Sep 08, 2014

When Do You Need a CPA?

Five Events When You Should Consider Hiring a Professional

By Guest Blogger Erica Beck, CPA, MBA

ericabeckMoneyLife100You can learn how to do just about anything by searching the Internet and reading an article or watching a YouTube video. People have never been more empowered to tackle complex and challenging tasks on their own. For example, I installed my kitchen cabinets by watching a series of YouTube videos and reading a few online articles. While I support, and at times embrace, the “do-it-yourself” ethos, when it comes to certain things, it’s just better to let the professionals handle it. When I installed my kitchen cabinets, I hadn’t factored in the style of my range hood and needed to move all of my wall cabinets over to account for it. Additionally, my floors were sloped and no matter how hard I tried I could not get my base cabinets leveled. I ended up having to call a professional to correct what I had done.

The same holds true when you’re deciding whether or not to employ a CPA. Sure, there are certain things you can do on your own, but I believe there are several life events for which you would fare better by hiring a professional. Here are just five situations when you should really consider hiring a professional.

1. Starting Your Own Business

Starting a business can be an exciting time. You’re getting ready to follow your passion and be in business for yourself. Choosing a name and a location can be easy, but when it comes to choosing the legal structure of your business, you may want to consult with a CPA. There are dozens of tax implications that need to be considered, and each legal structure has its advantages and disadvantages that should be discussed. Working with someone who has expertise in this area can prove extremely valuable to the success of your new business. Also, hiring a professional gives you the peace of mind knowing that you have access to an expert who can answer questions you may encountered down the road.

2. Running a Business

Running a business isn’t easy. It’s important for you to be aware of the financial health of your company. Using software such as QuickBooks and Peachtree are extremely helpful, but having professional expertise can help direct you in tax planning strategies, setting up accounting systems, analyzing operating results, and developing budgets and forecasts. Additionally, business owners will encounter dozens of new deductions, credits, and retirement planning strategies that should be considered.

3. Preparing a Complex Tax Return

With tax software, most individuals can answer a series of questions and then self-prepare their own tax return. But when you have a complex tax situation you should consider hiring a professional. Business owners, investors, self-employed individuals, or those who just want to reduce their IRS tax liability as much as possible should consider hiring a CPA to help look for deductions and credits or to help you figure out the tax implications of your individual and business transactions.

4. Going through a Major Life Change

If your financial situation is relatively the same year after year, there’s probably no need for you to hire a professional. If you experience a major life change, you may need to consult a professional to figure out the tax implications. Getting married, divorced, having a child, changing jobs, or getting ready to retire? These events can potentially change your financial situation instantly, and if you’re not prepared for it you could end up spending thousands of dollars.

5. Real Estate or Other Investment Dealings

Do you own a home? Are you aware of the deductions and credits for which you could qualify? Do you use a portion of your home for your business? Do you own rental property? If you’ve said yes to any of these questions, then a CPA can be your best friend! Owning rental property is a special tax situation, and since most transactions dealing with real estate and other investments can be large in terms of dollar amount, you don’t want to make mistakes. Those transactions can consist of tracking gains and losses on taxable investments, deciding to buy and sell stock, the wash rule, and dividends taxed at different rates. There are a lot of complex nuances that your CPA can help you navigate through.

To find a CPA in your area, visit the CPA Locator or submit your own question to Ask a CPA for advice on your specific situation.

Erica Beck, CPA, MBA, is a senior associate with PricewaterhouseCoopers LLP in Philadelphia. She is a PICPA member and member of the Annual Tax Forum and Planning Meeting, CPA Image Enhancement, and Diversity committees on the state level.

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Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.