Your information to discovering the appropriate tax advisor for you

Over the years I have been asked many questions from the taxpayer. But what is reliably noticed in my inbox at any time of the year is this: How do I find the right tax advisor?

It feels like the question is easy to answer, but it isn’t. Yes, I know a lot of tax professionals. And if it was just about finding someone with references, it would be easy. But the reality is that knowing a tax advisor and finding the right tax advisor for a particular person are two different things.

Most taxpayers turn to a tax advisor at some point – mostly to prepare tax returns. According to the IRS, more than 92% of individual tax returns filed through June 2021 were electronically filed, and of that approximately 53% were filed by tax professionals. If you’re withdrawing non-tax returns that were only filed to qualify for Economic Impact Payments, you’d likely see numbers closer to tax years 2018 and 2019, when tax professionals filed nearly 60% of all electronically filed returns.

That is much. But these statistics only reflect paid federal income tax filers. This doesn’t necessarily include tax professionals like me doing other things like auditing and controversy, bookkeeping and tax planning.

The right tax professional for you could be a paid writer who focuses solely on simple custom tax returns. However, you may need a preparer who works with small businesses year round, or one who is knowledgeable about cryptocurrencies. Or it may be the case that you would like to make your own declaration but need help clearing up the estimated payments or other tax issues.

You probably get the picture that there is a lot to consider. And that is exactly the point: There is no one-size-fits-all solution to find the right tax advisor for you. Finding the best fit can take time and patience. But when you consider what’s at stake, the effort is worth it. Here are a few steps to get you started.

Ask for recommendations

The best Dal Makhani in my area comes from a small restaurant off Route 100: I know that because it has been recommended to me again and again by people I trust. When I wanted to know where the best is in the area – from the best Indian food to the best flower shop – I asked. That’s how you learn. So do the same when looking for a tax advisor: ask your lawyer, your investment advisor, your work colleagues and your friends.

Do your homework

Once you have a recommendation – or three – do a follow up. An easy starting point? Check for your accountant online as most reputable professionals have a presence on the internet, even if it’s only on social media. You should get a feeling for whether the services offered, such as tax advice or bookkeeping, meet your requirements and whether the company culture is right at the beginning.

Understand login data

Letters following a name on a website don’t always mean a tax professional is qualified, but it can mean the person has passed proficiency tests or has specific tax training. Here’s a quick guide to some popular credentials:

  • A Certified Public Accountant (CPA) is certified by the state as an auditor. All CPAs are accountants, but not all accountants are CPAs.
  • An enrolled agent (EA) is a federally licensed tax advisor who can prepare tax returns and represent taxpayers before the IRS for collections, audits, and appeals.
  • The Annual Filing Season Program (AFSP) participants are returnees who have met the voluntary requirements of the IRS.
  • A JD (juris PhD) is a law degree, while an LL.M. (Master of Laws) is an additional law degree. Having a law degree doesn’t necessarily mean an attorney will prepare returns or have experience before the IRS.
  • A Volunteer Income Tax Assistance (VITA) preparer is trained by the IRS to prepare basic declarations, usually for low-income or elderly people. Some may have special training to assist with the return of military or non-citizens.

Most importantly, anyone who prepares federal tax returns for compensation must have a valid tax identification number (PTIN) of the preparer. The IRS maintains a searchable directory of creators with a current PTIN who have recognized professional qualifications.

To plan a meeting

We may not be ready for face-to-face interviews, but most tax professionals are zoom- or call-friendly. Once you have some solid recommendations, take a moment – well before tax season – to inquire about their services and whether they are accepting new customers. Some accountants are familiar with the basics of Form 1040 while others may specialize in real estate or small business schedules. Others can focus on cryptocurrency or foreign income. This is the perfect time to ask about any special circumstances related to your financial investments, job, or place of residence. But be thoughtful: this is not the time to seek free advice. Ask questions to help you find a good attitude and don’t solve an upcoming tax problem.

Have a budget

Prices for services may vary based on need and location. Note that fees can be fixed or hourly and may depend on the complexity of your return or your controversy. While pricing shouldn’t be the only thing you should rely on, it is important to stay within your budget. Inquire about fees in advance and discuss any concerns beforehand.

Discuss geography

There are no limits to federal income tax. But that doesn’t apply when it comes to state and local taxes or SALT. Your state or municipality, like many in Pennsylvania, may have quirky filing requirements, especially for business owners. It can get even more complicated if you’ve moved or live in one state and work in another – something that many taxpayers are facing due to the pandemic. You may also need additional advice if you own a business or property in another state, or if you spend time outside of the country. Make sure your tax advisor is familiar with and able to handle your filing requirements.

Check your calendar

Your tax advisor should know the time to prepare and file your tax return in advance – just like you. Because of my business, I have an extension almost every year and I worked that out with my tax advisor. If you know you are an early filer or have time restrictions, let them know early and make sure your tax advisor agrees. The same goes for understanding when and what information to provide in advance. If your tax advisor cannot offer a reasonable time slot that fits your schedule, it is better to find someone else.

Anticipate the future

Many taxpayers assume that their tax needs end on tax day. But the reality is that taxpayers often receive notices from the IRS and other tax authorities year round. Make sure you know how to contact your tax advisor after your declaration has been submitted, and know what your tax advisor will or can do for you if a problem arises. If your tax advisor doesn’t offer post-return services, it doesn’t have to be a deal breaker, but you should understand the scope of the services beforehand.

Follow through

The goal should be to build a professional relationship – one that you feel comfortable in. A good tax advisor also wants that. As soon as you have agreed on the terms of representation and laid down the basic rules, make your contribution.

** This is the second in a series about taxpayers and tax professionals. You can find the first in the series here.

This is a weekly column by Kelly Phillips heir, the tax girl. Erb provides commentary on the latest tax law, tax law, and tax policy news. Every week, find Erb’s Bloomberg Tax column and follow her on Twitter at @taxgirl.