To minimize your tax liability and capitalize on tax deductions, a tax consultant may be the way to go. With more expertise than standard tax preparers, tax consultants can help with tax planning, inheritance issues, charitable giving and other complex tax situations. Often, these advisors have training in tax law or accounting. Fees vary, depending on the scope of work and the skill and experience of the tax consultant. If you need help with tax-loss harvesting or minimizing capital gains on your investments, you may just want a financial advisor, who may or may not also be a tax consultant.
What a Tax Consultant Does
Tax consultants are professionals who specialize in tax law and financial-related counseling. They advise clients on income tax returns and a range of financial matters, including trusts, estates and retirement taxes. Besides providing clients useful tax-related advice, tax consultants are also responsible for staying informed about the most recent tax requirements, both on the federal and state levels.
Additionally, their responsibilities may include traveling to a client’s location for advising or helping someone reduce tax liability. One of the key characteristics of a tax consultant is excellent written and verbal communication skills. The consultant must be able to incorporate current tax law findings and his or her client’s research into a tax strategy that’s easy for the client to comprehend. These attributes are crucial when it comes to ensuring that clients fully understand a tax strategy.
These tax experts typically work for financial consulting firms, public accounting firms or government agencies. Or they may work independently. Also, tax consultants may work online. Clients range from individuals and families to organizations and corporations.
Sample Tax Consultant Services
Tax consultants may offer a variety of services to clients, including:
- Preparing your tax return
- Looking for deductions to lower your tax burden
- Helping with trusts
- Dealing with taxes on rental property income
- Sorting through tax implications of life events like marriages, divorces, deaths and births
There are no formal requirements or credentials for tax consultants, however. So before you hire one, make sure they have experience and know-how in the areas you will need help with.
Requirements to Become a Tax Consultant
As just noted, tax consultants do not have a formal certification process. But most tax consultants have a bachelor’s degree in accounting, finance, tax law or another related field. Additionally, paid consultants or advisors who prepare tax returns must become registered tax return preparers under IRS law. The IRS also requires these tax return preparers to register for a Preparer Tax Identification Number (PTIN).
In addition, preparers also have to take the Registered Tax Return Preparer competency test. However, some tax return preparers don’t have to take this exam. Professionals who don’t have to take the exam include certified public accountants (CPAs), enrolled agents (EAs), attorneys, supervised preparers and preparers who don’t prepare or assist in the preparation of any Form 1040 series returns.
The IRS provides the PTIN number option on an active or provisional basis. Specifically, tax return preparers who must pass the competency test receive provisional status, while CPAs, EAs and attorneys automatically receive active status. Additionally, paid tax return preparers must pass both a tax compliance check and a sustainability check. All preparers who meet these requirements become registered preparers under IRS law.
The most qualified tax consultants typically have licensure as a CPA or an EA. These consultants possess both the formal education and the tax experience required to provide strategic tax advice. But tax consultants merely registered under the IRS can also provide tax advising without formal education to complement their tax-related knowledge.
How to Choose a Tax Consultant
Tax consultants possess a range of different specialties and qualifications, so it’s important to do your homework when choosing one. If you can’t find the right one at a firm near you, you may want to consider online consulting. Online consulting is a more convenient form of tax advising that allows you to work solely through the web.
Regardless of which form you choose, you should look for certain key characteristics in your ideal tax consultant. This may include a consultant you can easily contact, one who provides all records and receipts of your returns, one with proof of qualifications and one with a traceable and satisfactory consulting history. These factors all matter when choosing a consultant, but below we’ll look at another important factor to consider.
Tax Consultant Fees
Tax consultants’ fees vary, based on several factors. Location plays a major role, with prices peaking where the cost of living is highest. Another factor is the complexity and scope of your tax situation. Generally, the more involved your finances are, the more you’ll have to pay. Also, if your situation requires highly specialized knowledge about the tax code, a tax consultant’s fee will be commensurate with their qualifications.
A tax consultant, who has extensive knowledge about the tax code, can help you cut your taxes – and save money. Generally, this kind of advisor works for you year-round, as opposed to a tax preparer, whose job is seasonal. Although you don’t have to hire a consultant, it’s important to ask yourself whether you could benefit from having one. Looking to make smarter financial decisions when tax time comes? If you aren’t fully certain where to begin, a tax consultant just might be your solution.
Tips Reducing Your Tax Liability
- Keep in mind that there are certain actions you can take to reduce tax liability before even hiring a tax advisor. When tax time comes you’ll want to consider making tax deductions to minimize taxable income. You should also ask yourself whether you could benefit from a tax shelter, or whether a tax extension would be more suitable for your financial situation.
- Consider using financial advisor to help you with your tax liability related to retirement or your investments. Scratching your head about where to find one? Try using SmartAsset’s financial advisor matching tool to find an advisor who meets your needs. After you answer a short questionnaire about your financial situation and goals, the tool pairs you with up to three suitable advisors in your area. The advisors’ profiles and contact information are then at your disposal, leaving you with the power to choose the one who is right for you.
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