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A surprising number of people continue to take a do-it-yourself approach to their taxes.
Yet much like DIY home renovations, this doesn't always work out as well as intended. The right tax advisor can make all the difference in minimizing tax liabilities and maximizing financial well-being.
Unsure of how a tax advisor can help you? Here are five reasons professional tax advice is more important than ever.
1. You Want to Build More Wealth
One of the fastest ways to build more wealth is to keep more of the money you earn in the first place. And the best way to do that is to find ways to legally reduce what you pay in taxes.
Doing so is easier than you may think. It's all spelled out in the tax law.
The tax law does three basic things: It says what kind of money is taxed. It sets the rates for those taxes. And it lists a whole lot of exceptions for when you don't have to pay a tax.
Working with a tax advisor who deeply understands this framework will help you reduce your taxes, increase your cash flow and allow you to build more wealth.
2. There Are Lots of Incentives Available
Contrary to popular opinion, the government supports your pursuit of wealth. It just wants you to find that wealth by investing in things that advance its priorities.
The government wants its citizens to have jobs, so it offers tax incentives to entrepreneurs who invest in their businesses. The government wants its citizens to have quality housing, so it offers tax incentives to people who invest in real estate. The government wants its citizens to have enough to eat, so it offers tax incentives to farmers.
The list goes on. A high-quality tax advisor will identify tax incentives that fit your life and business interests and then help you create a plan to incorporate them into your wealth-building strategy.
3. The Political Landscape Is Crazy Right Now
While the tax law is the government's instruction manual on how to make money without being taxed, turmoil in Washington, D.C., means those instructions are subject to change at a moment's notice.
There's a lot on the line with the 2024 election cycle. Even within the same political party, you can see dramatic differences in priorities among the presidential candidates that will translate into wildly different tax policies. A tax advisor should set you up with a proactive plan to ensure you are protected no matter who wins the White House.
4. The Economy Makes You Nervous
If you're worried about what's going on in the economy, you're not alone. Inflation is an ongoing concern, and plenty of businesses are hedging their bets that a significant recession may be looming.
The good news is the right tax strategy will allow you to reach your goals in almost any economy. A tax advisor will help you build and adjust that strategy as needed.
5. The IRS Is Watching
The IRS is on a hiring spree, thanks to funding from the Inflation Reduction Act. While some of that hiring is dedicated to much-needed improvements in customer service, the IRS also is adding auditors and other staff focused on enforcement. The hiring is also meant to address the severe understaffing experienced by the IRS over the last several years. As these roles are beginning to fill, we're already seeing in the CPA industry what feels like an overreach by IRS personnel.
Two examples I've seen with clients are conservation easements and captive insurance — two investments with specific tax incentives included in the tax code. I've seen the IRS come in and disallow these incentives, forcing the taxpayers to go to court if they want to take these incentives to which they are entitled.
Additional hiring at the IRS is likely to increase scrutiny, and potentially, overreach. Having the right tax advisor on your side ensures that you never have to talk with the IRS yourself; you have an expert advocate working on your behalf, making it much easier to sleep at night.
The Value Of Expert Advice
My work centers on making taxes fun and easy to understand. But that doesn't mean taxes aren't complex. Having the right tax advisor — now more than ever — is critical for your long-term financial success.
What does the right advisor look like? Here are a few key characteristics:
- Strong network. You want an advisor who has access to a strong network of specialists so that you'll have appropriate expertise no matter how your financial plans evolve.
- Proven system. You also want an advisor who follows a proven system for permanent tax reduction; working with someone who can replicate results is a far better predictor of your future results than working with an advisor without a system.
- Unafraid of the IRS. You want someone who is confident in their work and ready to deal with the IRS on your behalf if needed.
- An entrepreneur. Entrepreneurial CPAs understand how other entrepreneurs and investors think. They don't just follow a list of dos and don'ts; they'll guide you in how to do what you want to accomplish.
Make time to find an advisor who understands you and your goals—and make them a part of your team. When you do, you'll find you can make way more money and pay way less tax.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.