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Pegasus Financial Planning, LLC

Tax Season - Part 1: Do I need an accountant?

Ty McGilberry

Tax PlanningTax season, that time of year between January 1st and April 15th for individuals, families, and small business owners to file their taxes.  We wait anxiously in late January and early February for our W2s, 1099s, and other financial documents.  For many of us, figuring out what the IRS forms mean is hard enough, which is why we wonder who to turn to for help.  Sound familiar?

Two questions we often hear during tax season are:

  • Do I need an accountant?
  • How do I know what topics to discuss based on my tax return?

We discuss each of these questions in a two-part series.  First, we address who should consider working with an accountant. 

Most people think that all an accountant does is help up gather our documents, they help us navigate the maze of forms, and they give us the documents to sign to send off to the IRS.  Before we get into how to take actions from based on our tax return, let’s discuss who should talk to a tax professional and how they can help us.

Who should consider working with an accountant… 

The quick answer is anyone that falls into these categories:

  • The thought of doing your own taxes scares or overwhelms you
  • Your taxes are complicated, or a complicated tax situation happened in the previous year
  • You’ve waited until the last minute and the tax deadline is around the corner
  • You are being audited by the IRS

In our experience, there are a number of other people who benefit greatly from working with an accountant.

Sales professionals with variable income

Sales professionals like real estate and insurance agents, product and service reps, and even servers in high end restaurants should consult a tax professional to best manage their tax liabilities.  Some of these professionals are W2 employees and some are 1099 independent contractors.  In both situations, the variable income can make it very difficult to preplan for taxes from year to year.  In addition, 1099 independent contractors have unique planning needs related to expenses, income, and tax management that lead many of them to owe taxes from previous years or to get audited.  So, these sales professionals above all should work with an accountant and planner.

Business owners

Being a business owner has many challenges before you even begin to start considering taxes.  Like sales professionals, business owners run the risk of owing back taxes and being audited.  The stress of tax season, along with what corporate structure is best and which employee benefits to offer, if any, are just some of the tax-related challenges business owners face.  And decisions which may lower your taxable income now can also impact your ability to apply for mortgages or actually cause you to pay even higher taxes later, which is why it’s important to coordinate your planning efforts with all of your advisors.

Bought or sold real estate during the year or planning to during the current year

Buying and selling real estate can have impacts on tax planning, insurance needs, and even estate planning..  For example, utilizing different tax-planning strategies in your decision-making process can affect you and your beneficiaries when you’re no longer around.  These are key decisions an accountant, an estate attorney, and a financial advisor can help you to plan. 

First-time parents

Having a baby is one of the most impactful changes in the lives of taxpayers.  Understanding everything from dependent tax credits to planning for future education expenses can affect your taxes, not just for the current tax filing year, but for years to come.  Understanding how childcare, summer camp, college projections, and other parental expenses impact your taxes are all reasons to consult an accountant when becoming a parent.

Caring for elderly parents and other loved ones

Caring for loved ones can be both stressful and a loving act.  And knowing how it impacts your taxes goes a long way to understanding if and how you might declare a parent on your taxes.  This can get complex, because it affects your parent’s taxes as well.  Before you claim someone other than a child, it is imperative to speak with a tax professional and that all parties understand how their taxes are impacted and who can be claimed for tax purposes.

Newly married couples or divorced individuals

Marriage and divorce are opposite sides of the same coin.  In both cases, the ramifications due to the change in relationship status have direct impacts on tax returns.  Married filing jointly, head of household, and single are filing options that each come with distinct advantages and disadvantages.  Working with your tax advisor to determine which is appropriate for your individual family situation will have a direct impact on how your taxes are calculated. 

On the flipside of the coin, alimony, Qualified Domestic Relations Orders (QDROs), property settlements, and other parts of the divorce settlement are all reasons to sit down with a tax and financial advisor both during and after the divorce.  When a couple divides real estate, property, and other tangible assets, there are a number of tax considerations.  Some important questions include what is the cost basis of the assets, are the assets being sold, is one owner buying out the other owner, how are the assets currently titled, along with a number of other factors.

Pre-retirees ramping up to retirement

Preparing for retirement can be one of the most stressful times in your financial life.  Common questions are when to retire, when to take social security income, when to take retirement distributions, which accounts should be tapped for retirement, and others that each have their own tax implications.  When living on a fixed budget becomes a reality, misunderstanding any of these decisions can go beyond just the taxes impacts because the decisions made may also influence your income during retirement.

These are just a handful of people that should consult a tax or financial advisor. If you have questions about your personal situation, please schedule a consultation with us today.


This article was prepared by Pegasus Financial Planning. Advisory services are offered through Sowell Management. Pegasus Financial Planning and Sowell Management are not affiliated. Sowell Management does do business under the name of Pegasus Financial Planning. This information is intended to be educational and is not tailored to the investment needs of any specific investor.

Sowell Management does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Sowell Management cannot guarantee that the information herein is accurate, complete, or timely. Sowell Management makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.

Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the author and not necessarily those of Sowell Management or its affiliates. Sowell Management does not assume any duty to update any of the information.

Past performance is no guarantee of future results.

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