What Does a Tax Accountant Do?
Written by True Tamplin
Reviewed by Editorial Team
Understanding Tax Information
The collection and preparation of information before the deadline for tax filing is an excellent opportunity for individuals and businesses to review their current financial position and decide on their future plans.
Generally, compliance with the tax guidelines of the Internal Revenue Service (IRS) can help them strengthen their financial situation. For example, they can take advantage of tax deductions and avoid paying penalties, which saves them money in the long run.
However, with the ever-changing nature of the tax code, paying the right amount of taxes and filing the appropriate forms can be challenging, especially when you try it on your own.
Whether you work on your taxes personally or decide to hire a professional, it is essential to be aware of the various forms of taxes that you need to consider when filing your returns:
- Income Tax - This is the amount individuals owe to the government based on their salary and other income sources.
- Payroll Tax - This is the portion of the employee's paycheck deducted by employers to fund Social Security programs.
- Estate Tax - This tax is triggered when the estate of a deceased person goes beyond a certain threshold.
- Property Tax -This is the type of tax property owners must pay based on the value of their assets.
- Sales Tax - Most states require businesses to collect this tax from customers when they make a purchase.
- Business Tax - These are taxes that businesses pay on their profits and are used to fund government programs.
- Tariff - These are charges on imported goods that are applied to support local enterprises.
Individuals and businesses needing help with their taxes can hire professionals to support them in various tax matters, such as the following:
This type of tax service involves monitoring and recording the cash inflow and outflow of either an individual or a business. As the cash inflows and outflows grow larger, the process becomes more complicated, and the support of a tax accountant might be required.
Tax compliance focuses on ensuring that companies or individuals meet filing deadlines, avoid penalties, and remain compliant with IRS guidelines. This also covers retrieving, analyzing, and consolidating the necessary tax information.
Tax Reporting and Strategy
This service is about helping individuals or businesses develop an effective plan to minimize taxes. It might involve analyzing the current tax rate, researching potential deductions and credits, and determining the best way to improve cash flow.
Wealth Management Tax Services
This tax service type helps clients maximize their net worth by providing advice on issues relative to wealth management, such as fiduciary taxation, generation-skipping transfer tax (GSTT), charity tax, and estate tax.
International Tax Services
This service focuses on the foreign tax compliance and reporting needs of multinational businesses. It also entails understanding the latest trends in global taxation and providing advice for expanding abroad.
Legal Business Solutions
This type of service provides clients with the legal tax-related advice they need during all stages of their business. This can include areas such as entity formation and intellectual property issues.
IRS Audit Representation
For individuals facing an audit from the IRS, gathering evidence, responding to inquiries, and even attending the interview can be stressful. Fortunately, some IRS-authorized tax professionals can represent their clients during these proceedings.
Tax Management Consulting
Tax management consulting provides comprehensive support for dealing with taxation, especially for complex or unfamiliar tax issues. This service can involve helping businesses at the management level identify potential areas of improvement in their operations.
Benefits of Hiring Professional Tax Services
Today's complex tax regulations can make it difficult for individuals and businesses to meet their tax obligations independently. This is why many of them seek professional help with their taxes.
Below are some of the benefits they can experience when hiring a professional tax service:
- Saves Time and Money: Professional tax services can save companies and individuals valuable time by taking on the complicated tax processing themselves. They also help clients save money by maximizing tax deductions or credits and avoiding penalties.
- Lessens Chances of IRS Audit: Hiring a professional tax service reduces errors in filing, lessens the chances of an IRS audit, and improves overall compliance with current tax laws.
- Provides Access to Expert Financial Advice: Working with professionals provides clients access to expert tax-related financial advice. This can assist them in making strategic business decisions that meet their needs while addressing potential issues.
- Supports Business Planning: With the advice of their professional tax service provider, businesses can plan their operations in such a way that they will be able to maximize profits while minimizing tax liabilities.
What to Look for When Hiring Professional Tax Services
Hiring professional tax services can help people avoid costly mistakes. However, when choosing a service provider, there are several factors that clients should consider:
The individual or company offering tax services should have the right expertise and knowledge about the specific type of tax that needs to be handled. Someone who is updated on the current tax regulations and has years of experience in the chosen field might be the best choice.
It is essential to consider if the services being offered by potential tax service providers meet all of the client’s needs. This can range from basic tax accounting and compliance to IRS audit representation or international tax services.
Asking about a professional tax service’s cost structure in advance is the most effective method to avoid unpleasant surprises later on. Clients should also compare the cost of their prospects’ services before settling on a provider.
A professional tax service provider should possess the right qualifications and certifications. Clients can ensure this by checking references and speaking to previous clients. This will also give them a better idea of how each prospect works.
Financial information is confidential, and data breach is a serious concern. An excellent professional tax service has adequate measures to protect sensitive data. This can include tools like anti-virus software, firewalls, and encryption protocols.
An excellent professional tax service should be accessible and offer timely communication. This will assure clients that their questions or issues will be addressed quickly and efficiently.
A good tax service provider should offer ongoing support to keep the individual or business up-to-date with the latest changes in tax laws. They must also be willing to frequently review a client’s status and ensure compliance with any updated regulations if necessary.
Average Cost of U.S. Professional Tax Services
A Form 1040 and a state tax return with no itemized deductions cost $220 to prepare and file, whereas an itemized Form 1040 and a state tax return cost an average of $323.
Self-employed individuals pay an average of $457 to complete an itemized Form 1040 with a Schedule C and a state tax return.
Rates will vary if portions of the tax filings fall under special circumstances and require the tax professional more time to finish.
When Should You Hire a Professional Tax Service?
There are certain circumstances when hiring a professional tax service is the best action. These can include the following:
If You Are Experiencing Time Constraints
Individuals or businesses may lack time to prepare their taxes before the deadline. Hiring a professional can save the time and hassle which often comes with this process.
If You Are Anticipating Complex Returns
If an individual or business has complex items to report, such as multiple income sources or substantial non-cash donations, it might be better to hire a professional. Circumstances like these usually complicate the tax filing process and require additional forms.
If You Value Security
Hiring a reliable tax professional assures clients that they are filing correct information while being protected from fraud and data breaches. This can provide them with a sense of security and peace of mind.
With the ever-changing nature of the tax code, paying the right amount of taxes and filing the appropriate forms can be challenging, especially for businesses or individuals who attempt it independently. This is why many of them seek professional help with their taxes.
Tax services are provided by professionals who specialize in the various aspects of taxes, such as tax accounting, tax compliance, tax reporting, wealth management taxes, international tax services, and IRS audit representation.
Clients who hire professional tax services save time and money. They also have fewer chances of being audited by the IRS while simultaneously gaining access to expert advice that can help them with their planning.
Clients should select a professional with the right qualifications, relevant experience, and a transparent fee structure when looking for a service provider to meet their tax needs. Someone accessible who offers quality services, ongoing support, and data security is also preferred.
Enlisting the help of a professional, such as a tax accountant, is important when clients have limited time to meet the deadline, are anticipating complex returns or if they value security.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.