Tax advice involves a professional navigating you through effective and complex tax strategies to help lower your overall tax liability. This type of guidance can be beneficial for both businesses and individuals.
Unlike accountants, who are more focused on financial reports and accounting regulations, tax advisors have a deep understanding of business strategy, law, and finance. They can also compute taxes on diverse investment portfolios and find the right deductions for your situation.
Choosing a Tax Advisor
Many people could benefit from the help of a tax professional. Juggling the day-to-day demands of running a business and keeping up with the ever-changing tax code is not for the faint of heart.
The first step to finding a qualified tax advisor is to ask for referrals from those in your network who have worked with one. It is also important to check online reviews, focusing on those that are both positive and negative.
Work experience is essential for becoming a tax advisor, including time spent as an accountant, financial assistant, or financial examiner. Obtaining a relevant degree is crucial as well, with an associate degree in accounting or similar field of study leading to a job as a tax preparer and a bachelor’s degree in accounting, business, finance, or accounting technology giving you the necessary skills to advance. A master’s degree in taxation provides more advanced training for those interested in being tax advisors.
A tax planner can help you understand how business and life decisions affect your taxes. They can also help you find ways to minimize your tax burden without breaking the law. There are many strategies that can reduce your tax bill, such as deducting expenses, dividing income or disguising your assets. These strategies can save you a lot of money.
Tax planning is a year-round service that includes financial solutions designed to reduce your taxes. Your tax advisor will look at your current year’s taxes and make projections about what you might owe next year. This is different from tax preparation, which focuses on filing forms for compliance.
A tax planner can help you determine what type of withholding you should have on your paycheck and how much federal and state taxes should be withheld from each pay period. They can also recommend that you change your residency to a state with lower income tax rates.
An audit is a process by which the IRS examines your returns and records. There are four types of tax audits: correspondence, field, office, and review. Correspondence audits are handled through the mail; field audits are conducted by an agent who visits your home, place of business (if you own a business), or your accountant’s office to conduct a general examination of your records. Office audits are conducted in an IRS office and typically involve questioning by an auditor regarding information on your return.
An IRS review is similar to an audit and is used when a discrepancy between your reported income and total deductions is found. During the review, the IRS will request proof of statements and documents such as receipts, bills, canceled checks, legal papers, tickets, or bank account records. Regardless of the type of audit, working with a qualified local tax attorney is the best way to ensure you are prepared and protected.
In general, investing in tax-efficient assets can help a person minimize their taxes. An advisor can help them figure out which types of investments to put where. This is important because different types of accounts have varying tax consequences. Some offer tax deductions or deferrals while others have no tax implications at all. These types of accounts include 401(k) plans, individual retirement accounts (IRAs), Roth IRAs, health savings accounts, and 529 college savings plans.
An advisor can also help clients make good decisions about which funds to invest in and how much to contribute to each account type. They can also provide guidance about the timing of contributing to and withdrawing from each account type. This is known as asset location and can significantly improve a person’s after-tax returns. The right mix of assets in taxable and tax-advantaged accounts depends on the investor’s goals, financial situation, risk tolerance, and investment horizon. It’s a complicated process, but an advisor can help them make it as simple as possible.Steuerberatung