When Should I Hire a Tax Consultant
Tax laws are extremely complex, but an experienced tax consultant can guide individuals and businesses through a variety of tax-related scenarios. This includes:
- Tax preparation and tax planning
- Audit representation and preparedness
- Entity formation and business tax guidance
- Estate tax planning
- Charitable giving and its tax impacts
- Mergers and acquisitions (1031 exchanges)
- Bookkeeping tax compliance
Taxes are part of every major financial or business decision, so no matter what your tax situation looks like, a trusted tax consultant can advise you and possibly improve your position.
Who Needs a Tax Consultant?
If any (or all) of the following are true, a tax consultant can help improve your tax strategy:
- You have multiple sources of income – If you receive income from multiple sources, a tax consultant can help assess your total tax liabilities and determine which tax deductions or advantages you can leverage with each income source. This includes multiple W-2s, 1099s, business income or rental income.
- You own a business – If you own a business, you’ll need to consider payroll taxes, sales tax, business tax deductions and the impact of any impending transactions. If you’re looking to start a business, tax law is implicated at the very beginning during entity selection.
- You’re about to sell a major asset – If you’re preparing to sell a business, real estate or certain investments, tax liabilities will be triggered with the transaction – typically capital gains taxes. A tax consultant can help minimize your liabilities and the impact of capital gains taxes on your overall strategy.
- You want to better leverage tax deductions and credits – If you believe your tax liabilities are excessive, a tax consultant can review your eligibility for various tax deductions and credits. This can be projected for future tax years, ensuring you’re well positioned going forward.
- You’re facing an audit or want to prepare for one – If you’ve received communication from the IRS that you’re being audited, a tax consultant can review your financial information, calculate your tax liabilities and provide guidance on how to proceed. Some tax consultants double as enrolled agents, which can officially represent their clients before the IRS and handle communications.
If you’re anticipating an audit or just want to ensure your tax compliance is in place, your tax consultant can review your organization’s processes and ensure taxes are being prioritized properly. - You have tax issues (like back taxes) that need to be addressed – If you have tax problems like back taxes or unfiled taxes, a tax consultant can provide answers. And when it’s time to approach the IRS, your tax expert can handle the official communications. This may include negotiating penalty abatement, an installation plan or an offer-in-compromise, among other options.
- You’ve recently experienced a significant life change – If you’ve recently been married, gone through a divorce, had a child or received an inheritance, there will be tax impacts. A tax consultant can advise you on how to proceed and incorporate your changing life situation into your tax planning.
- You’re planning on leaving assets behind for beneficiaries – If your estate planning strategy includes leaving assets for beneficiaries, there are ways to do so while minimizing your tax liabilities. Gifting and trusts are two examples, and a tax consultant can advise you on each.
As you can see, there are many instances where a tax consultant can provide valuable guidance. If you’re unsure about your tax positioning or tax strategies, consider scheduling an appointment with an expert to get a big picture idea of where you stand.
Tax consultants are experts in the Internal Revenue Code, and some are qualified to represent taxpayers in official communications and negotiations. Specifically, tax consultants can provide the following tax services:
- Tax preparation and planning – Tax preparation services involve filing your taxes accurately and on time, using your financial information to calculate liabilities, deductions and other important items.
Tax planning services are designed to minimize your tax liabilities into future tax years, and involve multiple strategies. They include loss harvesting, investing in tax-advantaged accounts, timing income or capital gains, utilizing charitable giving and many others. Your tax consultant can advise you on which tax-saving strategies make the most sense for your taxes. - Estate tax planning – Estate tax planning services, like other tax planning services, are designed to minimize your tax liabilities. For estate planning purposes, a tax consultant can assist with setting up trusts, advise on giving, and review your estate planning documents to verify they align with your estate planning goals.
- Audit representation and preparedness – A tax consultant can perform risk assessments and flag potential audit triggers, clean up your books for compliance purposes and support evidence gathering in response to an audit notice.
- Business entity formation and tax guidance – Business entities are taxed differently, and your tax consultant can advise you on which is the right fit for your operations. Your tax consultant can assist with succession planning, project tax liabilities multiple years into the future, perform M&A due diligence, and help balance tax liabilities and cash flows.
- Payroll tax guidance – A tax consultant can also provide guidance on payroll taxes. Specifically, they can help implement payroll tax controls, help develop tax-advantaged employee benefit plans, and ensure workers are properly classified.
Tax consulting services can provide essential guidance on big picture tax questions. This includes guidance on IRS audits, tax problems, tax planning, business formation, payroll taxes, and a variety of other complex tax concerns.
If you’re unsure how to optimize your tax position, schedule an appointment with a reputable tax consultant who can identify the right steps for you or your organization to take.
