In a complex financial world, high-net-worth individuals and families often grapple with intricate tax matters. With ever-changing laws and regulations, these situations grow increasingly challenging, leaving those not well-versed in tax law scrambling to stay compliant. Fortunately, enlisting the help of tax professionals is an effective way to sort through tax-related issues.
The term “tax professional” is a blanket term with various roles under it, such as tax strategist and CPA. Both services are equally essential to ensure you are tackling your taxes using a holistic approach.
Learn the difference between a tax strategist and a CPA and how the professions working hand-in-hand can help solve your tax issues effectively.
What is a Certified Public Accountant (CPA)?
A Certified Public Accountant is a designation given to accounting professionals who have met specific educational and experience requirements. The CPA’s role in accounting is multifaceted and encompasses a wide range of responsibilities: tax preparation and filing, tax compliance, and auditing.
What is a Tax Strategist?
A tax strategist is a highly specialized professional who develops strategic plans to minimize tax liabilities for individuals and businesses. Their primary objective is to help you legally reduce your tax burden while ensuring compliance with tax laws and regulations.
Tax strategists possess in-depth knowledge of federal and state tax codes and stay updated on the latest changes in tax legislation. With these, they can formulate the right solutions to complex tax problems.
Tax Strategist vs. CPA: How Do They Differ?
These two professions are well-versed in tax-related matters. However, key differences make one more appropriate in certain situations than the other. This section tackles the differences between a tax strategist and a CPA.
1. Focus of expertise
On the one hand, the role of CPAs typically revolves around auditing and tax preparation due to their expertise in financial reporting. They ensure the accuracy and integrity of financial statements and conduct audits to assess a person or organization’s compliance with accounting principles and regulatory requirements.
On the other hand, tax strategists take a broader perspective regarding expertise. While they are proficient in tax planning and compliance, the scope of tax strategy goes beyond traditional accounting functions. It is not uncommon for tax strategists to give advice related to business structuring, operations, and investments.
2. Education and certification
The path to becoming a CPA or tax strategist is almost similar, with some nuances.
For CPAs, they first need to earn a bachelor’s degree. Next is to pass the American Institute of Certified Public Accountants (AICPA) exam to secure the practicing license, which they must renew every one to two years.
Tax strategists do not have a set path. Many tax strategists are former or current CPAs, tax attorneys, financial advisors, or enrolled agents in the IRS. Unlike CPAs, they are not bestowed with a special license. However, the IRS does regulate the tax strategists’ duties and ethical standards.
Due to their responsibility to record transaction history for tax filing purposes, CPAs tend to be reactive. On the contrary, tax strategists tend to be proactive since their primary goal is to continuously provide credible advice to reduce tax reliabilities.
How Can a Tax Strategist and a CPA Work Together?
CPAs and tax strategists have specialties regarding tax-related matters. However, there are specific financial issues wherein enlisting the help of both can be beneficial.
1. Review tax returns for missed opportunities
After a CPA has prepared your tax return, a tax strategist can analyze it to identify any potential deductions, credits, or tax-saving opportunities. They can carefully examine your financial situation and goals to ensure all applicable tax strategies are employed to minimize tax liabilities and maximize after-tax income.
Moreover, if your tax experts determine you’re due for a tax refund, they can collaborate to advise you on what to do. With insights from a CPA, your tax strategist can formulate a plan for investing in a particular venture or paying off unsettled debts.
2. Resolve tax disputes
Tax disputes may happen when both parties interpret or apply tax laws and regulations differently. When these disputes or audits occur, the assistance of both a CPA and tax strategist becomes even more crucial.
A CPA can collate and audit the necessary documentation and information to support your position, while a tax strategist can use their expertise in state and local tax laws to defend your position. Moreover, they can use the same knowledge to advise you against making a decision that will land you in a dispute.
3. Create tax-efficient investing strategies
The tax strategist can assess your investment portfolio and goals, considering the tax implications of different opportunities. After the fact, tax strategists can collaborate with the CPA to ensure the investments align with your overall tax planning objectives and take advantage of available benefits or incentives.
Optimal Tax Management
Tax is a complicated obligation, which leaves many to dread it. Fortunately, you have experts in the form of CPAs and tax strategists to make this otherwise arduous process more manageable. On top of that, they can work together to ensure your finances are in order and you’re legally compliant, potentially saving you money long-term.
We hope this article provided credible insight regarding the differences between a tax strategist vs. a CPA and how these two experts’ collaboration could be beneficial.
To ensure your finances are in good hands, consider working with a professional wealth coach like what TenCap offers. Apart from investment planning, estate planning, and other services, we also provide tax strategy services for our clients to gain insights into their investments.
We are not competing with your CPA—TenCap believes that high-income earners need both tax strategy and tax compliance professionals to guard and grow their wealth for the future.
Schedule a consultation right now and discover everything TenCap Wealth Coaching offers!
Greg Black, CFP®, ChFC®
Greg is a fiduciary who assists you in every area of your financial life, including: tax strategy, investments, estate planning, cash flow optimization, and insurance protection. Each category is interconnected and crucial to ensure you don't unknowingly or excessively forfeit money to financial institutions or the government.