Personal finance column: How to choose the right tax pro
Having the right professional on your team can be critical to your financial success. Yet depending on your circumstances and goals, the top tax expert in the Roaring Fork Valley may not be the best fit for you. That’s why it’s essential to do some due diligence and consider a variety of factors when making your decision.
1. What are their credentials?
The CPA (Certified Public Accountant) is the undisputed gold standard in the industry. However, if your situation isn’t complex, you may be perfectly fine working with an EA (Enrolled Agent). EAs focus specifically on taxation, while CPAs usually handle taxes and more.
Since the professional will be performing an important function and will have access to some of your most sensitive personal information, it’s always a good idea to check to see if they have an active license and any regulatory blemishes on their record. Two places you can use to check include the Colorado Division of Professions and Occupations (choose “Accountancy”) and CPAverify.
2. Are they accepting new clients?
Many tax professionals in the Roaring Fork Valley aren’t. As such, you may have to contact half a dozen to find two or three who have an opening. You can also look outside the Valley if need be, but you should stay within Colorado because each state has its own unique tax rules.
3. Do they employ tax minimization strategies?
Ideally, the tax pro you end up working with will be able to accurately capture and report what happened last year while helping you implement strategies that will lower your future tax bills.
The following questions can help you determine if they’re a good fit in that regard:
- Will you provide forward-looking tax planning recommendations as part of our work together?
- What type of tax minimization strategies do you commonly use with your clients?
- Based on what you know about my situation, what are some of the tax minimization strategies you might recommend?
4. Do they work with clients like me?
You’ll want to hire a tax advisor that works with clients like you. They’re more likely to be familiar with your set of circumstances and proactively offer solutions that match your needs.
For example, if you’re a high earner with restricted stock units, investment income and rental properties, your CPA should understand these issues inside and out. Alternatively, if you’ve just inherited assets and are trying to minimize your tax bill while familiarizing yourself with all of the tax implications, you will want a tax pro that specializes in these areas.
Here are some questions to ask yourself:
- What stage of your life or career are you in?
- What are your various income types, sources, and amounts?
- Are you self-employed or do you own a business? How is that business structured?
- What is your net worth?
Once you have a grasp on some of the important attributes that define your financial position, you can then look for a tax expert with the relevant experience and know-how.
5. Do they feel like a good fit?
Once you’ve found a tax expert who meets your needs from a technical standpoint, make sure they’re also someone you like and trust. While your chosen pro doesn’t need to be a dear friend, it’s often easier to develop a strong working relationship with someone whose personality pairs well with your own.
In addition, if you currently work with a financial advisor or wealth manager, consider asking them for a tax advisor referral. Many financial professionals have close working relationships, and your financial advisor likely has at least one tax specialist they can recommend. Ideally, your financial advisor and tax specialist will work together to ensure the strategies they implement are in line with your financial goals.
Brian Littlejohn, MBA, CFP®, CFA is the founder of Sherwood Wealth Management in Basalt. Brian provides his clients with customized investment management and comprehensive financial planning services to help them organize, grow, and protect their assets.
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