The last thing any individual or business wants at tax return time is another bill to pay. Still, a tax consultant could be just about the best money you have ever spent.
A tax consultant can help you prepare your accounts, but they do more than that.
An experienced tax consultant can help strategize your financial position. They can assist with broader financial planning issues, maximizing cash flow and reducing how much you have to pay.
Tax consultants help companies and private individuals alike. If you’re wondering whether a tax consultant is suitable for your financial standing, keep reading. We’ll cover the duties these professionals perform and how they can help you save money.
What Is a Tax Consultant?
A tax consultant is a specialist, sometimes an attorney, often an accountant, who offers advice on tax law and financial planning. The person is an expert in taxation regulations and their application.
Tax consultants usually specialize in personal liability or business taxation, although some offer both services.
An expert consultant may not necessarily be the same individual or firm that prepares and files your return, but some companies offer a blended service.
They will prepare your accounts and liability and then pass them to a tax management specialist within the practice to review.
What Does a Tax Consultant Do?
Tax consultants offer a wide range of financial services. They advise clients on income returns but also other financial matters, including trust and estate planning and managing income in retirement.
A tax consultant doesn’t just look at the financial liability on your accounts as a fait accompli. Their role is to offer a full range of planning services to strategically minimize your liabilities and maximize your cash flow and income.
The consultant can also protect you from tax evasion. This federal crime involves individuals or businesses misrepresenting their income to the Internal Revenue Service to pay less tax.
However, tax evasion can sometimes be unintentional. Whatever the intent, approximately one out of every six dollars in federal taxes is not paid.
Tax evasion can give rise to hefty monetary penalties, imprisonment, or both under Section 7201 of the Internal Revenue Code.
A tax consultant can help you avoid these charges. They advise on your income bracket, assets, financial holdings, and filing status to ensure you don’t unintentionally commit tax evasion.
The artistry and complexity of this is the job of a tax consultant who will typically offer a variety of services. These can include:
- Preparing personal or business returns for filing
- Searching for legitimate deductions to income that can reduce the amount you owe
- Lowering state liability in retirement through financial planning
- Managing payments for income sources like shares and real estate rental
- Helping with the financial impact of life events like marriage, divorce, and death
- Helping companies and corporations with their business tax
- Staying on top of changes in the law in what is a complex and ever-changing area of regulation and maximizing their client’s advantage
Tax consultants often work in firms of accountants or financial consulting businesses, but some operate on their own. A lot of the work can be online, streamlining the process.
Why Do You Need a Tax Consultant?
Some people have a rudimentary grasp of taxation legislation as it may apply to their situation or business. However, you won’t have the birds’ eye view or in-depth expertise of a specialist consultant.
A tax consultant has an overview of current regulations plus knowledge of current legislation, which is pretty complex.
Put simply, your consultant will be able to see the bigger picture, and this facilitates strategic management and financial planning, which is almost impossible for a non-expert to achieve.
Your consultant will analyze your current financial liabilities and income and discuss projections for the future, including target goals, all with the object of reducing your state liability burden and improving your financial position.
Successful tax management is all about planning. Many reductions in liabilities result from optimizing the financial position a year or two ahead, maybe even earlier.
You can achieve this yourself with thorough research of your accounts and up-to-date knowledge and application of current regulations. But a tax consultant makes the job easier and reduces the risk of mistakes and liability.
How Much Does a Tax Consultant Cost?
If you want your accounts prepared first, then your firm or consultant should be able to quote you a fixed fee for this service. The average in the US is $300 to complete a return. Financial consultancy on top is usually at an hourly rate.
Tax consultant fees vary depending upon the scope and complexity of the work and the range of services involved. The seniority and expertise of the consultant is also relevant to their fee level.
Expect to pay on average $150-$300 per hour for a good consultant. Ask if they can estimate a fixed price for the overall cost, especially if your return is in order and not unduly complicated. Remember, their costs could also be deductible!
What Are the Differences Between Tax Consultants and Tax Preparers?
A tax preparer’s role is a simpler and more streamlined version of a consultant’s. Here are some of the key differences between the two.
Consultants Usually Have More Expertise and Qualifications
A preparer’s sole job is to prepare income returns for those who need to file. They often do all the dirty work, gathering all the documentation and information and summarizing it on the return.
Tax preparers work for individuals and companies and prepare personal and corporate returns for filing. They may work as freestanding professionals or within a financial firm specializing in accounting and taxation.
Tax consultants do sometimes offer a service to prepare returns. Still, more usually, these consultants will review already completed returns and look at the broader picture of financial management, of which the reduction of liabilities is just one part.
Tax consultants often have a wide range of formal qualifications and may be attorneys or certified public accountants.
Tax Consultants Have a Wider Remit Than Preparers
Tax preparers do as their title indicates—prepare returns for filling. However, consultants offer much broader and more complex services.
A consultant may well look at a completed return and strategize how to reduce the liability burden. They might also assist in managing tax issues during bereavement, divorce, or retirement when income liabilities change.
How to Find a Tax Consultant
The first step in finding a suitable consultant is working out what service you need. If it’s just a question of sorting out paperwork to prepare a return for filing, then a fully-fledged consultant may just be overkill and expensive to boot.
Some consultants are licensed as both certified public accountants (CPAs) and enrolled agents (EAs). These financial professionals have a raft of formal qualifications and demonstrable expertise and can provide comprehensive strategic advice.
However, other consultants have just registered with the IRS and don’t have all these qualifications or a formal background of specialist financial education.
If you approach a medium to a large-sized firm of advisers, it will steer you towards the appropriate consultant for the complexity of your situation. However, this assumes you have already found a company you want to hire.
The first decision you need to make is whether you want to work solely online or face-to-face meetings in an office. Online consulting is convenient and time-efficient, but it doesn’t work for everyone.
If you are looking for a consultant for your own personal situation, then ask friends, family or work colleagues for a recommendation. Some people post on social media groups for their local community, but you should treat these suggestions with caution as they may be from people you don’t know.
Small to medium-sized businesses are often involved with local networks where they can find specialist advice and support, including tax consultants who target these groups to generate clients.
Whoever you use, check out their licensing and verify their credentials, especially if you opt for online consulting. Remember, you are handing over sensitive financial and personal data, so this is an area ripe for fraudsters.
Only work with people who speak your language. Good communication skills are essential in the complex area of strategic financial management.
Enjoy the convenience of an online service partnered with the expertise of your own personal CPA. MI Tax CPA offers a full range of financial services to suit the needs of individuals and local businesses, so you know you have someone in your corner when it’s time to file.
Whether your needs are as simple as just preparing a straightforward return or your finances are complicated, we can offer the tax and financial preparation service you require with clear communication.
Call us today and take the first step on the road to better tax management.