Maximizing Your Tax Savings: A Guide to Hiring the Right Tax Advisor
Published on February 8th, 2023
Are you hiring a tax advisor? Then you have to know that choosing the right tax advisor is crucial when building a tax or wealth strategy. A good tax advisor helps to formulate and execute these strategies, ensuring that you keep more of your money.
Tax Advisors vs Tax Consultant vs Tax Accountant
Tax advisor, tax consultant, and tax accountant are all professionals who specialize in helping individuals and businesses navigate the complex world of taxes, but there are some key differences between them:
- Tax Advisor: A tax advisor is a professional who provides guidance and advice on tax-related matters. They typically have a broad understanding of tax laws and regulations and can offer insights on tax planning, compliance, and optimization. Tax advisors can be either individuals or firms, and they often work with a wide range of clients, including individuals, small businesses, and large corporations.
- Tax Consultant: A tax consultant is a professional who specializes in tax planning, compliance, and optimization. They typically work with businesses and organizations to identify tax-saving opportunities and help them comply with tax laws and regulations. Tax consultants often have expertise in specific areas of taxation, such as international tax, sales tax, or property tax.
- Tax Accountant: A tax accountant is a professional who specializes in preparing tax returns and ensuring compliance with tax laws and regulations. They typically work with individuals and businesses to file accurate tax returns and minimize tax liabilities. Tax accountants may also provide guidance on tax planning and optimization strategies.
What do tax advisors do?
When you hire a tax advisor, their primary objective will be to help clients reduce their tax liability or maximize their tax refunds within the limits of the law. They play a crucial role in ensuring that their clients are compliant with tax regulations and help them navigate through complex tax codes.
Here are some tasks that tax advisors typically perform:
- Conduct research on tax laws and regulations to stay up-to-date with changes that could impact their clients.
- Prepare and review tax returns for individuals and businesses, including income taxes, sales and use tax, property tax, and estimated taxes.
- Advise clients on tax planning strategies, such as deductions and credits that could reduce their tax liability.
- Represent clients before the Internal Revenue Service (IRS) or state tax authority in the event of an audit or dispute.
- Review proposed legislation that could impact their clients' tax liabilities.
Checklist for hiring tax advisors
- Credentials: Look for a tax advisor who is a certified public accountant (CPA), enrolled agent (EA), or tax attorney. These professionals have specialized training and expertise in tax matters.
- Experience: Choose a tax advisor who has experience working with clients in situations similar to yours. For example, if you are a small business owner, look for a tax advisor who has worked with other small business owners.
- Reputation: Check online reviews and references from past clients to gauge the tax advisor's reputation. You can also check with the Better Business Bureau and state licensing board to see if there are any complaints against the advisor.
- Communication: Choose a tax advisor who is easy to communicate with and is responsive to your needs. You want someone who will take the time to explain complex tax matters in a way that you can understand.
- Fees: Be clear on how the tax advisor charges for their services. Some may charge an hourly rate, while others may charge a flat fee or a percentage of your tax refund. Make sure you understand the fees upfront and that they fit within your budget.
- Availability: Make sure the tax advisor is available when you need them. This is especially important during tax season when deadlines are tight.
- Specialization: If you have a specific tax issue that needs to be addressed, look for a tax advisor who specializes in that area. For example, if you need help with estate planning, look for a tax advisor who specializes in that area.
- Technology: Consider a tax advisor who uses technology to make the tax preparation process easier and more efficient. This may include electronic filing, secure online portals for sharing documents, and other digital tools.
- Trustworthiness: Choose a tax advisor who is honest and trustworthy. This is important since you will be sharing sensitive financial information with them.
Steps to follow when hiring tax advisors
With tens of thousands of pages in the US federal tax code, plus state and local taxes and international business taxes, choosing the right tax advisor can be challenging. Here are five steps to follow when selecting a tax advisor:
- Step 1: Find high-caliber advisors: While there are many tax advisors, not all are created equal. Screening for basic qualifications is simple, but it's more challenging to identify the best. Look for a community of passionate accounting professionals who are vetted and trained in a proprietary system for reducing taxes permanently.
- Step 2: Choose wisely: Look for a tax advisor who is passionate about applying tax law to support your financial future, with creative ideas for legally saving your money. Also, consider someone who is a good fit, comfortable to work with, and has good credentials.
- Step 3: Create a long-term strategy: Work closely with your tax advisor to create a long-term tax strategy that defines your goals, explores various opportunities, and maps out a plan for permanent tax savings.
- Step 4: Meet regularly: Talk with your advisor regularly to discuss your goals, provide updates on your business, and make strategic moves to support your financial dream.
- Step 5: Build a team: Your tax strategy is one piece of your overall business plan, so build a team to support you. Your team should include a tax advisor, legal advisor, insurance advisor, and financial advisor, all working together to ensure your success.
Skills tax advisors should possess
When hiring a tax advisor, it's important to assess their skills to ensure they have the knowledge and expertise needed to handle your tax affairs effectively. Here are some skills to check and how to assess them:
- Taxation knowledge: Check their understanding of tax laws and regulations, including federal, state, and local tax laws. You can ask them questions about specific tax situations and scenarios to assess their knowledge.
- Analytical skills: Tax advisors must be able to analyze complex tax data and apply it to their clients' financial situations. You can assess their analytical skills by giving them a real-world tax scenario and asking them to explain how they would handle it.
- Attention to detail: Accuracy is critical in tax preparation, so it's essential to assess a tax advisor's attention to detail. You can ask them to walk you through their process of reviewing and verifying tax information.
- Communication skills: Tax advisors must be able to communicate complex tax information clearly and effectively to their clients. You can assess their communication skills by having them explain tax concepts to you in layman's terms.
- Problem-solving skills: Tax advisors must be able to identify and solve problems related to their clients' tax issues. You can assess their problem-solving skills by giving them a hypothetical tax problem and asking them to walk you through their solution.
- Technology skills: Tax preparation software is a vital tool for tax advisors. You can assess their technology skills by asking them about the software they use and their proficiency in using it.
- Client management skills: Tax advisors must be able to manage client relationships effectively, which includes handling sensitive financial information. You can assess their client management skills by asking them about their experience working with clients and how they handle difficult client situations.
If you're unsure about how to assess the skills of a tax advisor, you could consider using professional skill assessment solutions such as HireQuotient. We offer specialized assessments that are designed to help recruiters and hiring managers make data-driven and informed hiring decisions. When it comes to assessing the skills of tax accountants, we offer a range of assessments including:
- Accounting Assistant Test
- Accounts Payable Assessment Test
- Accounts Receivable Test
- Wealth Management Test
- Advanced Accounting Test
- Accounting Manager Test
- Intermediate Accounting Test
- Bookkeeper Test
- Junior Accountant Test
- Accounting Clerk Test
These assessments can help you identify a candidate's strengths and weaknesses in specific areas of tax accounting, giving you a more complete picture of their skills and abilities.
How much does it cost to hire tax advisors in the US?
As of January 26, 2023, the reported average salary for a Tax Advisor is $92,954, with a typical range between $84,528 and $102,962. Several significant factors can affect salary ranges, such as education, certifications, additional skills, and years of experience in the profession.
Questions to ask a tax advisor when hiring
Here are some important questions to ask and why:
Q. What are your qualifications, and how long have you been practicing?
Asking about qualifications and experience will give you an idea of the level of expertise of the tax advisor. It's essential to hire someone who has the necessary qualifications and experience to handle your tax-related matters.
Q. What are your areas of specialization?
Knowing the areas of specialization of a tax advisor will help you understand if they are a good fit for your specific tax needs. Some advisors specialize in individual tax returns, while others focus on business taxes or international tax laws.
Q. How do you keep up with changes in tax laws?
Tax laws are continually changing, so it's essential to hire a tax advisor who stays up-to-date with the latest regulations and laws. Asking this question will help you ensure that the advisor has a solid understanding of current tax laws.
Q. How do you communicate with your clients, and how often?
It's crucial to have open communication with your tax advisor to ensure that your needs are met. Understanding their communication style and how often they communicate with their clients will help you determine if they are a good fit for your needs.
Q. What is your approach to tax planning?
A good tax advisor should be able to provide you with a comprehensive tax planning strategy that will help you minimize your tax liability. Asking about their approach to tax planning will give you an idea of their level of expertise and the strategies they use.
Q. How do you charge for your services?
Understanding how a tax advisor charges for their services will help you avoid any surprises when it comes to fees. Some advisors charge an hourly rate, while others charge a flat fee or a percentage of your tax return.
Q. Can you provide references or testimonials from past clients?
Asking for references or testimonials from past clients will give you an idea of the advisor's track record and level of client satisfaction.
Tax advisors stats and demographics
- Over 58,135 tax advisors are currently employed in the United States.
- Women make up 63.4% of all tax advisors, while men make up 36.6%.
- The average age of an employed tax advisor is 47 years old.
- The most common ethnicity among tax advisors is White (58.0%), followed by Hispanic or Latino (17.6%), Asian (10.1%) and Black or African American (9.7%).
- Tax advisors are most in-demand in New York, NY.
- The energy industry is the highest-paying industry for tax advisors.
- Cumberland, RI pays the highest annual average wage of $98,049 in the US.
- In 2021, women earned 102% of what men earned among tax advisors.
- LGBT individuals make up 8% of all tax advisors.
- Rhode Island is considered the best state for tax advisors to live in.
- Tax advisors are 61% more likely to work at private companies than public companies.
Hiring a tax advisor is an important decision that can have significant financial implications for individuals and businesses. By following the checklist for hiring a tax advisor, assessing their skills, asking the right questions, and understanding the types of tax advisors, you can make an informed decision that meets your specific tax needs. Follow us for more insights and guides related to hiring.
Thomas M. A.
A literature-lover by design and qualification, Thomas loves exploring different aspects of software and writing about the same.
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