12 Jun Should Doctors Hire A CPA to Do Their Taxes?
I’m in the business of getting paid to do taxes for other people but that doesn’t mean I’m going to say all doctors should hire a CPA to do their taxes. Rather, I take a more nuanced approach in answering this question, which I get asked quite often.
I came up with 3 reasons why a doctor should hire a CPA and 3 reasons why a doctor should NOT hire a CPA.
3 Reasons To Hire A CPA
1 – You need to prepare a Form 1120S, Form 1065, or 1120. I don’t recommend that any doctor attempt to prepare these forms on your own. There’s a lot of complexity that is difficult to learn on your own that could lead to an incorrect return.
2 – Your income is around the top of the phase-out range for the Qualified Business Income deduction and you’re self-employed. A knowledgeable CPA can help plan to maximize your QBI deduction while optimizing your retirement plan contributions.
3 – You’re invested in activities that are generating losses. This could include rental real estate or any other business venture throwing off losses. You’d need to brush up on the finer points of the passive activity rules of §469, the basis rules of sub-chapter S & K, and don’t forget about the at-risk rules of §465.
3 Reasons NOT To Hire A CPA
1 – You are a true DIYer. You would rather spend time learning about taxes than paying a CPA $1,000+ every year.
2 – You have a general distrust of financial professionals. There needs to be a certain amount of trust between you and your CPA to get the most value. While I like to think that CPAs are trusted more than the financial advisors out there, I recognize that not all CPAs are qualified to be doing taxes for others.
3 – You are sure you’re not missing anything. Many situations are simple enough that you can be confident you’re doing it right. If that’s you, you’re better off doing your own taxes.
As a CPA specializing in taxes, I recognize that not every doctor needs to hire a CPA but there are many that absolutely do. I’ve talked numerous people out of hiring me and referred them to online tax preparation options. My favorite is www.taxhawk.com. I worked at an accounting firm with the current head tax person there.
But there are people and situations where hiring a CPA brings in way more value than the fees paid each year. So it’s up to you to decide what the best fit for you really is.