Thread by @roncaruthers

1. How to select a Tax Professional that works for YOU, not the IRS....

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One of the questions I got a month ago was how to select a tax professional, so I thought I'd put some of the top questions to ask to make sure you're paying the LEAST amount possible.

2. First off, here is something really important to understand:

If you make more than $50,000 as a single individual or $104,250 as a married couple, you ARE a target for higher taxes.

In fact, the Tax Foundation released research that 60% of us will pay higher taxes soon

3. Even though they say taxes are going up only for the 'rich', the analysis shows that a lot more than the rich are going to be affected.

Just like I tried to warn everybody.

Anyway, keeping more of YOUR money should be your goal, so that is what we're going to talk about.

4. Your Tax Professional should be one of your top advisors....and more importantly, they should work WITH you, not against you...

...meaning they should be proactively bringing you ideas and strategies to save you money, not telling you what you 'can't' do.

5. But here is where there is a huge disconnect:

80% of accounting fees collected across the country are NOT for tax preparation or planning....they're for accounting.

Meaning most accountants don't actually practices as tax specialists.

6. Further, unlike doctors, accountants are not formally categorized into specialties.

Worse still, most of the CPA education including the exam is focused NOT on taxes, but financial accounting...the summarizing, analyzing and audting of companies.

7. So, if you feel like your accountant just doesn't know how to help you, you're not alone:

It's not what they were trained to do.

Many tax preparers do it just for the money and to cover their overhead.

8. So, what you want is a concentrated tax specialist: If you're in real estate, then you want someone who focuses on that.

Crypto? Same.

And if you have a small business, you want someone who focuses on THAT.

So, how DO you find someone good?

Start with these 10 questions:

9. 'Question #!

Are you aggressive, conservative or somewhere in between?'

Many tax profesionals are actually scared of the IRS.

That is NOT the person you want.

Likewise, you don't want someone who feels you should pay more just to avoid them asking any questions.

10. Basically, you want someone how is cautiously aggressive, OR

aggressively cautious.

You pick.

But if the law is gray on something, and much of the law IS, you want to use it to your advantage.

While avoiding breaking the law where it is clear-cut.

11. Question #2: Will you help me plan my taxes?

Do you use pro-forma (what if) software to help me see different scenarios.

You don't just want someone to prepare your return....you want someone to PLAN it.

12. YES, this IS going to cost more, but the savings should MORE than cover the cost.

Also, they should be doing a pre-year-end tax reduction consultation, especially if you're self-employed.

You want to make sure you're never wasting a deduction.

13. And you want to pay attention to your brackets for things like Roth IRA conversions.

Question #3:

Can you tell me about a recent tax change about small business (or real estate or crypto) that may affect me?

Obviously, we want to make sure they're keeping up with changes.

14. Question #4:

What steps do you take to reduce the chance of being audited?

I'll give you some tips in a separate thread tomorrow, but you want them to have a good answer here.

15. Question #5: How many self-employed entrepreneurs do you have as clients?

There IS a sweet spot here:

You want to make sure they have plenty that are like you, so they're hip to all the savings, but that they're NOT a 'paper mill' that just pumps out returns.

16. Again, this is a PARTNERSHIP, and you're interviewing for a potential non-payroll employee.

17. Question #6: What is your policy about responding to phone calls and emails?

If your person is busy, they're NOT going to always be able to be reached immediately, and with tax planning, you likely won't need immediate access,

18. but there should be some level of understanding about when and how they'll get back to you.

19. What credentials do you have specifically in the area of taxes (not auditing)?

Even better than CPA, in my not humble at all opinion, is a Master's Degree in Taxation (MST) or an EA, for Enrolled Agent.

This is NOT an IRS agent, but someone who has taken intense tax courses

20. Remember, nothing against CPA's, but much more of their time is spent on audting procedures than the actual filing of taxes.

EA's and MST's spend WAY more time learning the ins and outs of the actual tax code and filing of returns.

Also, ask what they do to say current.

21. I have a ridiculous amount of continuing education that I want people in my office taking, and I practice the same myself on the finance side:

In fact, I'm enrolled in 6 advanced financial planning courses just this year.

Anyway, you want someone who takes this seriously.

22. Question #8 (the last one was #7, I just forgot to number it)

How do you feel about filing extensions?

Some tax professionals just want to get the returns done so THEY can be done for the year, but there are huge advantages to filing an extension that I'll dicuss tomorrow.

23. You want someone that is PRO tax extension.

Question #9: What are your fees, and do you have a written fee schedule?

Quoting a fee for a return is NOT cut and dry if the person you're using is any good.

In fact, many good pros will NOT quote a fee for the first return.

24. However, they should be able to give you a ballpark figure.

Also, keep in mind that the firm or person I described above will NOT be cheap.

You do NOT want a cheap person if you are self-employed.

It WILL cost you.

OTOH, you don't want to be overcharged.

25. BTW, at my firm, we charge by the plan or schedule after the first year.

NOT hourly.

And, while there is nothing wrong with an advisor that charges by the hour, the reason we don't do it is because we do NOT want to have to keep track of everytime a client calls...

26. Further, we WANT them to call and not avoid it because they don't want to get a bill.

So, I recommend you find someone who does this by the package or by the IRS schedules that they have to file. However, again, there isn't anything 'wrong' with an hourly advisor.

27. Also, keep in mind, if your records are sloppy or disorganized, they may have to charge you more just to sort everything out, but most good firms will have a bookkeeper on staff so you're paying a lower rate for that person.

28. In our case, we charge by the hour for bookkeeping and representing someone before the IRS, flat fee or package fee for everything else.

Finally, question #10:

29. Can you provide references?

I put this one last for a reason. One, because everybody else is going to list it first, but also because even the WORST professional will have SOMEBODY that can say nice things about them.

30. Seriously, the worst I ever got screwed was by someone with GLOWING references

In fact, this firm hired actors disguised as clients to say nice things about them.

So, I always feel that references have limited value, sadly.

31. However, if you're going to ask for them, here are some questions to consider:

-Why do you like this person?
-How did YOU meet them?
-Have they come up with creative things others didn't think of?
-Do they keep in touch during the year?

32. Reference questions continued:

-Do they give you specific year-end strategies?
-Do they thoroughly explain your tax situation to you so YOU understand what's going on?
-Do they encourage the use of extensions?
-Do they send articles that pertain to you from time to time?

33. If you're going to ask for references, remember, you want SPECIFIC answers, not vague 'they're a really nice person' answers.

But again, take all of this with a grain of salt.

34. I think that's enough for now to get you started, although I will follow up tomorrow with more informatoin on find the BEST preparer and partner you can.

I have lots more where this came from, and you'll see it over the next couple of days.

35. Finally, if I've been a little quiet lately, it's because I was on the road for 2 weeks,

then had to go to Virginia Beach last minute (where I met up with @ShadowRents !) to speak at a tax conference,

Then I got food poisoning on the filght home!

36. On top of all this, one of my companies is for sale, so in addition to my day job, I've been working on prepping that every night until I pass out and do it all again the next day.

I'm finally caught up!

Anyway, hope you enjoy these tips, and I'll have more tomorrow.

/end

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