If you were to ask me how many words I thought the tax code was, I would have guessed 60-70,000. Not 10.1 million!
Ever wonder why understanding the tax code is so difficult? This might be the reason why.
10.1 million words in today’s tax code. That is mind boggling to even think about. People wonder why there are loopholes and things the rich do with their money to pay minimal if no taxes.
Getting a good tax professional is important once you reach certain a certain point. If you are pretty straightforward I don’t think there is reason to pay someone to do your taxes.
What Defines Straightforward?
To me, straightforward is well, just that. Below is what I would consider to be someone who shouldn’t pay for their taxes to be done:
- You don’t have any taxable accounts you invest in regularly. These include IRA’s, 401k, taxable accounts, HSA, etc.
- You don’t have any investments producing cashflow for you.
- Your sole source of income is your W2
When Would I Get a Tax Professional?
Below outlines when I would recommend getting a tax professional:
- You have more than one income stream
- You own real estate producing cash flow
- You own a business producing income
My Current Situation
This will be the first year I have my taxes done by someone who knows what they are doing. I closed on my second investment property, have multiple income streams and I have maxed out my tax advantaged accounts. With those steps, it is going to be even more important to find someone who knows what they are doing.
There is one additional thing I am planning to do next week. Come tax time, people get excited when the receive a large tax return. What they don’t realize is this is not a good thing. The goal at the end of the year should be to receive as close to 0 back as possible. If you are receiving a large chunk of change on your tax return, that means you left money on the table you could have invested.
Think about it. If you receive $1,500 back in taxes at the end of the year, that money invested could be worth $1,600. All about perspective.
Key Takeaways:
- The tax code is complicated. Don’t waste your time reading it.
- Understand if your current situation warrants paying someone to do your taxes.
- Receiving a large tax return is not a good thing.
