Tax Consultants

Written by True Tamplin, BSc, CEPF® | Reviewed by Editorial Team

Updated on January 03, 2023

What Is a Tax Consultant?

A tax consultant is a professional who gives comprehensive and strategic advice on tax-related matters. They work with individuals and organizations to minimize potential tax liability and ensure compliance with tax laws.

To qualify for a tax consultant position, individuals must undergo the minimum required education in a business, tax, or finance-related field. They might also need to acquire specific certifications and apply for a special license from the Internal Revenue Service (IRS). 

This role is often a good fit for detail-oriented, analytical individuals who enjoy working with numbers or those with good financial skills who enjoy assisting others. 

Many businesses engage tax consultants to help with tax matters. These include accounting firms, law firms, banks, and real estate companies. Some tax consultants also choose self-employment.

Duties of a Tax Consultant

 The standard duties and responsibilities of tax consultants include the following: 

  • Facilitating Tax Planning: Tax consultants create strategies to minimize the client’s taxable income. This can include taking advantage of available tax breaks or deferring the payment of taxes.
  • Providing Tax Advice: With the financial data on income, tax deductions, and other relevant information, tax consultants can guide clients on minimizing their tax liability. 
  • Preparing Tax Documents: Tax advisors collect necessary information from clients, such as income, expenses, and other data points, to calculate the taxes owed and prepare the appropriate documentation.
  • Filing Tax Returns: After the appropriate figures are calculated, and the documents are prepared, the tax consultant will submit the client’s returns to the proper regulatory body.
  • Keeping Up With Tax Laws: Tax consultants ensure they are updated with the latest tax laws and regulations by attending seminars, reading journals, and networking within their industry.
  • Acting as Client Representative: Tax consultants can act as client representatives during audits to ensure tax compliance, including the accuracy of tax documents.

Tax_Consultant_Duties

Requirements to Become a Tax Consultant

Individuals need to possess specific qualifications to become tax consultants. Below is a list of these requirements:

Education

Tax consultants generally have bachelor's degrees in accounting, finance, business administration, business tax, or other related fields. 

A master's degree is optional but advantageous as it deepens exposure to complex tax issues. Graduate programs in taxation, accounting, business administration, and legal studies are good options.

Certification

Certifications enhance the skills and knowledge of tax professionals. This also opens up further opportunities and enables them to provide additional services to their clients.

Enrolled Agent (EA): This certification is the highest credential issued by the IRS. It is earned by passing a comprehensive exam or through experience as an IRS employee. Seventy-two hours of continuing education courses every three years is also a requirement.

Accredited Tax Advisor (ATA): The ATA certification is issued by The Accreditation Council for Accountancy and Taxation. Three years of experience in tax preparation, planning, compliance, and consulting are needed before one can take the certification exam. 

There is also a continuing education requirement of 30 hours per year or 90 hours within three years.

Certified Public Accountant (CPA): Tax consultants who are also CPAs have added credibility.

CPAs have a bachelor’s degree in accounting or a related field. Then they must pass the exam administered by the American Institute of Certified Public Accountants (AICPA).

Annual Filing Season Program: This voluntary IRS program is for seasonal tax professionals who want to add to their skills and knowledge. Those who complete 18 hours of continuing education and pass a tax law test receive a record of completion. 

Registration and Licensing

Whatever designations they hold, the tax consultants who prepare tax returns for individuals must have a Preparer Tax Identification Number (PTIN) issued by the IRS. This is the primary license needed by a financial professional to process tax returns with the IRS. 

Skills

The skills needed to be an effective tax consultant are the following:

Accounting Skills

Tax consultants assess clients' financial records, so accounting skills are essential in identifying critical information, verifying its accuracy, and performing necessary calculations. 

Ability to Do Financial Analysis

Tax consultants need the skills to analyze tax returns and other financial statements because this will be their basis for suggesting improvements that could reduce their clients' tax obligations.

Knowledge of Tax Law

It is essential to know about tax laws and their business application. This knowledge helps ensure compliance during the tax preparation process.

Attention to Detail

The ability to thoroughly process even the most minor information is instrumental in tax consulting. This allows the tax consultant to assess the overall financial situation with accuracy.

Communication Skills

Good verbal and written communication skills enable tax consultants to share and receive information with clarity and precision. This makes way for effective consultation and case discussions.

Organization Skills

An organized physical and digital filing system makes it easy to locate documents when needed. This skill can be beneficial for tax consultants who are handling multiple clients.

Ability to Do Research

Tax consultants also need to have the ability to explore and research tax law and regulation. This ability ensures that the tax consultant is updated with current changes and can provide their clients with the most appropriate tax advice.

Tax_Consultant_Requirements

Cost of Hiring a Tax Consultant

Tax consultation fees depend on various factors, including location and the complexity of services rendered. Here are a few ways in which tax consultants charge their fees: 

  • Custom Consultation: Some tax consultants take a generalized approach to simple, recurring concerns. However, customized consultation with a tax consultant experienced in the client’s industry might be more effective for complicated situations. 

Custom consulting may cost approximately $2,000 or more per year. With this setup, the client and tax consultant can thoroughly discuss the business records and assess the situation more deeply.

  • Contingency Fee: Tax consultants may work with lawyers on legal matters concerning property taxes. If the client wins the court case, a tax consultant may charge contingent fees ranging from 10% to 25% of the settlement amount.

Tax consultants may bill only standard filing fees if their client does not receive monetary compensation from the opposing party.

  • Online Consultation: Some tax consultants offer their services exclusively online, charging between $25 to $1,200, depending on the scope of the consultation. Although this can be convenient and cost-efficient, some clients might prefer in-person meetings.

How to Find a Tax Consultant

Tax consultants can have a range of specialties, so selecting one best suits your needs is crucial. Here are some pointers to consider:

  • Ask For Recommendations: A referral from a trusted person gives you confidence in the tax consultant’s quality of work. If this is not an option, several online resources can be helpful.
  • Assess Their Communication Skills: When meeting prospects, observe for excellent communication skills. This might be a good indicator that the tax consultant can explain the intricacies of tax laws to you in a simple manner later.
  • Select Someone You Can Trust: Choosing a tax consultant you can trust is vital since you will be handing over sensitive information. Before selecting a tax consultant, check their credentials and past experience. Also, read reviews from other clients, if available.

Tax Consultants vs. Tax Preparers

A Tax Preparer is a professional who focuses primarily on preparing and filing income tax forms. 

To become a tax preparer, individuals must possess a high school diploma or a General Educational Development (GED) Certificate. In contrast, tax consultants need at least a Bachelor’s Degree in Accounting or a Business-related Field.

Like tax preparers, tax consultants also prepare and file income tax returns. However, tax consultants are more knowledgeable about tax law and can offer additional services such as tax planning or tax advice. 

While expertise varies among individual tax consultants, generally, they may be able to help clients with a broader and more complex array of financial and taxation concerns compared to tax preparers. 

Both tax consultants and tax preparers must register with the IRS and obtain a Preparer Tax Identification Number, which will serve as a license to prepare and file tax returns.

Tax_Consultants_vs._Tax_Preparers

Final Thoughts

Tax consultants are experts who give strategic advice on tax-related matters. They support both businesses and individuals in complying with tax laws and regulations. They also offer other services, such as tax planning and audit representation.

Although some clients choose a tax preparer over a tax consultant, clients who need more comprehensive advice or have complicated tax situations could benefit more from working personally with a tax consultant. 

If you decide to hire a tax consultant, you must first verify if they possess the right qualifications in terms of educational background, credentials, licenses, skills, and related experience. 

For example, most tax consultants have a PTIN issued by the IRS, but only some will specialize in handling clients within the same industry as your business. 

Therefore it is crucial to ask for recommendations or choose candidates from reliable sources and narrow them down by interviewing the best ones.

Then, before signing any contracts, you should also ask your prospects questions about their fees and how they structure their services so that you can make a more informed decision.

Choosing a tax consultant might need a bit of investment in terms of time. However, once the right candidate has been selected, you can rest assured that your tax consultant will look out for your best interest in tax-related matters. 

FAQs

What is work done by a tax consultant?

A tax consultant provides tax-related advice, prepares and files tax returns for individuals and organizations, and ensures that clients are tax-compliant.

What is the difference between a tax consultant and an accountant?

A tax consultant provides tax-related advice, while an accountant helps businesses make critical financial decisions by collecting, tracking, and correcting company finances.

What are the responsibilities of a tax consultant?

A tax consultant is responsible for facilitating tax planning, providing tax advice, preparing tax returns, keeping up with tax laws, and acting as a client representative during audits.

Is a tax consultant a good career?

A career in tax consulting is considered a stable path. Tax professionals are always needed by businesses and individual taxpayers, regardless of economic conditions.

How do I become a tax consultant?

A bachelor's degree in an accounting or business-related field is needed to become a tax consultant. Many consultants also get professional endorsements like the certified public accountant (CPA) or accredited tax advisor (ATA) designation.

About the Author

True Tamplin, BSc, CEPF®

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.

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