5 Underrated Benefits of Professional Tax Help in Boosting Refunds

Tax season is here! The deadline for most U.S. taxpayers to file their tax returns for 2023 taxes is April 15, 2024. For the next month and a half, millions of Americans will be puzzling over old receipts, fretting over spreadsheets, and wondering how well they actually understand IRS rules.

Not everyone needs professional tax advice. If your adjusted gross income (AGI) is $79,000 or less, you can file federal taxes for free. But if you have higher income, own a small business, or are a higher level of savvy taxpayer with more complex personal finances, you might benefit from professional tax help.

Let's look at a few ways that professional tax help can improve your finances and increase your chances of a tax refund.

1. Double-check for all available tax deductions

Working with a professional tax advisor, like a certified public accountant (CPA), can help you make sure you're getting all of the tax deductions that you deserve, such as:

• Traditional IRA contributions: Depending on your income, you can deduct up to $6,500 for 2023 ($7,500 if you're age 50 or over)
• Health savings account (HSA) contributions: You can deduct $3,850 for self-only coverage or $7,750 for family coverage for 2023
• Standard deduction: $13,850 for singles, $27,700 for married couples filing jointly

Professional tax advice can also help you get any little-known tax deductions that apply to your situation. These could include deductions for gambling losses, pet care expenses for certified service animals, or capital gains tax benefits from reinvested stock dividends.

2. Make sure you're following IRS rules

Professional tax help can also reassure you that you're filing taxes correctly and following the IRS rules. Many people have misunderstandings about tax deductions.

For example, many middle class homeowners are surprised to learn that they do not get a tax break for home mortgage interest. You can only get a tax break for your mortgage interest if you itemize deductions (instead of taking the standard deduction). And ever since the 2017 Tax Cuts and Jobs Act, the standard deduction has gone up significantly -- and this has made it harder for most taxpayers to itemize deductions.

The $10,000 State and Local Tax (SALT) deduction cap is also a point of contention for many homeowners in higher-tax states. Even if you paid $10,000 of local property taxes and $8,000 of state income taxes in 2023, you still can only deduct $10,000 of that combined amount -- and only if you have enough other deductions to itemize.

A professional accountant can stay up to speed on the latest IRS rule changes, and make sure your tax return follows the law.

3. Make strategic tax-planning moves

People with lower incomes who qualify to file taxes for free usually cannot make many clever maneuvers to save money on taxes. If you work for one employer and have W-2 income, your taxes are pretty simple, and that can be a good thing.

But if your income has increased significantly, if you own a home, if you run a small business, and if you have multiple tax-advantaged accounts like a traditional IRA and health savings account, your taxes are more complicated. This complexity can also be a good thing -- because professional tax advisors can help you make smart tax-planning moves.

An accountant can help you spot opportunities to move money to increase your tax deductions, such as:

• Increasing your charitable contributions
• Maxing out your traditional IRA
• Getting a high-deductible health plan so you can use a health savings account

Small business owners can often benefit from professional tax advice, because business tax returns are more complicated. A good accountant can help you set up your small business to file taxes as an S corporation, which can save you money on payroll taxes and improve your financial flexibility. Professional tax help can get you the optimal tax treatment for your business income and personal finances.

4. Gain better visibility into your taxes

Working with an accountant will give you better clarity for why your tax return works the way it does. For many people, filing taxes is confusing and frightening -- there's lots of sternly worded fine print and bureaucratic IRS language that's hard to understand.

A good accountant can help demystify your Form 1040. Professional tax advisors can explain why you got a refund this year (or why you owe taxes), what you could do differently to have a better tax situation next year, and how to set yourself up for long-term tax-planning success.

5. Get peace of mind and personal advice

One of the hardest to measure, but highly valuable, reasons to hire professional tax help is that it takes a burden off of your mind. I love working with my accountant, because it feels good to have a professional advisor in my local area who I can call on the phone or meet with for personal advice.

Some of the best tax software also offers access to professional tax help on-demand, and that can be a good fit for lots of people's tax returns. But if you're a small business owner, you might want to consider hiring an accountant who can be a dedicated resource for your tax returns.

Bottom line

Professional tax advice can save you time and money by increasing your tax refund, but it can also set you up for bigger success in your personal finances. Filing taxes is like an annual temperature check for your financial life. Working with a good accountant can help you maximize your tax benefits, stay on track for retirement savings, and strengthen your financial foundation.