As tax season rolls around again, we’re all looking for the best ways to maximize our returns. However, if you’re filing on your own, that is easier said than done.
The solution to choosing a tax professional? Hire a professional. A tax advisor, tax agent, or certified public accountant (CPA) are professionals who will help you navigate complicated US tax laws. They’ll take the burden off your hands and make sure you never overpay.
This article will tell you everything you need to know about hiring a tax professional—how they work, why you need them, and how to choose the best tax professional for you.
Why Do You Need a Tax Professional?
A lot of people think it is a waste of money to hire a tax professional. After all, why would you pay for someone to help you pay the government?
However, that is a common misconception. Spending money on a tax professional is actually the best way to save money each year. They will help you drastically cut down the amount you need to pay—especially if you are a small business owner, freelancer, or someone with multiple sources of income.
The US tax code is long, complicated, and hard to navigate on your own. In fact, US taxes get more complicated every year.
Does that mean you will file your taxes incorrectly if you don’t hire a professional? No, but it does mean you will miss certain loopholes and trapdoors that could save you tons of money.
To put it simply, working with a professional is the only way to avoid wasting money and make sure you get the highest possible return.
Different Types of Tax Professionals
So, you want to hire someone to help you file your taxes. Where should you start?
First of all, you have to know who you’re looking for. There are multiple types of professional accountants and tax agents who can help you out. The right expert for you depends on your individual tax situation.
Here are the three most common tax professionals you should know about:
Enrolled Tax Agents
An enrolled tax agent, sometimes referred to as an enrolled agent or EA, is a licensed tax professional who is approved to represent clients before the IRS. That means they have the credentials to file your taxes on your behalf.
Enrolled agents provide tax-specific services for businesses and individuals. They generally work for an hourly rate and are hired during tax season.
If you work with an enrolled agent, they can prepare your income taxes and offer advice to help you get the highest refund or minimize payments.
Certified Public Accountants
Similar to enrolled agents, certified public accountants are credentialed tax professionals who can legally file on behalf of an individual or business. The key difference is that a CPA is licensed by their state, while an enrolled agent has a federal license.
Most CPAs have a graduate school education, and many are hired full-time by businesses and corporations. Other CPAs work within accounting firms to help small business owners and individuals with complex tax situations.
Alongside offering tax advice, they can take on a variety of accounting tasks (such as auditing and payroll).
Certified Financial Planner
A certified financial planner, or CFP, is a trained tax professional who helps individuals manage every aspect of their finances.
Unlike other tax professionals, CFPs work year-round and take on a variety of tasks. They can help you plan for retirement, build a budget, manage your investments, and more. Business owners and executives often work with a CFP to keep track of their complex personal budgets.
Choosing the Right Tax Professional
Finding the right accountant or tax agent for you doesn’t have to be complicated. There are plenty of certified professionals available to help you out.
That said, you shouldn’t hire someone on a whim. It’s important to do a little research and make sure you’re making the right decision for your finances.
To help you find the right tax professional, here’s a quick 3-step guide.
1. Decide Which Type of Tax Professional You Need
We talked about three types of tax professionals in the section above: enrolled tax agents, certified public accountants, and certified financial planners.
If you want to work with someone who can manage every aspect of your finances, you should consider hiring a CFP. They will work with you year-round to save, invest, and budget your money.
Now, if you only want to work with a professional during tax season, you’ll need to decide between an enrolled agent and a CPA. Both types of tax advisors will help you to maximize your return and minimize your payments for an hourly fee.
That said, a CPA’s services are generally more expensive than an enrolled agent’s services. CPAs can also help with a variety of other financial management tasks, so they are the best advisors for small business owners and independent contractors.
2. Search for Professionals in Your Area
Once you know what kind of professional you are looking for, you can use directory searches to find someone in your area.
To find an enrolled tax agent, search through the National Association of Enrolled Agents. If you’re looking for a CPA, you can check the CPA Verify Database.
Finally, to find the right CFP for you, look up your area on AICPA’s Credential Directory.
3. Check Credentials and References
Sadly, there are some shady unprofessional tax advisors out there who will take your money for low-quality services.
To avoid getting scammed, ask your tax professional for their credentials and references before you hire them. You should also be able to find references from past clients on their website or through a Google search.
This stage might be time-consuming, but it’s worth it to protect yourself from scams.
Final Thoughts
Here’s the bottom line: taxes are complicated. Working with a professional can help you avoid overpaying and get the best possible return.
The good news is, hiring the right tax professional is easy! Just do your research, pick the right professional for you, and save your hard-earned money.
