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Everything to Consider When Choosing a Tax Consulting Firm

by Purva Jagtap
Everything to Consider When Choosing a Tax Consulting Firm

Did you know there are four kinds of tax preparers to choose from? Did you know that a tax consultant and a tax preparer are not the same?

Because of various levels of skill and experience, CPAs, Attorneys, Enrolled Agents and others get confused with each other.

It’s important to know which one is right for your needs, what they can do, and what they can’t. A good tax consulting firm will have a variety of tax preparers and tax representatives at different levels of experience.

Because one person can’t do it all, it’s important to know the experience, reviews, and capabilities of a tax consulting firm. Comparing consulting fees, getting to know the types of taxes you’re facing, and your options for consultants is your best weapon against audits.

Want to know more about how to choose the right tax consulting firm? Keep reading to find out!

What Is a Tax Consulting Firm?

First off, a tax consulting firm or tax consultancy is a type of business with expert advice and perhaps other tax services for their tax filing clients. A tax consultancy needs to know tax laws for the state, county, and city of their tax filers.

They also need to be creative to minimize their client’s obligations and get them out of tough spots. One of the goals of tax consultants is to reduce or virtually eliminate the chance of an audit. In short, a good tax consultant can save you millions in taxes or conflicts with the IRS.

Tax consulting firms are made up of many kinds of tax experts dealing with different areas of tax law and procedure.

What to Look For In A Tax Consulting Firm

First off, you’ll want to make sure what kind of tax consultants your firm is made up of. Having a variety of tax preparers and full tax consulting representatives is a good sign you’ve hired the best tax consultant for you.

The various types of agents you can have range from highest to lowest in education, experience, and representative power:

  • Enrolled Agent
  • Certified Public Accountant
  • Tax Attorney
  • Annual Filing Season Program Participant
  • PTIN Holders

It’s this special mix of specialties and experience which makes a successful tax consulting firm work. Taking a closer look into the top three roles will help you understand why only one role covered isn’t enough.

Breakdown of Roles With Unlimited Representation Rights

Enrolled agents or EAs are the creme de la creme of tax preparation and planning. Every three years they must accrue 72 hours of continuing education. To become an enrolled agent, they must either have taken a three-part comprehensive exam or worked for the IRS.

Certified Public Accountants or CPAs are licensed by the various state boards of accountancy, US territories, and the District of Columbia. They also must pass the Uniform CPA Examination.

Both CPAs and EAs specialize in tax preparation and planning, and provide unlimited representation rights. Both must undergo ethics and suitability checks and training as well.

There are big differences in the roles of EAs and CPAs, however. CPAs maintain financial records, financial statements, and provide auditing services in addition to tax preparation and representation.

EAs are more geared toward federal tax issues and have the highest level of licensing by the IRS. They directly represent individuals or businesses on any matter before the IRS.

Tax attorneys also prepare tax returns, offer planning advice, and also have unlimited rights to represent their clients before the IRS. They, however, are more concerned with going around tax laws and finding exemptions.

Top Tax Consulting Firm Tips

The IRS wants people to plan their taxes well. A healthy tax system is one that is held in check by its own citizens. Realizing this, they provide guidance and training to tax professionals, as well as enough freedom to represent as many people as possible within functioning regulation.

There are, however, some kinks in the system. You need to decide who will represent you. To do that, you need actionable knowledge of how to choose someone right for you.

Here are ten tips to get you started. Using these tips, you can’t go wrong.

  1. Check your consultant’s history of references and reviews
  2. Check the tax consulting firm’s qualifications
  3. Ask about service fees when comparing consulting fees
  4. Ask about e-file as the primary filing method
  5. Make sure the consultant has time to listen in depth to your concerns
  6. Provide all relevant information, records, and receipts to do their job
  7. Never ever sign blank tax returns
  8. Ensure your preparer includes their PTIN (Preparer Tax Identification Number)
  9. Report any abusive tax preparers or consultants to the IRS
  10. Review all your returns before signing with your consultant

These ten steps apply to preparers and consultants alike.

CPAs, Enrolled Agents, and others have various directories and listings you use to check credentials. A good tax consultancy firm has nothing to hide about their credentials and their history. It isn’t quite like looking at a website designer’s portfolio, but they should be able to provide past cases they’ve been able to help clients.

As well, references and reviews about local tax consultant firms near you are essential to finding one you work well with.

Communication is key when it comes to tax preparation, tax representation, and tax planning or consulting. 

Your Guide to the Right Tax Consulting Firm

Finding the right tax consulting firm is a big job made easier by following the steps in this guide. We’re always looking for the best ways to make life easier, and what’s better than avoiding an audit?

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