- \ Gerard Gruber
- January 18, 2023
An increasingly complex tax system consumes an ever-increasing amount of taxpayers’ time and money, leading to more frustration and concerns over compliance and how much they’re paying in taxes. For most taxpayers, the amount of work involved in preparing and filing...
An increasingly complex tax system consumes an ever-increasing amount of taxpayers’ time and money, leading to more frustration and concerns over compliance and how much they’re paying in taxes. For most taxpayers, the amount of work involved in preparing and filing their taxes may not warrant hiring a tax professional. But for those with higher incomes or more complex situations, a good tax professional can be both a time and money saver.
Not All Tax Preparers are Created Equal
Not all tax preparers are created equal. They differ widely in the type and level of services they offer, making it essential to take the time to find a professional best suited to your specific needs and circumstances.
There may be hundreds of tax professionals in your area spread across the broad spectrum of experience, quality, and available services. So, how do you choose?
Here are six critical steps to narrow your choices and find the right tax professional for your needs.
Assess Your Tax Preparation Needs
The first step in your search for the right tax professional is to assess your tax preparation needs and determine what level of services you need. Generally speaking, the higher your income, the more complex your tax situation will likely be.
Many Americans have basic needs, requiring simple tax returns that can be prepared online or through a low-cost chain tax preparation company such as H&R Block. Their situations are relatively straightforward, requiring few tax forms.
Investors with multiple sources of income, itemized deductions, non-qualified investment accounts, or who own a business typically require more guidance. In these situations, you aren’t just looking for someone to fill out the forms for you, you are looking for someone to (1) identify potential problems to help you avoid trouble and (2) find savings to minimize your tax lifetime liability.
Work with Professionals Who Help People Like You
Still, it is important to look for tax professionals experienced in working with people like you. If you’re a physician, you may choose to find a tax professional who specializes in working with physicians. Business owners, a professional who works with business owners. For this, you need to understand the profile of a tax professional’s typical client.
Check with Your Colleagues, Family, Friends, and Existing Advisors
Who knows you better than the people closest to you? You may also know enough about them to determine if your tax situations are similar. If you find they are happy with their tax professional, they can be your quickest path to finding the right one.
Don’t forget to ask your other advisors, such as your attorney or financial advisor, as well. These folks probably work with or know of many tax professionals to whom they would be happy to make an introduction.
Verify Credentials and Experience
As a high-income earner, hiring a tax preparer will not be sufficient. You’ll need someone with the expertise and experience to provide tax advice. You could look for a CPA, but it’s important to know that not all CPAs are experienced in handling individual taxes. You could look for an enrolled agent practicing as a tax advisor. Still, it’s essential to check their background for educational and professional achievements, experience level, and whether they are qualified to represent you in front of the IRS.
Ask Questions
Before deciding who to hire, it is essential to interview your candidates. If you wait until tax season for your search, you can’t expect a quality candidate to have time for a lengthy interview. However, they may have time for a ten-minute phone conversation. As part of your conversation, you can get additional information to help verify their background and experience. But it is also an opportunity to get answers not found on their website, such as:
- Who is your typical client?
- How many tax returns do you prepare in a year?
- Is there anyone else involved in preparing returns?
- How do you charge? Hourly or a flat fee?
- How do you secure my data?
- How do you communicate with your clients?
Equally importantly, ask yourself a gut-check question: Is this someone I can trust and work with?
Compare Fees
When you think you’ve found a good match, the fees charged may not be the most crucial consideration unless they are way outside the norm. But it’s important to know how you will be charged and that the fees are in line with other top tax professionals.
Beware of Red Flags
If you’ve done your due diligence as outlined here, you won’t likely run into any red flags. But it doesn’t hurt to keep an eye out for some of the more obvious ones, including:
Big promises: Avoid any tax preparer promising big refunds. They can’t promise anything unless they have a chance to view your financial and tax situation thoroughly.
Doesn’t sign returns: Legitimate tax preparers are lawfully required to sign the tax returns they prepare. Do not sign a return that the tax preparer hasn’t signed.
No physical or online presence: This is not a good sign, especially if you need to get in touch with them.
Charges fees based on your refund: Hourly or flat fees are charged by legitimate tax preparers. Assessing fees based on the size of your refund is unethical.
With your time and money at stake, choosing the right tax professional can be one of the more important financial decisions you make, requiring the kind of diligence outlined here to choose wisely.
At Harbor West, we work closely with many of our clients’ tax professionals and would be happy to give you some referrals should you need them. Tax planning is a year-round event and shouldn’t be brushed aside. After all, the more you keep, the more you can enjoy.
This information is for general purposes and is not intended to provide specific investment advice or recommendations. Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. Individuals should always consult their own financial or tax advisor regarding their specific situation before acting on any information provided. Harbor West and Geneos Wealth Management, Inc. do not provide tax or legal advice.
Securities and investment advisory services offered through Geneos Wealth Management, Inc. Member FINRA/SIPC