign the tax returns that they prepare.
- Their fee is based on a percentage of your tax refund. Most tax preparers will charge a flat fee based on the complexity of your tax return or charge you by the time it takes to prepare your return. If a tax pro's payment is dependent on the size of your refund, they may be willing to bend the rules of the tax code in order to get a bigger payout.
While hiring professional help isn't required, you might need extra help. If you're going to enlist the help of an expert, make sure you do your homework first.