Consumer guide to hiring a professional tax consultant
Taxes are a highly complex subject. So much so that most people require at least some assistance preparing and filing their tax returns. However, hiring a professional tax consultant is something that you need to consider carefully. These professionals will know about every financial aspect of your life, such as social security numbers, income, marriage, children, etc. That is why it is in your best interest to work with some of the best tax resolution companies in the country. For a professional tax consultant, reputation is everything. These professionals know to save you both time and money in your IRS dealings. Aside from assisting the IRS, they can also help you file income taxes, prepare your tax returns, tax notices, etc. This article will provide you with all the information you might need to select the best possible tax consultant for your situation.
When should you hire a professional tax consultant?
There are many situations where hiring a tax professional may be beneficial. You may want to hire one when you are short on time or unsure how to deal with all the tax forms coming your way, for example. Or you may have a few tax questions that require answers.
Furthermore, you may want to hire a professional tax consultant to cut your tax bills. Your tax professional will help you not to miss any vital deductions and avoid any costly mistakes. Another time you might want to hire a tax professional is when you are already in a “bind” with the IRS and need someone to get you out of it. These professionals can also help you review any previous tax returns and point out any mistakes. All in all, tax consultants are there to help you resolve tax issues, help you not create tax issues in the first place, and provide valuable tax advice.
Benefits of hiring a professional tax consultant
The benefits of hiring a tax professional depend on one taxpayer to another. However, some benefits will apply to most taxpayers. They include:
- Avoiding simple yet costly mistakes
- Resolution of tax issues promptly
- Reducing the risk of an audit
- Getting answers to all your tax-related questions
- Getting an easier way of understanding the tax code
- Saving you time and money
Overall, working with a professional tax consultant will, at the very least, allow you to understand your tax situation. It will enable you to make better decisions in the years to come, protect your income from taxes, and much more. You don’t need to be in trouble with the IRS to get benefits from hiring a professional tax consultant. However, it is much better to hire one before getting into trouble.
Different types of professional tax consultants
Every tax consultant has their area of expertise. There are three notable “types” of tax consultants:
- CPAs (Certified public accountants)
- Enrolled agents
- Tax attorneys
All of the above tax professionals maintain high ethical standards and have substantial experience in their expertise. However, to get the most “bang for your buck,” you should know which professional to hire. And to know that, you need to learn more about each tax consultant type.
Certified public accountants
Certified public accountants possess state certifications to practice accounting and provide various services to their clients. CPAs deal with financial records, tax returns, auditing services, and financial statements. Furthermore, some professionals specialize in one field, such as appeals, tax audits, or payment/collection issues. They can provide you with last-minute tax filing tips, help you navigate certain tax situations, and represent you before the IRS. Lastly, some CPAs specialize in retirement planning and can help you create a financial strategy for your retirement.
Lastly, CPAs can help taxpayers to identify any deductions and credits that can improve their tax returns or lower their tax bills. This makes them ideal for any taxpayers that don’t need to strike a deal with the IRS but still want to improve their tax situation.
Enrolled agents are there to help you with federal tax matters. These professionals are the only type of tax professionals that the IRS directly licenses. Enrolled agents can represent their clients, prepare both business and individual tax returns, and generally fulfill any role that any other tax professional can. For example, if you want to get into the IRS debt forgiveness program, you may want to hire an enrolled agent. In addition, the fact that the IRS licenses these tax professionals means that they are more suitable to help you with any deals you might want to strike with the IRS.
Also, enrolled agents specialize in taxation, whereas CPAs have a much broader scope of services they can offer their clients.
Tax attorneys are tax professionals licensed by the state to practice law. Almost every state will require tax attorneys to obtain a law degree and pass a bar exam, making these professionals indispensable in legal matters. Tax attorneys can help their clients with tax planning and tax return preparation. Furthermore, they can represent their clients before the IRS and provide excellent advice for long-term tax-reducing strategies. Tax attorneys are also the professionals to ask about the difference between civil tax fraud and criminal tax evasion. If you are concerned about tax and legal issues, hiring a tax attorney can help with both.
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Hiring a professional tax consultant
Besides figuring out which tax professional suits your purposes the best, there are several other things that you need to consider when hiring a professional tax consultant. The first thing you may want to do is look for any “red flags,” such as:
- No qualifications
- No prior history
- Unusually low fees
- No e-filing options
- Low availability
- No PTIN (Preparer Tax Identification Number)
If you spot any of these red flags, you may consider hiring a different tax consultant. Also, never sign any tax return if your tax professional has not added their name or PTIN. That will help you avoid IRS tax relief scams and protect you from anything that might get you into trouble with the IRS.
You will also want to confirm any tax fees with your consultant to prevent you from being overcharged. If you need your consultant to represent you before the IRS, ensure they can do so. CPAs, tax attorneys, and enrolled agents have unique PTINs and ITIN (tax identification numbers) that allow them to represent their clients before the IRS.
Skills and qualifications to look for
Your ideal professional tax consultant needs at least two years of experience in tax planning/preparation or public accounting. They also need to have exceptional problem-solving skills and an analytical mind. In addition, of course, a tax consultant must be registered and have all the licenses for their work. A good tax consultant also has outstanding interpersonal skills and attention to detail.
You may also want to consider hiring a tax consultant with a finance and accounting degree. If you have international income sources, you may want to hire a tax professional familiar with international returns.
Questions to ask your tax consultant
As mentioned above, you must first ask whether your tax consultant has an IRS-issued PTIN. If the answer is “no,” that is the conversation’s end. Second, you will want to ask them if they offer a free initial consultation. Most tax professionals will provide one. You may also want to ask how they are keeping up with the latest tax laws and if they will be the ones that will be preparing your tax return. Some tax consultants present themselves as the ones who will do all the work when they delegate it to someone from their office. Others may even outsource the job completely. If any of that happens to be the case, you are paying for a reputable tax professional and not getting one.
You will also want to ask what happens if you get audited, how long your records will be kept, and whether they will keep the receipts/records on file. And don’t forget to ask whether your tax consultant can e-file with the IRS. Lastly, ask about the payment and at what point of the process the price is expected.
There are no “set” costs associated with hiring a tax professional, as all cases are unique and differ in complexity. That being said, you may want to talk to several tax professionals and have them review your case in a free consultation. All of them should provide you with fees that fall in a similar range. If they are not, it may be that they haven’t given the case enough thought or that they are trying to goad you into working with them by presenting lower initial fees only to “crank” them up later.
What happens if you don’t hire a tax consultant?
If you manage to file your taxes according to all the rules and regulations, absolutely nothing. At worst, you will not spot any credits and deductions that might boost your tax refund amount. But if you prepare your taxes wrongly, there can be severe repercussions. For example, filing your taxes can easily lead to mistakes that can get you into trouble with the IRS. Furthermore, if you have never filed before, the process can be extremely confusing, not to mention time-consuming. And if you happen to get audited, you’re on your own. In other words, you are solely responsible for any error by choosing to file your own taxes. But if you hire a tax consultant, they will be there to assist you throughout the process and defend you before the IRS.
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What to do after hiring a professional tax consultant?
After hiring a tax consultant, many people bring in a mess of documents and receipts. This wastes the consultant’s time and, in turn, wastes your money. What you want to do instead is to create a neat summary of all your income, expenses, social security numbers, donations, investments, etc., alongside any pertinent documentation. Don’t forget to include any tax-related documents and any tax forms that the IRS sent to you. The more time you spend organizing these documents, the less time your tax consultant needs to spend doing the same. And, in most cases, the consultant’s time is more expensive than your own. Of course, if an hour of your time is worth more than the consultant’s, feel free just to give them a jumble of documents and have them sort it out.
After your tax consultant presents you with a tax return, never sign the return if it is blank; make sure you are delighted with what is in return before signing it, as you are ultimately responsible for it. Furthermore, ensure that your tax consultant also puts their signature on the return. Failure to do so is a huge red flag.
Lastly, we would like to reiterate that if the offer sounds too good to be true when hiring a professional tax consultant, it probably is. However, if you must “cut corners,” at least research your tax consultant of choice thoroughly. Otherwise, you may find yourself in a world of trouble down the proverbial road.
Take advantage of the information other consumers share
If you need more information on top tax professionals and the best tax relief companies, peruse the Consumer Opinion Guide. Our knowledge database is there to help you make the most out of your tax return and save you money in the short and long run.