By: Ava Merritt
Why This Decision Matters
Many people debate whether to file taxes themselves or work with a tax advisor. Software programs make filing seem simple, but the real question is whether you could be losing money by missing deductions, choosing the wrong structure, or misreporting income. For many individuals, especially business owners and real estate investors, filing yourself may sometimes cost more in lost opportunities than the fee you pay an advisor.
Knowing when to outsource your tax planning can help make your financial life cleaner, more organized, and more efficient.
Situations Where Filing Yourself Works
Some taxpayers have simple returns and do not need advanced planning. Filing yourself may be fine if:
- You only have W2 income
- You have no dependents
- You rent instead of owning property
- You do not have investment income
- You do not contribute to complex retirement accounts
- You do not have business, freelance, or gig income
For simple financial profiles, DIY filing is often cost-effective.
When You Should Hire a Tax Advisor
A tax advisor becomes more valuable when your financial life no longer fits into a basic template. The more moving parts you have, the more opportunities there are for potential legal tax reduction and for mistakes.
You Have Business Income
Business owners may benefit significantly from strategic tax planning. If you:
- Own an LLC, S corporation, or partnership
- Have contractors, employees, or payroll
- Purchase equipment, software, or assets
- Write off expenses
- Receive 1099 income
You may want an advisor to help structure your finances correctly. Business taxes can involve self-employment tax, payroll tax, depreciation, and entity strategy, areas where DIY software may not fully cover every scenario.
You Own Rental Property or Short-Term Rentals
Real estate investors often benefit from a tax advisor because of:
- Depreciation
- Cost segregation
- Material participation rules
- Short-term rental tax classification
- Repairs vs improvements
- Mortgage interest
- Property tax deductions
These areas can influence whether you offset income, how much you depreciate each year, and whether losses may reduce taxes elsewhere.
You Have Multiple Income Streams
- Side hustles
- Gig work
- Freelance work
- Investments
- Royalties
- Partnership income
- Digital sales or creator income
Multiple income streams can require planning to help avoid potential double-taxing yourself or underreporting income.
You Experienced Major Life Changes
- Marriage
- Divorce
- Children
- Buying or selling a home
- Starting or closing a business
- Relocation
These events can affect tax brackets, credits, deductions, and filing choices.
Your Income Has Increased
Higher income can bring additional complexity, such as:
- Phaseouts
- AMT exposure
- QBI limitations
- Charitable planning
- Retirement contribution strategy
An advisor may help you evaluate ways to structure income to potentially avoid overpaying.
You Want to Reduce Your Tax Bill Legally
Tax advisors may use planning strategies such as:
- Proper entity selection
- Payroll optimization
- Documentation systems
- Retirement structures
- Bonus depreciation
- Business deductions
- Expense timing
- Accountable plans
These strategies typically require more than simple software, especially when your situation is complex.
You Received an IRS Notice or Audit Letter
Any form of IRS communication is often best handled with professional support. A tax advisor can:
- Respond to notices
- Provide documentation
- Clarify reporting
- Help reduce the chance of penalties
- Support you during audits
DIY filing may not provide the same level of support in these situations.
You Want to Plan for the Future
A tax advisor helps you plan for:
- Large purchases
- Business expansion
- Real estate acquisitions
- Compensation strategy
- Cash flow modeling
- Multi-year tax efficiency
Software typically looks backward. Advisors can also help you plan ahead.
Why DIY Software Creates Hidden Problems
Most tax software focuses on fast filing, not optimization. Common issues include:
- Incorrect depreciation
- Missed deductions
- Improper categorization
- Unclaimed credits
- Incorrect payroll structure
- Overpaying self-employment tax
- Using the wrong filing status
- Mixing personal and business expenses
These mistakes can cost more than professional fees in some cases.
How a Tax Advisor Saves You Money
A tax advisor may improve outcomes by:
- Reducing taxable income
- Structuring payroll for S corporations
- Helping you qualify for QBI deductions
- Identifying potentially available credits
- Implementing depreciation strategies
- Documenting deductions properly
- Improving audit support
For business owners and investors, these strategies can sometimes lead to meaningful savings each year, depending on the situation.
The AE Tax Advisors Approach
AE Tax Advisors focuses on proactive, year-round planning for clients with growing or complex financial lives. This includes:
- Entity reviews
- Payroll planning
- Real estate tax strategy
- Quarterly check-ins
- Year-end optimization
- Documentation systems
- Deductions and credit analysis
- Audit support
The goal is to keep clients compliant while working to reduce taxes legally.
Final Thoughts
Hiring a tax advisor is not about the complexity of filing; it is about the strategies that surround it. When your financial life expands beyond a simple W2, a tax advisor can become a helpful financial partner. The cost of professional planning is often small compared to the potential savings, clarity, and support it may bring.
For high-income individuals who want a strategic partner steering their tax planning, more information is available at AETaxAdvisors.com.
Disclaimer: This article is provided for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules can change, and the impact of any strategy depends on individual circumstances. Before taking action based on this information, consider consulting a qualified tax professional who can review your specific situation.
