Choosing Your Perfect Tax Advisor

TLDR: Choose a tax advisor only once you know their credentials, how they will charge for services, what their services include, and how they will communicate with you.

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I've met with thousands of individuals looking to hire me or my firm as their tax advisor. It surprises me when I occasionally talk to people that don't ask me any questions about who I am or how I operate. After all, choosing a tax advisor is one of the most important financial decisions an individual or business owner can make.

In today's world, the value of a good tax advisor goes way beyond sending forms to the government once a year. Your ability choose the tax advisor that fits your needs is crucial in your wealth building process. Here are the things I think potential clients I meet with should understand as they consider a tax advisor that meets their needs.

Start With the Basics: Who Can Prepare a Tax Return?

Anyone who is paid to prepare federal tax returns must obtain a Preparer Tax Identification Number (PTIN) from the IRS. A PTIN allows an individual to prepare tax returns for compensation, but it does not necessarily indicate extensive tax education, testing, or professional credentials. In fact, it only takes about 15 minutes to apply for a PTIN! From there, a PTIN holder can start preparing tax returns for the public - even without any type of training or experience!

For individuals with straightforward tax situations, a PTIN holder may provide adequate service. However, taxpayers with investments, rental properties, businesses, trusts, or complex planning needs may benefit from working with a professional who has additional credentials.

Enrolled Agents: Tax Specialists Licensed by the IRS

Enrolled Agents (EAs) are federally licensed tax professionals authorized by the U.S. Department of the Treasury. To become an EA, candidates typically must either:

• Pass a comprehensive three-part Special Enrollment Examination covering individual taxation, business taxation, and representation before the IRS, or

• Gain qualifying experience working for the IRS.

One of the most significant advantages of working with an EA is that taxation is their primary area of expertise. They are authorized to represent taxpayers before the IRS for audits, collections, appeals, and other tax matters. Most often, fees for services by Enrolled Agents are lower than fees for Certified Public Accountants. With the right level of experience, EAs can be great tax advisors.

Certified Public Accountants: Broad Financial Expertise

Certified Public Accountants (CPAs) are licensed by state boards of accountancy.

Becoming a CPA is extremely challenging and generally requires:

• A bachelor’s degree with significant accounting coursework

• Additional college credits beyond a traditional undergraduate degree in many states (typically a Master's Degree)

• Passing the rigorous 4-part CPA exam (less than 20% pass their first time)

• Meeting direct experience requirements established by the state licensing board (typically 1-2 years)

• Completing ongoing continuing professional education each year

Unlike EAs, whose focus is taxation, CPAs often have broader expertise that may include:

• Financial statement preparation

• Auditing

• Business consulting and advising

• Accounting system design

• Financial analysis

• Tax planning and compliance

  
  

For business owners, high-net-worth individuals, and organizations that need both accounting and tax expertise, a CPA can provide valuable integrated advice.

Which Is Best?

The answer depends on your needs.

• A PTIN holder may be sufficient if your tax situation is straightforward and you primarily need annual tax preparation, but not ongoing support throughout the year.

• An EA may be ideal if your primary concern is tax compliance or dealing with the IRS.

• A CPA may be the best fit if your situation involves both tax compliance, tax planning, and broader accounting or financial issues.

  
  

Most importantly, credentials alone do not guarantee quality. Experience, communication skills, and even personality are often just as important as the letters after a person’s name.

Understand Fees Before You Engage

One of the most common frustrations taxpayers experience is uncertainty about fees. As a taxpayer and tax advisor, I can relate to my clients in that no one likes to pay for tax services. However, I can also say that as a tax advisor, my goal is to save my clients more than they pay me each year.

As you consider a professional tax advisor, they need to clearly explain:

• What their fee structure is

• What services are included for those fees

• What services are billed separately

• When payment is due

• Whether tax planning meetings, phone calls, or IRS correspondence are included or will be billed separately as they occur

  
  

Avoid situations where fees are vague or cannot be estimated in advance. While it may not always be possible to provide an exact fee before reviewing your information, a reputable advisor should be able to explain their pricing methodology and provide a reasonable estimate.

The lowest fee is not always the best value. Effective tax planning can often save far more than the difference in preparation costs.

Look Beyond Tax Return Preparation

Many taxpayers evaluate advisors based solely on who can prepare a return most cheaply. Cleaning up mistakes made by poor tax preparers can cost you significant time and money - well beyond what you might think you save by going with someone cheaper. The old saying goes, "You get what you pay for."

A quality advisor should be available to answer questions throughout the year. If they aren't willing to answer questions or don't feel able to, you have a tax preparer and not a tax advisor. The best advisors act as year-round resources rather than seasonal return processors.

Communication Matters

Technical expertise is important, but communication is equally critical.

When interviewing a tax advisor, consider:

• How quickly do they respond to questions or requests?

• Do they explain concepts in understandable language?

• Are they willing to educate clients in an understandable way?

• Can you schedule meetings when needed?

• Do they proactively reach out when tax laws change?

A knowledgeable advisor who is difficult to reach may provide less value than a slightly less technical advisor who communicates consistently and clearly.

It is common in my industry today for clients to reach out to their tax professional and not get a response for weeks or even months. This is completely inappropriate for a tax advisor. While they may not be on call at all times, the should be able to get back to you within a few days. If not, it may be time for a new tax advisor.

Watch for Red Flags

Be cautious if a tax preparer:

• Bases fees on the size of your refund (this is illegal in some cases)

• Refuses to sign the return they prepare

• Promises unusually large refunds

• Cannot explain positions taken on your return

• Is unavailable outside tax season (this is more indicative of a tax preparer than a tax advisor)

Professional tax advisors should be transparent, ethical, and willing to stand behind their work.

Final Thoughts

Choosing a tax advisor involves much more than finding someone to complete tax forms. The right professional can help you plan proactively, avoid costly mistakes, navigate IRS issues, and make better financial decisions throughout the year.

Whether you choose a PTIN holder, an Enrolled Agent, or a CPA, focus on qualifications, communication, transparency, and accessibility. A trusted advisor who understands your goals and is available when questions arise can provide value far beyond annual tax preparation.

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