What Is a Tax Accountant?
Tax accountants are accounting professionals who specialize in taxes. They’re trained to prepare and review tax returns, but they can also provide tax planning and consulting services to help individuals and businesses minimize their taxes.
Key Takeaways
- You can hire a tax accounting professional to help you comply with tax laws and avoid IRS penalties. Tax accounting also plays a significant role in minimizing your tax liability.
- Many tax accountants can prepare and file tax returns, manage tax payments, and assist with audits. They can also offer tax planning services and provide financial advice based on their deep understanding of their clients' financial situations.
- Tax accountants often have a bachelor's degree in accounting. Many also obtain additional credentials, such as a CPA or enrolled agent, by passing exams and satisfying other requirements.
- When selecting a tax accountant, consider recommendations, areas of expertise, fee structures, and certifications. Also look for a level of convenience and accessibility that fits your needs, whether it’s with online or local accountants.
Accounting professionals and types of accounting
An accountant is a professional who specializes in measuring, analyzing, and communicating financial information. They help individuals, businesses, and organizations understand their financial health by providing insights based on their financial data.
There are several different types of accounting, such as:
- financial accounting
- managerial accounting
- forensic accounting
- cost accounting
- auditing
- governmental accounting
- tax accounting
An accountant’s specific duties vary depending on the kind of accounting they practice.
What is tax accounting?
Tax accounting is the branch of accounting that focuses on the preparation, analysis, and presentation of tax-related information for individuals, businesses, and other entities. It’s a vital aspect of managing personal finances and running a successful business.
One of the key reasons tax accounting is important is to ensure compliance with tax laws and regulations. Failure to comply with tax laws can result in penalties, fines, and even legal consequences.
Another essential aspect of tax accounting is minimizing tax liability, such as by identifying tax breaks that will ultimately reduce the amount of tax you owe. This can save a significant amount of money in the long run and improve cash flow for businesses.
What does a tax accountant do?
As the name suggests, a tax accountant is an accountant who specializes in taxes. If you're looking for someone to help you with a tax issue, a tax accountant can be a great option. They have a deep understanding of tax laws and regulations, and they use their expertise to help clients comply with tax requirements and minimize their tax bills.
Here are a few services and practice areas tax accountants frequently offer.
Tax filing and compliance
Many tax accountants focus on preparing, analyzing, and managing tax returns and payments for both individuals and businesses. This can including a variety of tasks, such as:
- preparing and filing income tax returns
- preparing and filing 1099 forms
- calculating and paying payroll taxes, sales taxes, and property taxes
- organizing and storing tax-related documents
- assisting with any tax audits or legal disputes
Since the tax laws are constantly changing, staying on top of all the current requirements and procedures can be a challenge. That’s why tax accountants are also trained to keep up with these changes and ensure that their clients file their taxes accurately and on time.
Tax planning
In addition to compliance work, tax accountants can also offer tax planning services. In that role, they work closely with their clients to develop strategies that can help minimize their tax liability. This can include identifying tax deductions and credits that their clients may be able to claim.
Financial advice
Another advantage of working with a tax accountant is their ability to provide sound financial advice. They have a deep understanding of their clients' financial situations and can offer guidance on how to make the most of their money.
For example, by analyzing past tax returns, tax accountants can identify trends and provide valuable insights for future financial planning. This can include advice on investments, retirement planning, and other financial decisions that can have tax implications.
Business formation
Tax accountants can also provide valuable advice on the structure of a business, such as whether to operate as a sole proprietorship, partnership, limited liability company, S corporation, or C corporation. Each has its own tax implications, and a tax accountant can help determine the most tax-efficient structure for a business.
Educational requirements and credentials for tax accountants
The education requirements for tax accountants can vary widely, depending on the specific role they hold. While it's not required, most tax accountants have a bachelor's degree. For example, a full-time tax accountant working at an accounting firm typically needs at least a bachelor's degree in accounting.
CPAs
Many full-time tax accountants are certified public accountants (CPAs), which are licensed by the states where they work. To get a CPA license, a candidate has to:
- earn 150 hours of college credits, which is typically more than needed for a bachelor’s degree
- pass a four-part exam covering various accounting-related topics, including personal and business taxation
- meet work experience requirements, which usually must be completed under the supervision of a licensed CPA
Once licensed, CPAs then have to take continuing education courses to stay up to date on the latest rules, laws, and regulations in their area of concentration.
Enrolled agents
Some tax accountants who are not CPAs become what is known as an enrolled agent (EA). This credential allows the tax accountant to represent clients in any tax matter before the IRS.
Although there aren’t any education requirements to becoming an EA, such as taking a certain number of college courses, they generally must pass an exam administered by the IRS (although certain former IRS employees don’t have to take the test). The exam covers the preparation of individual and business tax returns, as well as how to represent a client before the IRS.
EA candidates also have to pass a background check and obtain a Preparer Tax Identification Number (PTIN) from the IRS.
Once certified, EAs also have to take continuing education classes to maintain their certification.
How to choose a tax accountant near you
Whether you're a small business owner or an individual taxpayer, finding a reliable and qualified tax accountant to prepare your tax return is crucial for ensuring that your taxes are filed correctly and on time. However, with so many options available, finding a tax accountant near you can be a challenge. To make the task a little easier, here are a few useful tips on how to find suitable tax accountants in your area.
Ask for recommendations
A good first step in finding a local tax accountant is to reach out to your friends, family, and coworkers for recommendations. They may have used an accountant in the past and can provide you with valuable insights into their experience. Ask them about the services provided, the fees charged, and their overall satisfaction with the accountant's work.
Consider areas of expertise
Not all tax accountants specialize in the same areas. Some may have more experience working with small businesses, while others may be more knowledgeable in individual tax returns. It's essential to find an accountant who has expertise in the type of tax return you need to file. This will ensure that you receive the best advice and assistance for your specific situation.
Understand the fees
Before hiring a tax accountant, be sure you understand their fees. Some accountants charge a flat fee, while others may charge an hourly rate. Be sure to ask about any additional fees or expenses that may be incurred, such as filing fees or charges for phone calls and emails. It's essential to have a firm grasp of the fees upfront to avoid any surprises later on.
TurboTax Tip:
If you’re hiring a tax accountant to prepare your tax return, avoid fees based on a percentage of any tax refund. You don’t want there to be any incentives to claim tax breaks you’re not eligible for to increase the fee.
Check certifications
When it comes to filing taxes, most people want to hire a certified tax accountant – such as a CPA or EA. These certifications indicate that the accountant has met the education and experience requirements outlined earlier. However, it’s a good idea to check an accountant’s certification before you hire them.
To verify a CPA’s credentials, check with the Board of Accountancy for the state where the CPA is located.
For an EA, you can send an email to the IRS at epp@irs.gov that includes the EA’s:
- first and last name
- complete address (if available)
- enrolled agent number (if available)
As an alternative, the IRS has an online directory of credentialed tax preparers, which includes CPAs and EAs. You can verify a tax accountant’s credentials with this tool.
Look for convenience and accessibility
When choosing a tax accountant, you’ll want to consider convenience and accessibility. However, what works best for you might be different than what’s best for someone else.
For example, an online accountant offers the most convenience for some people, since you can meet with them without leaving your home.
On the other hand, you’ll want to look for accountants in your area if you prefer face-to-face meetings. Working with a local tax accountant will also make it easier to drop off and pick up any necessary documents.
Schedule a consultation
Once you have a list of potential tax accountants, it's a good idea to schedule a consultation with them. This will give you the opportunity to meet them, discuss your tax needs, and get a feel for their personality and communication style. During the consultation, be sure to ask about their fees, the services they provide, and their availability during tax season.
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