Nov 14 / Jay Zigmont, PhD, MBA, CFP®

Do I Need a CPA or Tax Preparer?

Taxes should be an ongoing consideration, but depending on your employment situation and financial circumstances, you may only worry about them once per year. While you may be able to handle filing your own tax return, there are definitely situations where hiring a professional can work to your advantage, saving you money, time, and a headache. Here's what to consider when deciding whether to hire a CPA or other type of tax preparer. 

What are the types of tax professionals?

When it comes to choosing a tax professional, you have options. You might opt to work with a CPA, or certified public accountant. A CPA is a licensed accounting professional, and their license is provided by the state they work in. That designation ensures professional standards for accountants, who aren't all CPAs, incidentally. To become a CPA, an accountant must have a bachelor's degree in business administration, finance, or accounting. They also complete 150 hours of education and must have spent at least two years as a public accountant. And they have to pass an exam. 
A tax professional you may be less familiar with is the EA, or enrolled agent. This is a person who is allowed to represent tax filers to the IRS. They receive this designation by having served as an IRS employee, or by completing a comprehensive three-part test that covers both individual and business tax returns. 
You don't strictly need either of these high-level tax professionals to file your taxes for you, but if you have a more complicated tax situation (see below) or want assurance that the person doing your taxes is as experienced as possible and has a certification, it's not a bad idea to hire one.

Do you need one?

When determining whether you need to hire a tax preparer, consider your tax situation and finances. Namely, how complicated are your taxes apt to be? If you're a W-2 employee (meaning, you work for a company that takes taxes out of your pay), and you held the same job for the entire year, and didn't encounter any other life changes that would impact your taxes (such as getting married/divorced, or moving to a new state), you might not need any tax-filing help. Chances are, you'll even be taking the standard deduction, meaning you won't need to itemize your deductions based on receipts you've saved. You can opt to use consumer tax software, and depending on your income, you may even be able to file your taxes for free. 
But on the other hand, if your tax situation is more complicated, it's a good idea to hire someone to file for you. If you own a small business, or lived in multiple states, or encountered one of those life changes mentioned above, consider hiring a tax preparer. In fact, if you own a business, it's smart to hire a CPA that will work with you throughout the year to help you stay on the right track, tax-wise. If you retired and started drawing on your retirement savings, a tax professional can ensure you don't pay more than you need to in taxes.
Another special consideration is whether you're at a higher risk of being audited. The IRS is understaffed right now, and tax audits have a far scarier reputation than what is warranted, as most audits consist of the IRS reaching out via the mail and asking for more information about your income and expenses. If you've been honest about these things when you filed, chances are you have nothing to worry about. 
That said, having a tax preparer like a CPA or EA to go to bat for you might be helpful if you have a more complicated tax situation, or earned a higher salary, as both of these factors may open you up to an audit. Some consumer tax software has audit support, but the human touch could be a lot more vital in these circumstances. 
Ultimately, there is no definitive answer to whether you need a CPA or other tax preparer. Consider your own financial, personal, and tax circumstances to decide if you need help with tax filing.
Jay Zigmont, PhD, MBA, CFP® is the Founder of Childfree Wealth, a life and financial planning firm dedicated to helping Childfree and Permanently Childless people. Dr. Jay is a CERTIFIED FINANCIAL PLANNER™, Childfree Wealth Specialist, and author of the book “Portraits of Childfree Wealth.” Dr. Jay is the co-host of Childfree Wealth Podcast. His Ph.D. is in Adult Learning from the University of Connecticut.

He has been featured in Fortune, Forbes, MarketWatch, Wall Street Journal, New York Times, Business Insider, CNBC, and many other publications.