Personal finance column: How to choose the right tax professional

Personal finance column: How to choose the right tax professional

Having the right professional on your team can be critical to your financial success. Yet, depending on your situation and goals, the best tax expert in the Roaring Fork Valley may not be the best fit for you. That’s why it’s essential to do your due diligence and consider a variety of factors when making your decision.

Here are five questions to ask yourself when choosing a tax professional:

1. What are their credentials?

The CPA (Certified Public Accountant) is the undisputed gold standard in the industry. However, if your situation is not complex, you can work very well with an EA (enrolled agent). EAs focus specifically on taxation, while CPAs typically handle taxes and more.

Since the professional will perform an important function and will have access to some of your most sensitive personal information, it is always a good idea to check whether they have an active license and any regulatory flaws on file. Two places you can use to check include the Colorado Division of PProfessions and Professions (choose “Accounting”) and CPAverify.

2. Are they accepting new customers?

Many tax professionals in the Roaring Fork Valley are not. As such, you may need to contact half a dozen to find two or three that have an opening. You can also look outside the Valley if needed, but you must stay in Colorado as each state has its own tax rules.

3. Do they employ tax minimization strategies?

Ideally, the tax professional you work with will be able to accurately capture and report what happened in the past year while helping you implement strategies that will reduce your future tax bills. .

The following questions can help you determine if they are suitable in this regard:

  • As part of our collaboration, will you provide forward-looking tax planning recommendations?
  • What type of tax minimization strategies do you commonly use with your clients?
  • Based on what you know of my situation, what are some tax reduction strategies you might recommend?

4. Do they work with clients like me?

You’ll want to hire a tax consultant who works with clients just like you. They are more likely to know your situation and proactively offer solutions that fit your needs.

For example, if you make a lot of money from restricted stock units, investment income, and rental properties, your CPA should understand these issues inside and out. Alternatively, if you have just inherited assets and are trying to minimize your tax bill while familiarizing yourself with all the tax implications, you will need a tax specialist who specializes in these areas.

Here are some questions to ask yourself:

  • What stage of your life or career are you at?
  • What are your different types of income, sources and amounts?
  • Are you self-employed or do you own a business? How is this company structured?
  • What is your net worth?

Once you understand some of the important attributes that define your financial situation, then you can seek out a tax professional with the relevant experience and expertise.

5. Do they feel like a good fit?

Once you’ve found a tax professional who meets your technical needs, make sure they’re also someone you like and trust. Although the professional you choose doesn’t have to be a dear friend, it’s often easier to develop a solid working relationship with someone whose personality blends well with yours.

Additionally, if you currently work with a financial advisor or wealth manager, consider asking them to recommend a tax advisor. Many financial professionals have close working relationships, and your financial advisor likely has at least one tax professional they can recommend. Ideally, your financial advisor and your tax specialist will work together to ensure that the strategies they implement are in line with your financial goals.

Brian Littlejohn, MBA, CFP®, CFA is the founder of Sherwood Wealth Management in Basalt. Brian provides his clients with personalized investment management and comprehensive financial planning services to help them organize, grow and protect their assets.

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