Published March 9, 2022
For higher-net-worth clients, thinking about estate taxes along with income taxes proactively in tax planning becomes even more important.
For higher-net-worth clients, thinking about estate taxes along with income taxes proactively in tax planning becomes even more important.
April 15 may well be a day of dread for most Americans. Working with an experienced accountant can help a lot. But how do you know when you’ve found the right fit? In this episode, David, Kari and Patrick walk you through some key things to consider when selecting an accountant, including:
Finding an expert who communicates well and has the experience to address your unique needs can make all the difference when it comes to paying Uncle Sam. Listen now to learn more!
Hiring a tax accountant can seem like a challenging process, but do you know what steps you can take to find the right professional for you? Listen to this podcast and hear the five essential questions you should ask your accountant or tax professional.
Hi, and welcome to another episode of The Adviser You Can Talk To Podcast. I’m David Mastroianni, a vice president and CERTIFIED FINANCIAL PLANNER™ here at Adviser Investments. Most people don’t know what to look for when they’re trying to find a CPA or tax professional. That’s the whole point of this podcast today. We’re going to help you with that by providing the five questions to ask when interviewing an accountant. Today, I’m joined by two of my esteemed colleagues. On my left, I have Kari Wolfson, vice president and CERTIFIED FINANCIAL PLANNER™ and a member of our relationship team here at Adviser Investments. Thanks for joining us, Kari.
Thanks, David. Happy to be here.
Great. And to my right, I have Patrick Carlson, who’s an attorney with a tax law degree and the director of our wealth services group here at Adviser Investments. Thanks for joining us, Patrick.
Hi, David. Thanks for having me.
Great. Thank you both. So finding a good accountant is one of the most crucial steps of an individual’s financial plan and for good reason: taxes. People have a huge aversion to paying taxes but often aren’t very proactive in optimizing their tax planning. Do you guys feel that’s a similar sentiment shared by many clients that you work with?
Yes. I agree. A lot of us complain about taxes. They’re a necessary evil, and if my son wasn’t born on tax day, it would probably be my least favorite day of the year.
And it makes sense, as they tend to be the largest personal expense for most of us. Plus, preparing your tax return even if you aren’t the one actually filing it takes a lot of time and effort. Tax planning really isn’t something we think about as much during the working years; you’re able to withhold it directly from your paycheck, but it can become a more obvious expense in retirement. And regardless of your life phase, collaborating with your adviser and a tax person or team is helpful not only to prepare and anticipate your taxes due, but also to strategize ways to potentially lower your future taxes due. And it’s something we do for our clients at Adviser Investments often.
Absolutely. I 100% agree. My background is as an estate planner and as an income tax preparer as well. So for me, the thing that often happened with a lot of our higher-net-worth clients is thinking about the estate tax side of things, too, alongside the income tax side. Because when you start adding those layers of taxes in, that proactivity and planning becomes even more important.
Great, thanks for sitting table, both of you. So for our listeners, I just want to mention quickly that even though we’re only discussing five questions in this episode, we do have more insights to share at the end, and we’re also going to share with you some more info about our tech services group. So make sure you listen through all the way. With that being said, the first question you should ask your accountant is: What are your qualifications? Patrick, I’ll hand this one off to you to start because there’s a lot of alphabet soup in our industry, and you’re probably a lot more familiar with some of the technical aspects of relevant qualifications, I would assume, right?
That’s a great question, David. And that alphabet soup is all too common in the tax industry as well. Most people reflexively go to that CPA, Certified Public Accountant, as the sort of go-to professional, and they can be a great fit. You become a CPA by having that educational piece. There’s an exam and there’s a continuing education requirement, but I would encourage a lot of clients to think a little bit more broadly, potentially look at a couple of other credentials that might make sense. There’s EA, which is an enrolled agent. This is an IRS credential that you achieve by experience or an exam that also has a continuing education requirement. There’s also tax attorneys. Tax attorneys can be really helpful, especially when you’re starting to get into that estate tax type of territory as well because they often will work really closely with your estate planner.
If you’re going to work with a tax attorney, I would consider looking into the state board of legal specialization because they’re going to impose some extra requirements as well on those attorneys. And then, of course, I would be remiss—there are some really great advisers out there that don’t have any type of credential because the tax industry is in some ways a little bit less regulated than the financial industry. You can be a really great tax adviser just from long-term experience. But if that’s where you’re going, you really want to vet that person’s qualifications a lot.
Yeah. My biggest takeaway on the alphabet soup is the continuing education requirement that a lot of these credentials require, and that’s important because tax laws are always changing. So they’re continuously learning and staying up to date with the newest changes. But I think also just doing homework, not only on their background, but also on the firm and the individual specialties. So how long has the firm been in business? Who will you be working with on a day-to-day basis? And also the size and capabilities of the firm.
In terms of client experiences, Kari, would you also recommend asking for referrals, talking with friends and family as well?
Sure, absolutely. I think asking a friend or family member and getting that recommendation is always a great starting point. It makes it easier than starting with no information or background on the person.
Makes sense. Especially if you can work with a professional that not only meets some of the prerequisites you both spoke about, but also is somewhat closely aligned with your own financial situation. That’s great. This leads into our second question that you should ask your accountant, which is: Who is your typical client? Kari, you already kind of mentioned some of these things, but what are the items that you would recommend someone focus on?
Yeah, I think every client’s needs will vary. It’s a case-by-case basis. So a business owner is going to face very different tax challenges and issues compared to a couple who’s retired and living off of their investment income. If you do own your own business, you probably want to hire someone who says they work with other small businesses, and it’s more than 5% or 10% of their client base. And then also, what industry?
I work with a number of business owners, and with for-profit versus nonprofit, the needs will be different. For those that are self-employed or own their own small business, it’s helpful to work with the tax adviser that can help not only set up the tax payments, but also any potential self-employed retirement plans. Working with families, a good question to ask would be whether or not they prepared trust returns. And then also thinking about stock options because that’s been something I’ve dealt with a lot lately. I actually worked with a client who received an unexpected tax notice, and they also work with our tax team and it was kind of unnerving just to get this notice, not knowing where it came from, what it meant, what the implications were. So being able to have our tax team partner with them and really solve the issue removed all of the concern and worry from the client’s plate.
That’s interesting and very helpful. I actually want to pull on that thread a little bit more because that speaks to how every client has different needs, but there’s also a lot of different firm types out there. You have your big four, your PricewaterhouseCoopers, Deloitte and Touche, midmarket firms, your small ma and pa accounting firms, but correct me if I’m wrong, Patrick, bigger isn’t always better when it comes to working with tax professionals, right?
Yeah, of course. I mean, you have to think about what those firms are offering to our clients. We’re trying to find out who your typical client is. If you think about those big firms, it’s going to be publicly traded companies, large privately held companies, maybe very old or ultra-high-net-worth individuals. And you have to think: Do you really need those things? Because you’re probably going to be paying for it if you become a client there. And is that really going to be helpful? So ask who that person’s typical client is. Same thing if you’ve got a lot of money held in a trust—maybe it’s a family trust that you inherited from someone. A tax preparer that’s familiar with trusts is going to be incredibly valuable for you.
Great, great. So again, common theme I’m hearing is finding the right fit with a professional that offers not just the range of services you’re looking for, but that also is able to specialize in certain areas that are more applicable based on your current situation. This goes in with our next question that you should ask an accountant, which is: What additional tax services do you provide? Patrick, I’ll let you lead this one off because as you can imagine, filing the 1040 and then “set it, forget it” probably isn’t the best approach when it comes to working with a CPA, I would assume, right?
I 100% agree. When you’re working with that tax adviser, they obviously should get the tax forms filled out for you. They should tell you what your balance due is or what your refund might be, but it really needs to go beyond that to providing you some advice, some planning, some information that is reducing your tax liability. Now, they might not be able to reduce that liability every year. But when you think about it over a several-year period, they should be bringing some ideas to the table that are helping you proactively manage that exposure.
Yeah, I agree. I mean, from our experience, the best accountants work side by side with the adviser, and a lot of our financial planning meetings with clients end with some sort of recommendation or potential change that impacts taxes or tax strategies. And it’s going to be different for younger clients versus clients that are in retirement. A lot of the opportunities I can think of are potential Roth conversions when a client eventually retires and starts to take the required minimum distribution. And also if they’re charitably inclined, should they give a portion of their required minimum distribution to charity? And also things as simple as the year-end tax-loss harvesting. So there’s a lot of opportunities throughout the year. And it’s great to collaborate with the tax team.
Well, that’s really helpful. What about the much-dreaded audit notice? Do you think audit representation is important too?
Oh, of course. I mean, nobody likes to get that audit notice. That’s always a really stressful experience, but it’s even more stressful if you have to try and figure that out alone and be on hold with the IRS, answering technical questions, figuring out what went wrong on a return. So I think that is an important service to make sure you ask the accountant about. And also just other questions. It doesn’t even have to rise to the level of the IRS saying, “Hey, we think there’s a problem on your return.” You asking a question: Hey, what about this? What about that? You want to make sure that the preparer isn’t just going to prepare the return, send it off and not give you any opportunity to ask about it.
Good, good. So just to summarize quickly, best practice: Find a professional that isn’t just going to do a “set it and forget it” program. They file you a 1040. You don’t hear from them in a year. Best to have someone that is going to be proactive in other areas of tax planning. That’s great. So we’ve covered three questions so far. We’re going to go to our fourth question about what you should ask your accountant, which is: How are your fees calculated? From my personal experience in working with other professionals, it’s more important to pay attention to how they charge, not necessarily what they charge. Do you guys agree with that sentiment?
I 100% agree. I mean, with a lot of accountants, the standard is that billable hour. That’s going to be the predominant form in the industry. When you have that, you’ll understand what they’re charging because they’ll tell you the hourly rates. But you kind of need to understand—if you send an email, if you send a text message, if you call on the phone to ask a question, is that going to be billed? Is each one of those going to be billed? Is it going to be billed collectively? If you have a flat fee type of engagement with the firm, what level of communication is included in that? You just have to ask those questions right at the outset so the relationship starts off productive with your accountant.
Yeah. Good point. If they bill by the hour, know what’s not included versus what is included. And it really all comes down to comfort, knowing what you’re paying now versus later and being on the same page.
Good. So just to reiterate, understand how they charge, evaluate that cost-versus-value proposition and ultimately your comfort level trumps all. So we’ve reached our final question, number five that you should be asking your account or tax professional. And that is: Will there always be someone familiar with my return available to answer my questions when I either call or email?
I wanted to preface this topic by saying my brother’s an accountant. I have a lot of friends that are accountants, and my brother, especially, he’s a great one. But I’d be remiss if I didn’t cover this topic. So hopefully other excellent tax professionals don’t take it personally. That being said, there are certain stereotypes for CPAs, and I’m not talking about wearing a green eyeshade or a pocket protector. It’s that unfortunately many of them are not great communicators. We here at Adviser think good communication is extremely important to the client experience. How would you guys ensure that this doesn’t become an issue when working with a tax professional?
No, that’s a great point. I think just setting the expectation upfront, understanding their communication style. Sometimes people prefer a phone call versus an email. And really what is the timeline for expecting a response, understand that. Also, how do you schedule meetings? Should you do it in advance? Do you reach out when it’s a few weeks away? Just getting all of those questions answered upfront is really important.
And I think on top of that, too, Kari, it’s about how people delegate within the firm. It’s very common in the tax industry that there’s going to be associates. There’s going to be other people that are going to be helping to finish the work for you, the tax return, the tax planning, whatever it might be. So knowing who you should reach out to—because it could be that one person is not as available because they’re in the midst of reviewing a lot of returns. And if something is urgent, knowing the breadth of your team is really helpful to be able to get a quick response.
That’s a great point, Patrick. And our motto here at Adviser Investments is that we’re an investment adviser you can talk to. That may sound hokey, but it is crucial that you work with someone who shares the same ideals when it comes to communication. Right?
Absolutely. I always tell the tax team that we don’t just want to be the investment adviser you can talk to. We want to be the tax adviser you can talk to as well. We know that taxes can be stressful. Not knowing what’s going on can be stressful. So we want to be that partner that’s along the tax journey with you.
Well said. Well, we’ve reached the tail end of our podcast here, and I just want to summarize the five questions that we’ve covered today. Number one: What are your qualifications as a tax accountant? Number two: Who is your typical client? Number three: What additional tax services do you provide? Number four: How are your fees calculated? Number five: Will there always be someone familiar with my return available to answer my questions when I call or email?
For our listeners, I want to mention a companion piece that we have, the 10 Essential Questions to Ask Your Tax Adviser, five more than we actually had time to cover here today. So if you want to access this document, please click on the link in our podcast description. Before we sign off, Kari, Patrick, any additional thoughts that you guys wanted to add?
That companion piece is a great piece to mention. And my biggest takeaway is that for most, hiring a tax person or team is really worth the investment as long as you hire the right one. So do your due diligence, do your homework and ask questions.
Great point. For me, a lot of people associate that tax season with February, March, April. April 15, it’s over. Just know that taxes can be something that you think about all year long and need support with all year long. Especially if you’re going to benefit from that ongoing planning, if you pay estimates, if you’re a business owner. Absolutely having that yearlong partner is helpful.
Good, good. I teased this in the beginning, but Patrick, can you give us a plug regarding our tax services group here at Adviser for some of our clients and other interested parties who might not know what we’re doing behind the scenes in that area?
Absolutely. So with our Adviser Investments Tax Solutions, we recognize from all the financial planning that we’ve been doing that taxes are often a huge consideration of financial planning. And they’re never really going to be the make or break in your financial plan, but managing that tax exposure can only help. So we recognize that bringing that in-house and being able to have everybody around the table—the investment side, the tax side, the financial planning side—all working for the clients collectively is something that’s been really helpful for a lot of clients. So it’s really a suite of services beyond just that return preparation. We’re going to obviously help you look back, make sure that return is correct. You don’t pay any more than you legally owe, but we also want to help you look forward along your journey. That way we’re helping maximize those short-term goals, medium-term and your long-term goals too.
Fantastic news. Thanks for the input. And on that note, Kari Wolfson, Patrick Carlson, thank you both for joining me here in the conversation today.
And for our listeners, if you’ve enjoyed this conversation, please subscribe and review our show. You can also check us out at www.adviserinvestments.com/podcasts. Your feedback is always welcome. And if you have questions or topics you’d like us to explore, please email us at email@example.com or call us at 800-492-6868. This has been David Mastroianni with Patrick Carlson and Kari Wolfson. Thank you again for listening to The Adviser You Can Talk To Podcast. Take care.
This podcast is for informational purposes only. It is not intended as financial, legal, tax or insurance advice even though these topics may be discussed. Information and events addressed in this podcast, as well as the job titles, job functions and employment of the podcast’s participants with respect to Adviser Investments, LLC may have changed since this podcast was released. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions..
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