Some individuals will continue to feel comfortable using tax preparation software, but there are circumstances where “you don’t know what you don’t know,” requiring you to call in the help of a CPA. A great CPA can provide much more value than just the peace of mind that comes from knowing that your forms are correct. They can provide planning and tax advisory services, consultation, business and international accounting, forensic accounting, business valuation and more.
Read on to learn four reasons why it’s worth hiring a CPA.
- To better understand your big financial picture
There are a variety of questions to determine if a CPA is right for helping you assess your overall financial well-being:
- Do I have a clear grasp of my financial situation and how the new law will shape it?
- When will I reach my savings or investment goals? Should I set new ones now?
- How does tax reform affect decisions such as selling my house, retiring, taking a sabbatical, supporting a favorite charity, or sending my kid (or me) to college or grad school?
Figuring this out on your own is tough. Having a trusted adviser in your corner who knows all about your circumstances and looks at the big picture can make a critical difference. A CPA can help you start thinking about strategic timing and next steps, so you don’t miss out on important opportunities.
- To help you save for the big stuff
If saving up for education expenses, a baby or retirement seems daunting, you’re not alone. Some frequently asked questions in this area are:
- My spouse wants to go to grad school. Can we swing this?
- What is the best way to contribute to my children’s’/nieces’/nephews’/grandchildren’s college costs?
- Am I saving enough to retire early? Is that even possible?
A CPA will help you strategize, whether you’re saving for school or saving for retirement. For example, under the new law, 529 funds can be used to pay private school tuition. A CPA can recommend the best way to fund the 529 and how and when to use it. A CPA can also assist in evaluating investment options that would be the most tax efficient to maximize your return in retirement.
- To make the most of your retirement
Your ideal retirement might be sipping a cocktail on the beach, or it might be trekking across America in an RV. Either way, there are specific questions to ask yourself in order to make the most of this next life stage, such as:
- When should I start receiving Social Security benefits? What are the tax implications?
- What is the best way to draw down retirement funds to minimize taxes and prevent financial problems?
- Is my estate planning in order?
Knowing how to handle Social Security benefits is critical. In 2017, 50% of married couples and 71% of single people aged 65 and older relied on Social Security for at least half of their income. A CPA can fill you in on what you need to know and work with you to develop an action plan.
Similarly, he or she can work with you and other professionals to create an estate plan that honors your wishes and minimizes taxes for your beneficiaries. Tax reform greatly reduced the number of taxpayers subject to federal estate tax, but only through 2025. If your state taxes estates, you will need to take that into consideration. Thinking about the distribution of your assets can be difficult; however, you can enjoy the peace of mind that comes with knowing everything is in order.
- To prepare you for whatever life throws at you
We all know the reality of the Forrest Gump quote – “Life is like a box of chocolates: you never know what you’re going to get.” Here are some important questions to consider before “life happens”:
- If a natural disaster hits my home or business, do I have a plan for financial recovery?
- Am I handling my health care expenses correctly to save the most money?
- If I am injured or become seriously ill, do I know how I can pay the bills?
So, if your particular box of chocolates sticks you with the coconut-filled one you hate, how can a CPA help? Many CPAs are knowledgeable about insurance, such as long-term disability and property, and can advise you on what you need to be prepared. And if they don’t offer this service directly, they most likely partner with an expert in the area so they can oversee your full financial picture. They also know about the tax incentives related to health care that may help you save and pay for medical expenses.
Next step: Making the Decision
If you’re not sure you’re on the right financial path, or what your path should even be, seriously consider contacting a CPA. To quote entrepreneur and business philosopher Jim Rohn, “You cannot change your destination overnight, but you can change your direction overnight.”
Of course, as a CPA, I’m biased. I’m extremely proud of my profession and believe deeply that people will benefit from our expertise. So let me share a more impartial comment from Manny, one of our readers in response to a much earlier blog, Is Hiring a CPA Worth it?: “Hiring a CPA may be a little costly in the beginning but will pay off in the long run. Tax planning and account management can be really confusing. Having a business and personal adviser will help save your time and money.”
For more information on working with a CPA, visit 360finlit.org. And to find one near you, visit cpasdotax.com.
April Walker, CPA, CGMA, Lead Manager Tax Practice & Ethics, Association of International Certified Professional Accountants