Seeking professional help: When does hiring a tax preparer make sense?

Key takeaways

• As 31 March approaches, taxpayers across India are planning how to maximise their savings.
• While e-filing platforms are gaining much traction, employing a tax preparer holds a strong value proposition as yet.

With the end of the financial year approaching, tax season is in full bloom. T’is the season to be scrambling for late-minute investment options and income tax return filing. But, filing taxes can be a dry and challenging experience, especially for individuals with limited or no familiarity with the process. Moreover, considering the ever-evolving tax landscape of India, many taxpayers do not have an accurate understanding of deductions, tax rates, and tax credits that can help save money.

For example, utilising the wrong form to file your ITR can attract a hefty fine and even legal implications. As per section 270A, individuals who under-report or misreport income are subject to a penalty of 200% of the tax value they seek to evade.

Non-compliance in any form can result in penalties, and in some circumstances also lead to prosecution. This is why hiring a tax consultant can sometimes be the right decision to protect yourself and increase savings.

Who is a tax preparer?

Tax consultants are qualified professionals who are proficient in the understanding and practice of tax laws, procedures, and provisions outlined in the Indian taxation system, governed by central and state governments.

Since the stipulated guidelines for taxation can be complex and change from year to year, these experts help individuals and businesses by protecting their interests and ensuring compliance with all tax requirements.

Consider the following reasons to assess if hiring a tax planner might be the right move for you:

1. Your income statement is complicated

Starting with an increasingly common struggle tax-payers with multiple sources of income face. If your finances are uncomplicated, there is a good chance you can manage your own taxes. Uncomplicated, in this case, would mean when you don’t receive much income apart from your regular job.

However, if your financial statement is complex with a mix of income from investments, employment, rent, freelancing, etc., a tax pro can help you streamline the filing process and advise you on ways to save.

2. You’ve made mistakes in previous returns

If there are errors in the returns you have previously filed, employing the services of a tax preparer may be a wise decision. Often, taxpayers find themselves facing penalties for unintentional mistakes. Some of the most common errors include selecting the wrong forms, not verifying ITR, under-reporting income, and failing to disclose capital gains or losses.

In such a situation, tax experts can help you prevent facing penalties by rectifying previous and present mistakes.

3. You’ve come into money

Inheriting wealth, whether through shares, property, gifts, or cash, is subject to complex tax implications. A limited understanding of tax nuances concerning inherited assets can cause you to overpay or even under-report by accident. Working with a professional tax consultant can help you mitigate any risks regarding taxation and fully realise your financial obligations as a result of your new-found wealth.

Conclusion

Hiring a tax preparer can effectively simplify your end-of-year tax filing complexities, however, it is important to choose the right professional to work with. A large number of taxpayers choose to save a quick buck by employing the services of unqualified or inexperienced individuals. As a result, they end up paying considerably more to rectify mistakes that could have been avoided by a professional consultant.

Your tax preparer should be a resource that alleviates your pains and struggles instead of adding to them. Make sure your vetting process is watertight and filled with relevant questions that assess their capability and proficiency.