Party Expansion: When Should I Hire a CPA?
Party Expansion: When Should I Hire a CPA?: Ian answers a question he often gets from friends and clients alike "Should I Hire a CPA?" Certified Public Accountants can be very helpful professionals to add to your party. So, when should you hire one?
What's up Internet? Welcome to Nerd Finance. My name's Ian Bloom. I'm your resident financial life planner and huge nerd. In today's episode we are going to be talking about growing your adventuring party by doing one particular thing, which is hiring a CPA. When does the CPA work for you? How do you decide when you need one? And those sorts of things.
So the reason that I wanted to cover this topic today is simply that it's tax season. We're in the middle of February at the time of this recording and I've been asked by a couple of people "When should I switch off of TurboTax and start handing this over to a professional?" Growing your adventuring party by hiring a CPA is something that you really have to decide on a cost-benefit basis. You see, they are professional and will make your life easier, but you have to make sure that spending the money is useful for you.
So here are a couple of things to consider when hiring a CPA. The first is what is the complexity of the items that I am trying to get taken care of? Because as it turns out, if you're just getting regular W2 income, have no investment income so you're just an employee. Not to knock it, it's simple, but the tax return side of it is probably easily handled by TurboTax at that point and might even be able to be filed for free. And I use TurboTax as a stand-in for all the tax preparation software that you can use out there. So complexity is the first thing. You want to make sure that you have something that the CPA would be able to work hard on for you. Like rental properties, stop compensation, 10-99 income or owning your own business. All of these things provide ample space for a CPA to do some meaningful tax planning for you.
The next thing that you'll want to consider when looking at growing your party by hiring a CPA is simply would it be worthwhile for you? You see, hopefully, viewer, you are starting to get up there in the working world. People's incomes do tend to go up the more that they work, as long as they ask for promotions and look for new jobs, and those sorts of things. So as your income continues to rise, one of the things that you might ask yourself is "Is it worth it for me to spend money to get time back?" These are things that people typically ask when they're thinking about hiring somebody to clean their house or to cook for them or using one of those home chef type things. And all of those are good things to do to get time back. But a CPA is another one that can do that for you. Plus at higher incomes, they might be able to help you with some sorts of tax planning tips like contributing to IRAs and stuff to reduce your tax burden.
So CPAs can be very, very helpful in this regard. They will take one of the most annoying annual tasks off your plate and make sure that you have it taken care of to your liking. So in summary, hiring a CPA is not necessarily for everyone. Spending that 500 plus dollars on a professional isn't always the right answer, but it probably will be the right answer if you have a high level of complexity in your tax return with things like stock compensation, business income, or 1099 income like a contractor. The other reason that you might want to hire a CPA is if you feel like you want that time back in your life. $500 is a small price to pay if you're getting paid $500 an hour, for instance, to offload your tax return.
So I hope that this video was helpful for you. If you like the video, like, comment, subscribe, those sorts of things. But also feel free to check out my website openworldfp.com in order to learn more about the firm and how we can help you have a wonderful day.