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  • August 9, 2022

How to choose the right tax advisor

How to choose the right tax advisor

How to choose the right tax advisor 150 150 360 Wealth Consulting

Small business owners and individuals often struggle to find the right professionals. I know I’ve made mistakes with service providers for the business as well as trade specialists at my home. It makes sense. You hire people to do things you don’t do. It’s tough to know who’s right or wrong for your needs. This can be particularly true when trying to figure out how to choose the right tax advisor.

Fortunately, there are easy ways to identify a good tax preparer. It’s not just the return preparation fee and current mistakes you need to consider. With the new rapid changes in tax law, there’s a lot more a provider needs to know. You pay the price for poorly completed returns. Auditors will require three years back worth of errors be paid without question. When substantial errors are found, fines, interest, and back taxes owed can be levied on the past six years.

answers matter

Most financial professionals will focus on the tasks. That’s what they’re trained to do. Colleges and certification boards don’t teach the people and problem solving skills needed for client communications. So they do what the know: the numbers. The thing is, times have changed a lot since the standards most are working from, those set by the Baby Boomer generation, were created. Most financial professionals have not.

Taxes aren’t just about the numbers. There are a lot of variables that can come into play with businesses, estate planning, investing, and personal factors. Before you commit to a particular advisor, ask a question or two to find out if they can – or will – look at your account strategically.

Why is this business in the same industry paying less taxes than I do? Can I deduct items that I use for both business and personal tasks? Is there an easy way for me to do bookkeeping for the household? These are just examples. The issues and questions you have will probably be different. Pick one or two to ask. This will likely tell you if a professional provides a customized approach to your needs or has a boilerplate operation. Don’t be surprised if you don’t get an answer. That’s common. Move on and try to find someone who is willing and able to think outside the box.

When price is the pitch, you get what you pay for

You’ve probably heard local tax firm claims they’re cheaper than the big guys. I’ve learned the hard way to be wary of those who compete on price. It’s tiring and expensive to fix work done wrong.

Let’s look at how national tax preparation chains operate. They don’t require experience from those they hire. There are no credentialing requisites. It’s unlikely your preparer is current on tax law. According to Indeed, H&R Block tax preparers average $11.11 an hour. I pay my administrative support staff more than that. It’s well below poverty level for a family of three. Ouch. Makes you wonder what kind of expertise you get from small firms that claim they’re cheaper.

Do tax preparer credentials matter?

It depends. CPAs may not have current tax knowledge. Enrolled Agents (EAs) are licensed by the IRS and specifically trained in federal tax planning, preparation, and representation. Some individuals go out of their way to seek out appropriate continuing education or surround themselves with people who keep current. Others grind out tax returns the way they always have, figuring there’s nothing new they need to learn. Credentials don’t necessarily mean tax expertise, but they can indicate a specialized and frequently updated education.

Do you really want to roll the dice when choosing a tax advisor
Do you really want to roll the dice when choosing a tax advisor?

QuickBooks Pro Advisors are useful too. New balance sheet and other reporting requirements for small business owners make this tool a wise one to integrate into your bookkeeping. 

Questions to ask potential tax advisors

Getting some information on how a tax preparation firm operates can tell you a lot about whether they’ll be a good fit for you. Consider asking the following as you consider how to choose the right tax advisor:

  • Do credentialed professionals review my tax return before you hand it to me?
  • What industry designations does your staff have?
  • What’s the percentage of returns you complete for businesses?
  • Are your preparers current on the latest tax laws?
  • What do you do if mistakes are found?
  • Will you be available to represent me in an audit? How much will it cost?
  • Do you look at returns strategically to try to find additional tax savings?
  • What does your tax preparation fee include?

Choose long-term thinking with tax advisors

DIY or cheap might seem prudent for your tax needs, but chances are, hiring the right provider will save you more than they cost. Tax returns aren’t boiler-plate. A conscientious tax specialist can find tax saving strategies churn-mills can’t. There’s that peace of mind thing, too. Audits are stressful enough without the added challenge of trying to defend errors you don’t understand. As you ponder the question of how to choose the right tax advisor, consider tomorrow. A solid tax strategy base can make a big difference in your future financial security.