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Hiring a tax consultant can be a great way to reduce your tax liability. Even though some people may assume tax consultants are only for the wealthy, the average American can also benefit from their services.
What Is a Tax Consultant?
Tax consultants recommend strategies to help clients reduce or eliminate tax liabilities. Contrary to tax preparers, who only assist with tax filing, consultants provide support beyond preparing tax returns. A tax consultant, for example, can help you locate missing tax deductions or request an abatement of penalties.
Most often, tax consultants have more education than tax preparers, such as in the areas of accounting, business, finance or tax law. They may also have additional certifications and licenses, such as a certified public accountant (CPA) license or an enrolled agent certification.
Tax consultants take education courses to stay up to date with the ever-changing tax laws.
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What Services Does a Tax Consultant Provide?
Tax consultants’ services go beyond tax preparation. They help businesses and individuals minimize tax liabilities by giving tax advice and answering tax-related questions. Additionally, they can help clients plan for the future by creating a tax plan for upcoming years.
The following are some examples of services a tax consultant can provide:
- Minimize taxes by researching the tax law
- Reduce previously assessed penalties
- Provide assistance with payment arrangements, such as an offer in compromise or an installment agreement
- Maximize tax-related contributions, such as individual retirement accounts (IRAs), health savings accounts (HSAs) and 529 plans
- Analyze different tax scenarios to determine the best tax strategy
- Assist with taking advantage of tax credits and deductions
- Optimize the timing of income or deductions at year end
- Examine prior-year tax returns to determine if they need to be amended
How Much Does a Tax Consultant Charge?
You should understand a tax consultant’s fees before hiring one. Several factors influence their fees, including the complexity of the tax issue, the required time and their expertise. Tax consultants typically charge by the hour, although some charge flat fees.
You can expect to pay anywhere from $175 to $450 per hour, on average, if your tax consultant is a CPA.
Steps to Take Before Hiring a Tax Consultant
Do your homework before hiring a tax consultant to ensure they will fit your needs. You can find a good tax consultant by asking family members, friends or colleagues for referrals.
Many tax professionals belong to organizations that provide continuing education and ethical guidelines. You can reach out to one of these for assistance in locating a tax consultant to fit your needs.
- American Academy of Attorney – CPAs (AAA-CPA)
- National Association of Tax Preparers
- National Society of Accountants
- National Conference of CPA Practitioners (NCCPAP)
- National Society of Tax Professionals
- National Association of Registered Tax Return Preparers
- National Association of Enrolled Agents
- American Institute of Certified Public Accountants (AICPA)
Questions to Ask Your Tax Consultant Before Hiring
There are several questions you should ask your tax consultant before making a hiring decision, which may include the following:
| Topic | Questions | What you should look for |
|---|---|---|
| Education and experience | What is your educational background? Can you tell me about your experience as a tax consultant? | Ideally, you should find out about the tax consultant's education and experience. The majority of tax consultants will have at least some college education. |
| Skillset | What skills and abilities do you have to perform the work I need done? | A tax consultant's skillset describes their ability to perform a particular task. It may include both soft and hard skills. Communication, time management and critical thinking are some soft skills. Hard skills may include technical knowledge, such as the ability to research extensive tax laws. |
| Specializations & niches | Is there a particular tax niche or specialization that you have? | Tax consultants may specialize in areas such as small business, retirement, corporate and international taxation, IRS representation and more. You should get an understanding of your tax consultant’s specializations before hiring. |
| Licenses and certifications | Which licenses and certifications do you hold? | The licenses and certifications that a tax consultant may hold include a CPA and an enrolled agent license. |
| Fees and billing | What do you charge for your services? | Some tax consultants charge an hourly rate, while others charge a flat fee. Understand the tax consultant's fee structure before hiring them. |
| Meeting style | What is your style of meeting with clients? Do you meet in person or virtually? | It’s up to you whether you wish to meet your tax consultant in person or via remote meeting. For this reason, you should find out how your tax consultant interacts with clients. |
Double-check your potential tax consultant’s professional designation and qualifications after interviewing them. By contacting licensing boards, you can verify their licenses and certifications. You can also refer to the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.
Should You Hire a Tax Consultant?
In most cases, you would benefit from hiring a tax consultant. This is especially the case if you have a complex tax situation or if you owe a large sum to the IRS. With the ever-changing tax laws, having a good tax consultant can be an advantage.
Most importantly, they could save you thousands of dollars and help you implement a tax plan to minimize taxes for future years.
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