As we age, our financial picture gets more and more cloudy. We are no longer dealing with receiving a simple, single, W-2 form from our employer which is then plugged into a do-it-yourself tax form. Instead, we're faced with a variety of income streams, each with its own rules, regulations and tax implications. Unfortunately, this can lead to complications, confusion and an ever growing list of questions.
What type of IRA do I have, Roth or traditional? How much was my required minimum distribution this year? Were my 401k contributions pre-tax or not? Will I owe any taxes on the proceeds from that reverse mortgage? Are my freelance jobs or crafting endeavors taxable income, or are they treated as a hobby? Should I apply this year's refund towards next year's potential bill?
If you don't know the answers to those questions, or at least whether those questions apply to you, then a tax professional is probably an excellent investment.
A tax preparation service can help seniors navigate the complicated rules regarding distributions from various types retirement plans and the tax consequences of each one. More than that, a tax preparation service will relieve you of a stressful, complicated process.
By allowing a professional, trained in navigating the maze of ever changing exemptions, tax credits, and legislation, to handle your taxes, you are less likely to inadvertently invoke a penalty, or miss a potential credit. Given the constant changes in this field, a tax preparation service can also help you avoid mistakes that may trigger IRS scrutiny. While every return stands an equal chance of being audited, certain mistakes and errors are more likely to trigger an audit or cause a so-called "flag" to be raised.
For the so-called "snow bird" retirees, a tax preparation service can often juggle the requirements of multiple states, and will be able to help them understand where their "residence" is for tax purposes, as well as what that implies financially.
As you can see, seniors can greatly benefit from the use of tax preparation services. Whether it's navigating a complex tax code, untangling retirement income streams or dealing with issues of domiciles and residences, trained professionals are often better equipped to quickly and efficiently assist you in preparing your taxes.