I’m freelancing in the US for the first time and the tax system seems so complicated compared to the UK, I am reluctant to hire an accountant as I’ve always managed myself before, but am I wrong that it’s more complicated here? Thanks…
I don’t know anything about the UK’s tax system, so I can’t speak to that, but I will say that when I hired a real accountant, my tax savings more than paid for his fee. This was – I think – mainly because he was much more aggressive taking deductions than I would have been.
For instance, if you have a home office and deduct it, you can also deduct part of your utility bills. I had been taking a home office deduction in various places I’d lived over many years, but I’d never known that. Then my accountant was like, “So, did you buy any furniture for that home office?” Et cetera.
My accountant also encouraged me to incorporate once my business reached about $20K/year in revenue. Now that I’ve incorporated, I have significantly less understanding of my business taxes – but hey, that’s what I pay him for.
Also, you are less likely to be audited – or so they say – if you go through a tax professional (not all tax professionals are accountants).
I’d strongly suggest hiring someone at least this first year. Find a CPA or qualified EA (Enrolled Agent) – do not go to HR Block or some other franchise staffed by people who got trained (dubiously) a few months ago. Have a professional do your taxes, and explain that you want to understand what the accountant is doing and what everything means. While your tax professional won’t be happy if you don’t come back next year, at least next year you’ll have a better idea of what you can and cannot handle on your own.
If you’re hoping for a longer, more relaxed appointment, please get your shit together ASAP and make an appointment for a less busy time – once it gets to be March/April, you’re not likely to get a patient lesson about American taxation.
And here’s a take on this question from bullicorn and accounting firm CEO Olivia Henley of Number Queen:
1. You can’t know what you don’t know. US Tax Code is literally 70,000+ pages long and it changes every year. CPAs and EAs are required to complete continuing education every year so they are familiar with those changes.
2. Tax professionals have the benefit study, experience, and perspective. Are your deductions excessive or likely to result in an audit? A good tax professional will know.
3. A good tax professional empowers you and makes you feel more confident about your taxes. If you find one that paints a picture of taxing agencies as scary or makes you feel dumb, get out of there!
4. Your time savings will likely more than pay for your fee. For the same reason you don’t change your car oil or cut your own hair, hire a tax professional.
Thanks to Olivia, and good luck to the original poster!
(Not everyone is into men, but if you are, you may enjoy: Personal Finance Made More Enticing With Shirtless Men and Unicorns.)