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Updated on Monday, March 15, 2021
A tax consultant is a tax expert who can help you with tax preparation, tax laws and other tax-related issues. While filing your own taxes is easy for some, it can feel daunting for others, with tax laws changing every year and one error on your taxes potentially meaning a visit from the IRS.
Working with a tax consultant (sometimes called a tax advisor) can help to minimize your tax liabilities, saving you from paying more than necessary on your tax returns. In this article, we cover what a tax consultant does and when you might want to hire one.
- What does a tax consultant do?
- Tax consultant vs. CPA
- Do I need a tax advisor?
- Tax consultant fees
- How to find a tax advisor
What does a tax consultant do?
A tax consultant advises people and businesses on federal and state tax law and liabilities. Each tax consultant has different specialties and a range of responsibilities, including:
- Tax preparation
- Estate planning, including estate tax and charitable donations
- Experience in tax laws
- Reviewing and minimizing tax liabilities for a person or business
Tax consultation experience is not universal. You may find one person who has more experience in serving businesses while others specialize in helping individuals prepare taxes.
Tax consultant vs. CPA
|Tax Consultant vs. CPA: How They Compare|
|Advises on long-term planning, like estate planning and related estate taxes||Limited knowledge of estate and financial planning, if any|
|Can assist in filing taxes, among other tasks||Mostly handles tax preparation and little else|
|Extensive knowledge of tax law||Tax law not required but decent knowledge of accounting laws and practices as a whole|
|No continuing education required||Annual continual educated courses required to keep a CPA license|
Whereas CPAs are mainly focused on tax preparation, tax consultants are experts in tax-related laws and practices. They can give expert advice on how taxes can impact you and your family in the short and long term, like estate planning and investing.
Tax consultants usually have a degree in accounting or something similar. While there’s no formal tax consultant certification like there is for a CPA, some advisors may go on to get a Master of Science in Taxation. There are also professional designations for tax advisors, like the Accredited Tax Consultant credential. The best tax consultants have financial education and tax experience to serve in these roles.
Tax consultants can also be CPAs. Certified Public Accountants have to complete a minimum number of credit hours, work experience and pass the CPA exam. CPAs are required to take annual tests to keep their licenses. Tax preparers aren’t required to get a CPA license, but it’s beneficial for them to have the extra level of expertise that comes with it.
Do I need a tax advisor?
If you’re struggling to do your taxes by yourself or find that new tax laws are confusing, you might benefit from using a tax advisor. But for some people, using a tax preparer, tax counselor or CPA would be enough.
You might need a tax advisor if you:
- Own property: Having a home or multiple properties means sorting through many different estates when managing your taxes and estate planning. A tax advisor can help you break down complex tax laws regarding your properties and if there are any concerns you need to know about.
- Earn a lot of money: The more money you make, the higher your tax bracket is. A tax consultant can help you move money around to lower your tax burden as a high-income earner.
- Might be audited: Tax consultants will stand by you if you get audited, which means they stand by the job they do for you. It’s an extra level of security you may want to take.
- Have children and assets: Estate planning is one of the most important steps you can take, especially if you have belongings that you want to pass along to heirs and organizations. Tax consultants can minimize estate tax obligations for your family after you die, making sure they keep as much money as possible.
- Invest: Capital gains can add a lot to your tax bill. A tax advisor manages your capital gains and losses to offset each other as much as possible.
- Are a business owner: Tax consultants can minimize business income taxes, including eliminating double taxation at the business and personal levels.
Not everyone needs a tax consultant. If you don’t fall into any of these major categories, you may want to seek out other tax professionals for help.
Tax consultant fees
How much you pay for a tax consultant varies greatly by the work you need, the advisor’s level of proficiency and where you live. The average rate accountants charged to file individual federal and state tax returns was $158 an hour in 2019, according to the National Society of Accountants.
Some average fees for various services that tax consultants provide are:
- Estate planning: $163/hour
- Audit of financial statements: $157/hour
- Elder care financial services: $131/hour
- Payroll services: $83/hour
- Form 940 (unemployment): $69 each
- Form 1040 with a Schedule A and state return: $273 each
- Form 990 (tax-exempt): $733 each
- Form 709 (gift tax): $413 each
Many professionals offer free consultations to see if you should work together. Take advantage of these consultations to see if a tax consultant is the right fit.
If you’re looking for someone to help you file taxes, you may qualify for free tax preparation or you can hire an accredited professional to help.
How to find a tax advisor
Taxes aren’t fun for most people. If you can get the help you need through a tax preparer or even a trusted relative, you might not need to pay a lot — if any at all — to file your taxes. You can also find an enrolled agent, or someone who’s passed the IRS taxation test. But if you need more help than what they’re willing to offer, you may want to find a tax advisor.
Here’s where to look if you do decide you need a tax advisor:
- Local firms: If you prefer in-person help, you can explore local firms or individuals near you. This lets you hand over documents and meet with someone face to face.
- Online consulting: Depending on the work you do and your needs, you may be happy with online consulting. It broadens your scope to include many more potential advisors. If you live in a high cost of living area, you may pay more for an advisor than someone who is living in a less expensive part of the country — and online consulting can help reduce the price.
When you’re looking for a tax consultant, ask friends for references. Read up on testimonials from former clients and look at reviews of their work, if available. Also verify if they are up to date on their credentials and certifications, like a CPA license.
Finally, it’s important to discuss, up front, when the consultant will return all of the necessary documents related to your tax returns. If your tax information is not returned, you run the risk of someone committing tax fraud under your name.