Yahoo Finance Tax 2021: Should I DIY, or get a tax agent?
With tax time rolling around, it’s time to get your affairs in order and collect all your receipts so you’re prepared to lodge.
But: will you handle it yourself, or will you call in a professional to – legally – maximise your tax refund and help you make sure you avoid scrutiny from the taxman?
Just because you did your taxes yourself last year doesn’t mean your financial situation is the same.
“You can cut your own hair, but you’ll get a better result if you see a professional. It’s the same with completing your tax return,” said CPA Australia tax expert Elinor Kasapidis.
More about Tax 2021:
Hiring a professional to sort out your taxes can give you the peace of mind knowing that it’s in good hands – but it does come at a cost.
Here are a few things to consider to figure out whether it’s worth hiring a tax professional:
How complex are your tax affairs?
If your finances are straightforward – for instance, you have one source of income with minimal deductions to claim – it may be enough to lodge your tax return yourself.
“Once your finances start getting a bit more complex – you might have a mortgage, own, buy and sell large assets, or invest in shares – meeting your tax obligations starts to become trickier as well,” said the Tax Institute’s Scott Treatt.
“Working with an accredited tax agent who understands the system and your position helps ensure you won’t be hit with penalties and that you’re not overpaying where you don’t need to. The same applies if you are subject to an audit or review.”
However, if you’re a business owner, you should almost definitely get a tax professional to sort out your affairs unless you have a very good handle on your finances, Treatt said.
“Firstly to ensure you’re not going to wind up hit with penalties if you misunderstand your tax obligations, but also so that your tax agent can help you make the most of tax rebates, concessions and other help for small business owners.”
How complex are your deductions?
If you have a number of deductions you intend to claim – such as a portion of your bills, a car you use sometimes for work, or depreciation expenses on home office furniture, you may find it tricky handling this on your own, said Finder banking and investment expert Allison Banney.
“You'll need to do your research to make sure you're up-to-date with the current legislation around these specific deductions, and you'll need to do the calculations to determine the correct amount you're legally entitled to claim. Plus, you need to be able to show your workings and calculations to the ATO in case you're audited,” she warned.
Meanwhile, it’s the tax agent’s job to know the ins and outs of tax rules and what people are and aren’t eligible to claim – including things you didn’t even know you could claim.
Has COVID complicated your taxes this year?
For some business owners, tax agents were the difference between keeping their business afloat and folding, said Treatt.
“The Tax Institute has assisted a number of our members to have their client’s JobKeeper and cash flow boost cases reviewed and approved where they had been rejected previously,” he said.
“Those small business owners would not have received that assistance, had their tax agent not known where and how to seek a review.”
Do you have many capital gains or losses to declare?
The COVID-19 pandemic led many people to jump into the share market for the first time – but this may also mean a new thing to consider when filing your taxes this year.
“If you've made a capital gain or loss in the financial year, for example by selling assets like shares or an investment property, you need to make sure you're claiming these correctly when filing your tax return yourself,” said Banney.
“It can become tricky if you've sold several assets within the year, as some of the losses might offset some of the gains.”
A tax agent will not only help you claim correctly, but also find a way to reduce your tax bill, too, she added.
The bottom line
While you can always handle your taxes yourself, and for free, the ATO has already issued warnings about what they’re watching this year.
“The ATO is getting smarter with its data so it’s never been more important to ensure your tax affairs are in order to avoid audits and potentially penalties and interest on unpaid taxes,” said Kasapidis.
When hunting for a tax agent, which will set you back between $55 at the very cheapest to around $200, keep an eye out for their qualifications and how proactive they are.
“Make sure not only to check their credentials but also the status of their registration with the Tax Practitioners Board,” said Treatt.
“Tax is an ever-changing landscape, so look for someone that not only has a formal qualification, but engages with new ideas, takes part in continued professional development and makes it a point to update their skills and knowledge regularly.”
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