By: Ana Giombetti, CPA, JD
Filing taxes can be complicated and burdensome. There may come a time when what was once a plain vanilla tax return becomes too complex to file on your own or even for your current tax preparer. Sophisticated tax advisors can be crucial in assisting with complicated tax planning and compliance issues. Engaging a sophisticated tax advisor can save time, reduce stress, avoid errors, and uncover potential tax savings. Many situations can trigger a need to seek help, but today we will look at five (5) of the more common signs you may need to engage a more sophisticated tax advisor.
First, let’s look at some terminology and differentiate among them. There is a difference among an accountant or tax preparer, a certified public accountant (CPA), and a sophisticated tax advisor. An accountant or tax preparer are not required to have minimum education standards or to be licensed to prepare tax returns. Literally anyone with minimal financial skills can call themselves an accountant or tax preparer. A CPA is licensed by the state and must adhere to strict standards, guidelines, and ethics, including a minimum number of hours of ongoing continuing education to keep their license. Sophisticated tax advisors are often CPAs who have taken extra coursework, such as acquiring a master’s degree in taxation or a law degree and focus most or all their time on tax law matters. The Tax Warriors® at Drucker & Scaccetti are sophisticated tax advisors with among the most highly concentrated group of CPAs with master’s degrees in taxation in our region.
So how do you know it is time to think about engaging a sophisticated tax advisor? The following are several situations where a sophisticated tax advisor would be most valuable:
- You have your own business(es) or rental property(ies)
Having your own business comes with many complexities. There are many possible deductions and revenue recognition rules, calculation of estimates tax payments, and asset depreciation that a your tax advisor should have the expertise to navigate.
- Tax filings in multiple states and municipalities
Every state and many municipalities have their own set of tax laws and regulations. It can be difficult to know them all and navigate on your own. You should seek a tax advisor who can assist with multiple state filings to ensure the most tax-efficient strategies are being utilized to mitigate your state and local tax exposure.
- High-net-worth individuals with multiple investments
Your tax advisors should assist with properly reporting these complex investments and work with the investment advisor team to ensure your investment plan is tax efficient.
- Receiving a notice from the IRS or state taxing authority
Even a simple notice from a taxing authority, if handled incorrectly (or not handled at all), can turn into a big issue quickly. Your tax advisor should have experience dealing with taxing authorities and ensure the proper steps are taken in a timely manner to avoid further penalties or assessments.
- A major life event
A change in your personal tax situation, such as getting married or divorced, moving to a different state, starting a new job in one state while living in another, buying a home, receiving an inheritance, etc., should often involve significant tax planning.
While there are countless other situations where a sophisticated tax advisor would be preferable, we hope this list gives you a sense of when you should evaluate if your current tax advisor is meeting your needs. The key word here is complexity. The more complex and complicated your tax filings become, the more likely you will benefit from a sophisticated tax advisor. If you fit into any of these situations, please call on us. We are always prepared to help.