Who Do I Talk to About Taxes?

• Certified Financial Planner (CFP)

A CFP is a financial advisor who has taken a step further with their training, meeting “rigorous education, training and ethical standards”. While CFPs are financial advisors, not all financial advisors are CFPs. This area can be tricky because the term “financial advisor” isn’t regulated, and rules are different based on “whether they collect commissions and which regulatory bodies oversee them –  the SEC, the Financial Industry Regulatory Authority or even state insurance regulators.”

CFPs aren’t necessarily who you’d hire specifically to prepare your tax returns - they focus more on the big picture of your investments, retirement savings, and more. Can they prepare your tax returns? Of course, but you may be shelling out more than you need to if you're not as invested in other areas.

• Certified Public Accountant (CPA)

Similar to the certification for a CFP, a CPA is also a step further -- they are accountants “who also meet the educational and experience requirements of the state they live in and have passed that state’s Uniform CPA Exam.” A good way to remember the difference is that all CPAs are accountants but not all accountants are CPAs.

Contrary to CFPs, CPAs are generally who you’d want to hire to help with your varied tax situations. They’re not limited to preparing tax returns - in fact many work year-round for business and individual taxpayers on a variety of tax-related issues.

• Tax Attorney

Tax attorneys are lawyers who specialize in the highly complicated world of tax law. You would typically hire a tax attorney if you have technical or legal issues like, but not limited to: unreported income, undisclosed foreign bank accounts, or owing more than a million dollars to the IRS. 

Tax attorneys will have advanced training in tax law, and many will have a Masters of Law in taxation, knowledge of accounting, but not necessarily in preparing tax returns. If you’re specifically looking for this specialty, you can also find tax attorneys who are CPAs and EAs and cover all your bases.

• Enrolled Agent

An Enrolled Agent is a tax advisor who represents taxpayers before the I.R.S. They are certified to represent both business and individual taxpayers and have no restrictions on who they represent. They are tax specialists who can help you with tax planning, prepare a return, in addition to representing you should the need arise. Many people like to have the input of a CFP, CPA, or tax attorney, but if you don’t - an enrolled agent may be a more feasible idea.

The Benefits of Working with a Tax Professional

At Fullerton Financial Planning, we offer a range of services including financial planning, investment management and retirement planning. We understand taxes can be a demanding, if time-consuming, process. Seeking advice from a tax professional who specializes in your specific situation is imperative, let alone just a good idea.

Here are several reasons we recommend working with a tax professional:

1..Save yourself time and stress

According to the IRS, it takes taxpayers an average of 11 hours to prepare a return. If you haven’t been studious throughout the year in keeping your paperwork together, you could be looking at even more time as you collect your 1099s, receipts for deductions, and other forms. 

Tax time comes with a deadline, so the pressure to get everything together in the first four months of the year is not only real, but filing late carries a penalty of 5% of your unpaid taxes for each month your tax return is late, up to five months. In 2018, the IRS reported 14 million tax submissions on the last day of filing. Who needs that? 

2. Making mistakes can be very costly

We talk frequently about how costly mistakes can be for your retirement planning, but mistakes in your tax preparation can be equally devastating. From missed deductions and credits, typos that can invalidate your entire submission, and forgetting sources of income, to making the wrong decision about itemizing deductions -- these seemingly small mistakes add up.

Additionally, some mistakes might tack on an additional 20% to your tax bill. 

3. Benefit with money-saving tax planning

Having a tax professional as a part of your financial plan and strategy can advise you on how to save and optimize your taxes throughout the year instead of desperately searching for deductions in March. For instance, if you get married in the same calendar year as you buy a house, you could be looking at tax-savings. Other major life events like having children, divorce, new jobs, and promotions may all result in monetary benefits.

4. You can reduce your risk of an audit.
An audit is the scary word associated with doing something wrong on your taxes, and though the I.R.S. audit comes with a negative connotation, it doesn’t necessarily mean there was a problem or that there was any wrongdoing by a business or taxpayer. The I.R.S. audited approximately 1 out of every 220 taxpayers in 2019, a significant drop from a decade ago when the odds were 1 in every 90.

An audit verifies the accuracy of a taxpayer’s return and/or specific transactions. One major paint point is that though many audits are randomly selected, the taxpayer has to pay for the audit to happen, and that can be huge. Additionally, an audit doesn’t just cover your most recent tax statement but will likely look over the last three years, but typically no further back than six years.

When you’ve had any one of the taxation specialists review, prepare or submit your taxes, the odds of your being selected for an audit theoretically decrease because they’re specifically looking for things that may trigger an audit - anything from data entry errors, to unreported income, disproportionately high deductions, and even the self-employed, especially if they haven’t reported a profit in the last three years.

Get Started Building Your Financial Plan

At Fullerton Financial Planning, our goal is to help you enjoy your retirement with confidence, not worrying about whether or not you have enough money to enjoy it. Our certified fiduciaries and experienced investment advisors have decades of combined experience helping people find answers to difficult financial questions. Sit down with a Fullerton Financial Advisor today to discover if you are on the right track for your retirement goals. 

We understand how important your financial future is to you and your family; we also understand how difficult making these plans can be. If you are not sure if your retirement plan has taken taxes into account, let us review your retirement plan. We utilize tax-efficient strategies and partner with other tax professionals so you can live and retire with confidence. When you schedule a call with Fullerton Financial Planning we’ll show you the best way to review your retirement plan for any tax implications.

Don’t leave your financial future to chance. Let us help you create a personalized plan so you can enjoy the retirement you’ve worked so long and hard for.