7 Questions You Need to Ask your Tax Accountant

I'm Grilling the Tax Man

With another tax season upon us it might be time to make sure your tax accountant or CPA is working in your best interest. We have identified 7 important questions to ask your tax professional so you can make sure they are the right one for you.

1) Do you consider yourself tech-savvy? This is becoming more important as technology becomes more integrated within our lives. Whether it’s communicating, sharing files, or protecting your electronic assets, tax preparers can be some of the worst when it comes to keeping up with technology. Make sure you tax professional can handle the demands of today’s world and make your tax experience easier, more efficient, and more secure. For example, our client portal software (BlueLeaf) allows us to share files and documents with our clients in a way that is much more secure than email or fax.

2) What services, beyond the usual reporting and number-crunching, are offered? A tax accountant needs to be more than a data entry clerk. It's their duty as an advisor to make sure the information they receive makes sense. If it doesn't, they should ask questions and seek clarity. Do you know how your taxes fit into your overall financial situation? A tax preparer with a financial background (like Phillip James) will be able to provide you with more quality information because they have an understanding of both financial planning and taxes. For example, they will know when to sell securities for a gain or loss depending on how your taxes look during any given year or whether you should contribute to a Roth, Traditional, or Back-Door IRA for the year.

3) Are you available outside of  tax season? Let’s face it, taxes are a high stress business, which is why some tax preparers are seasonal, especially at the strip mall center shops. You don't want a part time gym teacher doing your taxes. So even though your taxes are only filed once a year, tax planning is a year-long process. If you expect year-round access, you need to make sure the tax professional is available. This is important especially as you look at year-end tax planning strategies.

 4) How can you help me make more money? You tax advisor might balk at this question, but the answer they give will help you find out if the tax preparer is actually interested in your situation. Did they review all of your financial information you provided prior to the interview? Did they make sure you understood the tax concepts, instead of giving you a bunch of industry jargon? A proficient Tax Advisor’s goal is to see you succeed and to save you more in taxes.

5) How long have you been a Tax Accountant? What licenses and designations do you hold? How much professional education do you do annually? Just passing the test to be a CPA , EA, or RTRP isn't enough. With the tax code and interpretations of the code changing every year, continuing education is essential. Many tax professionals do more than just the minimum requirement for continuing education. Although more training doesn't necessarily mean the tax pro will be better, it's certainly not a bad sign. You can also inquire with the state CPA organization to discover if there have been any disciplinary actions entered. Can the tax preparer handle other things like bookkeeping, financial planning, and investments? Does your Tax Accountant understand your entire financial picture or are they simply just filling out forms?

6) How are your fees calculated? Do I have to pay just for talking with you on the phone? To avoid problems later, you need to discuss the preparer’s fee’s upfront. Tax professionals may bill by the hour, form, overall return, or some combination. Getting an engagement letter and an estimate of the total cost is what you should be looking for from your tax advisor. Hourly preparers or companies tend to hire junior preparers and focus on billable hours versus your account. After reviewing your previous returns and interviewing you, a tax preparer should be able to give you a good-faith estimate of all the costs. If the CPA bills by the hour, discuss the hourly rate of the accountant and staff as well as overhead expense reimbursement (e.g. what is the cost of a fax) and whether certain time is billed or not. If you can’t get this information it’s time to move on.

7) What kind of creative tax advice will you offer me? Advising clients on what they can do to grow their wealth and improve their tax situation, as well as discussing potential issues, should be part of a proficient tax professional’s services. Your tax preparer should be able to immediately show you how to find alternative strategies within your tax return whether it be pre-tax strategies, tax-deferral, tax-shelters, or tax credits. Think of things you can be doing throughout the tax year to save you money, like changing contributions to retirement accounts, using tax efficient investments, or taking advantage of lower/higher tax brackets to harvest gains/losses.

 At Phillip James Financial, we are a comprehensive financial services firm. This allows us to serve multiple needs of an individual or families all in one place making everything easier and more efficient. Having tax preparation combined with financial planning and investment management makes things easier for you. Schedule a meeting online today or call us to get your taxes prepared by a professional.