Having the right team of advisors is critical to achieving
your financial goals faster than you ever thought possible.
For most people, taxes are the single biggest expense.
This makes finding the right tax preparer for your team
extremely important.
HOW DO YOU FIND A TAX PREPARER THAT IS RIGHT FOR YOU?
First, not all tax preparers are the same. I previously
wrote an article about this last year titled: "Tax Returns
- Are they really all created equal", and you may be as
surprised as other readers about just how much tax return
preparation can vary.
In fact, I calculated the average savings I typically find
from annual tax savings, reducing professional fees and
audit assessments. In total, the average savings are:
- $23,750 Annual tax savings
- $5,000 Audit defense savings
- $10,000 Reduced audit assessment savings
- $50,000 Reduced legal fees
- $3,000 Reduced tax return preparation fees
This is a total average potential savings of $91,750! Your
tax preparer does make a difference! How much more could
you do with these savings?
Second, the right tax preparer for you depends on what is
important to you. Take a minute to answer this question:
WHAT MAKES YOUR TAX RETURN SUCCESSFUL?
How you answer this question will impact what type of tax
preparer you need on your team. I've asked this questions
to clients, prospects and colleagues. I have compiled the
most popular answers and what it means to you as you find
the tax preparer for your team.
ANSWER #1: Paying the least amount of tax legally
Your tax preparer needs to:
- Know the tax law very well and know how to be creative
legally.
- Ask you a lot of questions about your situation in order
to understand your situation and goals.
- Have a review process where at least one other person
reviews your return solely for the purpose of how to reduce
your taxes legally.
HERE ARE SEVEN (7) QUESTIONS YOU SHOULD ASK YOUR TAX
PREPARER TO DETERMINE IF IT'S A GOOD FIT:
Q1: Can you tell me about the other ___________ (your
industry) you service?
A: Your tax preparer needs to know how the tax law applies
to your situation. Having other clients in your industry
or with similar investments indicates that the tax preparer
is likely to be familiar with the tax laws that impact you.
Q2: Who will be working on my tax return?
A: It's very common (and a good business practice) for tax
preparers to have staff prepare your tax return. You want
to make sure the other people working on your return have
the same level of expertise.
Q3: What is your tax return review process?
A: Tax preparers who are focused on reducing your taxes
will have this built into their review process. Usually it
involves having another experienced tax preparer review the
return solely for the purpose of finding ways to reduce
your taxes.
Q4: What would you have done differently on my past tax
return?
A: Show the tax preparer you are interviewing your prior
year tax return. Creative tax preparers will be able to
give you at least one idea of what you can do to reduce
your taxes by looking at your tax return for just a few
minutes. If it's creativity you are after, this is a great
question to ask! But don't expect the tax preparer to give
you all the details right then and there - that's why you
pay them!
Q5: How much can you save me in taxes?
A: While it's difficult for any tax preparer to answer this
in just a few minutes of looking at your past tax return,
it is possible for them to know if they can save you taxes
after spending 30 minutes with you.
Q6: What deadlines do you impose on clients?
A: This may seem like an odd question for minimizing your
taxes but it has a direct impact. If your tax preparer
allows you to provide your information a week before the
tax return is due, it's very unlikely that the tax preparer
will have the time to focus on your return to truly
minimize your taxes. Tax preparers that want to reduce
your taxes want your tax return information early and will
communicate that to you.
Q7: What recent tax law changes should I be aware of? A: To
minimize your taxes, your tax preparer needs to know the
tax law inside and out, which includes the latest changes.
Your tax preparer needs to be able to answer this question
without hesitation.
ANSWER #2: Minimizing tax return preparation fees Your tax
preparer needs to:
- Focus on the tax work and recommend someone else for the
non-tax work (such as bookkeeping).
- Request tax information in a certain format.
- Require you to input your information online.
HERE ARE TWO (2) QUESTIONS YOU SHOULD ASK YOUR TAX PREPARER
REGARDING MINIMIZING RETURN PREPARATION FEES TO DETERMINE
IF IT'S A GOOD FIT:
Q1: What can I do to reduce my tax return preparation fees?
A: To minimize your tax return preparation fees, your tax
preparer always needs to have your fees in mind. Ask your
tax preparer what you can do to reduce your fees. If you
don't get at least 2 suggestions, your tax preparer
probably isn't thinking about how to keep your fees low.
Common suggestions include:
- Have someone other than the tax preparer do your
bookkeeping. I am always skeptical when a tax preparer does
the bookkeeping. First, they either charge an arm and leg
or if they reduce their rates to accommodate you, it means
they don't spend their time entirely on tax issues, which
could indicate their tax skills aren't up to par.
- Organize your information. Don't bring your tax preparer
a shoebox! A tax preparer that is really focused on keeping
your fees down will have forms, spreadsheets and other
tools available for you to use to organize your tax return
information.
- Enter your information online. Many tax preparers now
require clients to input their information online.
Accurately entered information can help reduce fees.
Caution: Information that is entered inaccurately can
increase your fees!
Q2: What is your fee structure?
A: Your tax preparer needs to be able to answer this
question with confidence. Any wavering could indicate that
the tax preparer knows the fees are too high for you but
just doesn't want to tell you. Unfortunately in these
situations, you find out too late!
ANSWER #3: Reducing audit risk Your tax preparer needs to:
- Know the tax law very well and how to properly report
your activity.
- Understand the IRS's current "hot buttons" or "red flags."
- Offer an audit defense plan.
HERE ARE FOUR (4) QUESTIONS YOU SHOULD ASK YOUR TAX
PREPARER IN REGARDS TO REDUCING AUDIT RISK TO DETERMINE IF
IT'S A GOOD FIT:
Q1: How many audits have you been through and what
triggered the audit?
A: The most important part of this question is what
triggered the audit. If it was triggered by how something
was reported, then that may be something the tax preparer
had control over (and may be a bad sign for you).
Q2: What was the outcome of the audits you have been
through?
A: A return can be randomly selected for audit or selected
because of a certain activity (even though it was reported
correctly). So it's important to understand the outcome of
the audits. Was additional tax assessed or were there no
changes? Additional tax may indicate that something was
not reported properly.
Q3: Do you offer an audit defense plan?
A: Tax preparers that are confident in their work will
offer an "insurance" program that covers their professional
fees to handle your audit if your return is selected for
audit.
Q4: What is your tax return review process?
A: Although tax returns can be selected randomly for audit,
many are selected due to how items are reported on the tax
return. Tax preparers who are focused on reducing audit
risk will have a review process that includes another tax
preparer reviewing your return solely for accuracy of
reporting.
Be selective with the tax preparer you put on your team.
The average savings I find for my clients is over $90,000!
Your tax preparer makes a difference!
----------------------------------------------------
Tom Wheelwright is not only the founder and CEO of
Provision, but he is the creative force behind Provision
Wealth Strategists. In addition to his management
responsibilities, Tom likes to coach clients on wealth,
business, and tax strategies. Along with his frequent
seminars on such strategies, Tom is an adjunct professor in
the Masters of Tax program at Arizona State University. For
more information, please visit
http://www.provisionwealth.com
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