Do I need an accountant for my situation?

Question

My wife and I gross 80K annually. 12K of that comes from my job as an independent contractor which I perform from my my home.

I'm wondering if the savings through deductions, an accountant could get us would justify what we pay him. I talked to an accountant here and he said his fee was between $1,000-$1,500.

-I work from home so I could get deductions for a portion of my rent and utilities.

-equipment purchases related to my business

-our church/charitable donations

-my wife drives for her job (about 800 miles/month) but she gets reimbursed .47 cents/ mile.

Answer 1

Well, let's start with the worthless miles driven by your wife.

800 * 12 * (.505 - .47) = $336 of misc deduction.  You add up all your misc deductions and subtract the first $1600 and put the rest on your schedule A.  If you can itemize, it lowers your tax.

Schedule A also includes the chairty.  But you said you rent, so what else do you have that would put you past $10,900?  (That's what you get if you don't itemize.)

Working at home.  If you have an exclusively business use area, yeah, you might be able to deduct rent and utilities based on square footage.  This reduces your schedule C, your income and the 15.3% SE tax.

Business equipment, even if you don't have the home office, you can track your business use and take depreciation.  The class life on office stuff is, I think, 7 years, so you'd get to take 1/7th a year.

Answer 2

If you are not comfortable handling return filing on your own, you will buy peace of mind by hiring a professional.  If you were my client, I would cut your quoted fee at least in half.

Answer 3

you dont need one necessarily....if you want to run your independent contracting onto a schedule c for self employment under your social security number then the fee that you pay an accountant would be deductible on that form at 100%

Answer 4

The fees quoted seem high for what you describe.  Talk to some more accountants if you want professional preparation.    

Your return doesn't sound that complicated.  I think you could do it yourself.  You will need to study Schedule C and Form 8829, available at irs.gov.

Your wife's mileage deduction comes to $336, so don't even bother learning about how to do that because you will get no tax benefit.  Unless you donate close to $10,000 to the church, you won't even itemize (use Schedule A).  But you might study the instructions for that Schedule just in case.

Answer 5

If you don't know tax laws (and don't have the inclination to learn them), hiring a tax prepare to your taxes would be a Great Idea™.   This person does not have to be an "accountant" (an enrolled agent would do the job nicely).  Also, if you keep good records on your business, this tax preparer should cost you much less than $1,000 per year.

Whether or not using the preparer will save you his/her entire fee in taxes is not the only issue.  Filing a tax return that has been done properly does have some value.