At some point in our lives, most of us need a tax consultant. This question can be answered by considering a number of different factors. To help you, here are the situations when you’d need a tax consultant.
- When you make over $200,000 per year
People who make under $200,000 per year have a small likelihood of experiencing an audit. However, as your income increases past the $200k mark, the chances increase. Those who make over this amount have a 3.7% chance of being audited. Scary, right? If you make over $1 million you have a 12.5% chance of being audited. It’s better to be safe than sorry. No one wants a phone call from the IRS. - When you receive K-1s
You will receive a K-1 when you’re a partner in a business or a shareholder in an S corporation. Sometimes abbreviated S Corp, these special types of corporations are created through an IRS tax election. A few K-1 forms are relatively simple to include in your tax return, but tax software is not built to handle forms like this, so you may need professional help. - When you could be subject to the Alternative Minimum Tax
The Alternative Minimum Tax (AMT) is an income tax imposed by the United States on individuals, corporations, and estates. It is a flat rate that is applied to an adjusted amount of taxable income above a certain threshold. It is also referred to as an exception. Some common reasons you may be subject to pay AMT include high state income tax, the sale of qualified small business stock, large business expenses incurred by an employee, and other various reasons. - When you have a foreign source of income
If you own an exchange-traded fund, this is an example of a foreign source of income. If you are a United States citizen or resident, you have to file and pay taxes on income you receive worldwide. Filing taxes in the United States for income you received overseas prevents you from double taxation. To make sure you do this right, you should visit a tax consultant for advice. - When you own a business, are self-employed, or have rental properties
If you own a business, are self-employed, or are receiving rental income, you should hire a tax consultant. He or she can help you find opportunities that can help minimize the amount of taxes by depreciating your business or real estate assets. - When you’re considering selling some real estate
A tax consultant or an accountant can help you use the like-kind exchange to minimize your taxes on the gain of the property. A like-kind exchange is a transaction that allows for the disposal of an asset and the acquisition of another replacement asset without generating a current tax liability from the sale of the first asset. - When you’re setting aside money for your children
Setting aside money for your children can be tax-deferred or tax-free. A tax consultant can help you to find ways for this to be possible whether you’re saving up for their college fund or creating a trust. They can also help you determine how much you should save per year, per month, or whatever is convenient for you. - When you plan to make a large gift
If you hire a tax consultant, they can help you understand the tax advantages of different possibilities, such as using your retirement plan as a source of funds. You may be subject to pay the 40% Federal Gift Tax, no matter who you’re giving the gifts to. However, there are some exclusions that could help you go over the $14,000 limit safely. - When you’re anticipating a big capital tax gain
A tax consultant can help you plan so that the gain is taxed at long-term rates. Doing this can help you minimize your taxes. You may think that you aren’t subject for the capital gains tax, but anyone who sells a capital asset may have to pay. Nearly everything you own is a capital asset, so to avoid any issues, hire an accountant or tax consultant to be sure. - When you’ve experienced a big life event
Things like getting married or divorced, having or adopting a child, financially caring for dependents, receiving an inheritance, losing your job, or starting a new job are all major life events. These are also a good reason to contact a tax consultant because they can potentially affect your taxes in a negative or positive way.
