A good tax planner should do more than help you file a tax return. Look for someone who understands your financial situation, communicates clearly, is available throughout the year, has appropriate experience and credentials, and takes a proactive approach to identifying tax considerations before important financial decisions are made.
The right tax professional should also be willing to work alongside the other professionals involved in your financial life.
Start by Understanding What You Actually Need
Not everyone looking for tax help needs the same thing.
You may simply need someone to prepare and file an annual tax return.
Or you may have a more complicated situation involving:
A business
Retirement income
Investments
Stock compensation
Real estate
Multiple sources of income
Significant charitable giving
An inheritance
A major asset sale
Estate planning
Estimated tax payments
An upcoming retirement
The more moving pieces you have, the more important it can become to find someone who looks beyond April 15 and considers how today's decisions could affect your taxes in the future.
Look for a Tax Professional Who Thinks Proactively
Tax preparation generally looks backward.
By the time a tax return is being prepared, most of the financial activity being reported has already happened.
Tax planning looks forward.
A tax planner may help you consider the potential tax impact of a financial decision before you make it.
That could include conversations around retirement-account distributions, investment gains and losses, charitable giving, business decisions, Roth conversions, withholding, estimated payments, or other financial events.
This does not mean every tax bill can or should be avoided. The goal is to understand the potential tax consequences of your decisions while there may still be time to evaluate your options.
Check Their Qualifications and Experience
Credentials aren't the only thing that matters, but you should understand who you're working with.
The IRS maintains a searchable Directory of Federal Tax Return Preparers with Credentials and Select Qualifications. The directory includes certain preparers with active Preparer Tax Identification Numbers who also hold recognized credentials or qualifications, including CPAs, enrolled agents and attorneys.
The IRS also recommends checking a tax professional's qualifications and history before hiring them.
Beyond credentials, ask about the person's actual experience.
Someone who primarily works with straightforward individual returns may have a very different practice from someone who regularly works with business owners, retirees, investors, executives, or families with complex financial situations.
A few questions worth asking include:
What types of clients do you typically work with?
Do you provide tax planning in addition to tax preparation?
Are you available throughout the year?
How do you handle more complicated tax situations?
Will I work directly with you or with someone else on your team?
Can you coordinate with my financial advisor, attorney, or other professionals?
Make Sure They're Available Outside of Tax Season
Your financial life does not only change between January and April.
You might retire in July.
Sell an investment in September.
Receive an inheritance in October.
Sell a business in November.
Or realize in December that a major financial decision could have tax consequences.
The IRS specifically recommends considering whether a tax preparer will remain available after the filing deadline in case questions or issues arise.
For someone seeking ongoing tax planning, year-round accessibility can be even more important.
Find Someone Who Asks Questions
A good tax planner should want to understand more than the numbers printed on last year's return.
They may ask about things such as:
Your income
Your investments
Retirement accounts
Business interests
Family changes
Charitable goals
Real estate
Expected major purchases or sales
Retirement plans
Changes in employment
Estate considerations
Financial goals for the next several years
Why?
Because tax decisions don't exist in isolation.
A decision involving your investments may affect taxes. A retirement decision may affect taxes. A business decision may affect taxes.
Understanding the bigger picture can help a tax professional identify issues that might otherwise be missed.
Look for Coordination Between Tax and Financial Planning
This is particularly important when your financial situation becomes more complex.
Imagine that you're considering a Roth conversion.
From a financial-planning perspective, you may be thinking about future retirement income, account balances and long-term tax diversification.
From a tax perspective, you need to consider the additional taxable income created by the conversion and how it interacts with the rest of your tax situation.
Or perhaps you're considering selling appreciated investments.
The investment decision and the tax consequences are connected.
The same can be true for retirement withdrawals, charitable giving, business transactions, estate strategies and many other financial decisions.
Ideally, your tax and financial professionals should be able to communicate rather than operating in completely separate worlds.
At Generations Tax & Wealth Management, tax and wealth planning are brought together under one roof so these conversations can be considered as parts of the same financial picture.
If you'd like to talk with our team about your situation, you can schedule a conversation here.
Ask How They Charge
You should understand how your tax professional is compensated before engaging them.
Ask:
How are your fees determined?
Is tax planning included or separate?
Are meetings throughout the year included?
Will additional forms or complexity change the price?
Are there separate charges for amended returns or IRS matters?
The IRS cautions taxpayers against return preparers who calculate their fee as a percentage of the taxpayer's refund or make claims about obtaining larger refunds than competitors.
A reputable professional should be able to explain how their pricing works.
Pay Attention to Communication
Technical knowledge is important.
But so is the ability to explain what that knowledge means for you.
You should feel comfortable asking:
Why are we doing this?
What are the alternatives?
What happens if I don't do this?
How does this affect the rest of my financial plan?
A good tax professional should be able to translate complicated concepts into language you can understand well enough to make an informed decision.
You don't need to become a tax expert.
But you should understand the strategy being discussed.
Watch for Red Flags
The IRS recommends choosing tax professionals carefully and highlights several warning signs.
Be cautious if someone:
Promises unusually large refunds
Bases their fee on the amount of your refund
Is unwilling to sign the return they prepare
Is difficult to locate or unavailable after tax season
Cannot clearly explain their qualifications
The IRS provides resources for checking credentials and certain disciplinary information when evaluating tax professionals.
Tax Planning Should Be Personal
There isn't a single tax strategy that is right for everyone.
Two people with the same income could have completely different financial situations.
One may own a business.
Another may be preparing for retirement.
One may have significant taxable investments.
Another may have most of their wealth inside retirement accounts.
One may want to leave a large estate to children.
Another may prioritize charitable giving.
Good tax planning begins with understanding your circumstances and your goals, rather than simply looking for a generic strategy to lower this year's tax bill.
How Do You Know If You've Found the Right Tax Planner?
A good tax-planning relationship should give you confidence that someone understands your financial picture and is thinking ahead with you.
Look for a professional who:
Has relevant qualifications and experience
Takes time to understand your situation
Provides proactive planning when appropriate
Is available throughout the year
Clearly explains recommendations
Is transparent about fees
Works collaboratively with your other professionals
Thinks about taxes as part of your broader financial life
You shouldn't feel as though you only hear from your tax professional when it's time to collect documents for another return.
Bringing Tax and Wealth Planning Together
Taxes can touch nearly every area of your financial life.
That's one reason Generations Tax & Wealth Management brings tax preparation and planning together with financial planning, investments, retirement planning and wealth management.
Rather than treating your tax return and your financial plan as completely separate conversations, our goal is to help clients consider how the pieces of their financial lives interact.
If you're looking for a tax planner or simply want to understand whether a more coordinated approach may make sense for you, schedule a conversation with Generations Tax & Wealth Management.
This material is provided for informational purposes only and is not intended as individualized investment, tax, accounting, or legal advice. Tax laws and individual circumstances vary, and you should consult the appropriate qualified professional regarding your situation.