How tax planning services really work and what they will cost you

SmartAsset: Tax planning services for financial advisors

SmartAsset: Tax planning services for financial advisors

Not every financial advisor offers tax planning services, but many will include them as an offering to manage your entire financial plan. Financial advisors who provide tax planning services are likely to provide some or all of the following services:

  • Preparation of tax returns, including returns on rental properties and partnerships

  • Maximize tax deductions

  • Planning to sell securities to recover tax losses, usually towards the end of the year

  • Ensure optimal use of Capital Gains Tax Rates

  • Plan to minimize taxes in retirement

In addition to preparing for retirement and death, a financial planning tax advisor can also help assess the tax implications of other major life events. Some of these can be marriage, parenting and divorce.

In addition to these tax-specific services, tax planning financial advisors can assist with other personal financial matters. In addition, insurance companies can save for college, portfolio management, debt management, small business financial plans and more. In addition to tax, financial advisors may specialize in other areas, including investment management, retirement planning, estate planning, and divorce.

Financial Advisor Tax Planning Fees

Like other financial advisors who specialize in tax planning Use different compensation models. Some are employees of large financial institutions, but most use one or more of the following to generate income:

  • Flat fee: These consultants charge a one-time service fee for preparing an annual tax plan. It can entitle the customer to ask questions and sometimes update the plan for the year.

  • hourly rate: Tax planning financial advisors can charge $100 to $400 an hour to provide tax advice, depending on their professional certification and experience and the complexity of the client’s situation.

  • Percentage of Assets: Financial advisors who also manage a client’s investments may receive a fee of 1 to 2 percent of assets under management.

  • Sales commissions: Advisors who provide advice on mutual funds, insurance, annuities and other products may receive a commission from the sellers of the products. It can be difficult to tell how much an advisor makes in commissions without asking the advisor.

Note that many tax planning consultants use a combination of one or more of these compensation systems. For example, a consultant may charge both a fee and a percentage. Also, the cost varies by location. Advisors in and around major cities tend to charge significantly more than advisors in small towns and rural areas.

Choosing a financial advisor for tax planning

SmartAsset: Tax planning services for financial advisors

SmartAsset: Tax planning services for financial advisors

Many financial advisors who specialize in tax have complementary areas of expertise. For example, they may be licensed lawyers or chartered accountants. Multiple professional certifications that may indicate that a financial advisor is likely to do a good job as a tax advisor. Here are some of the most prominent:

  • Certified Public Accountant (CPA): This is the highest certification in accounting, requiring extensive study, passing a rigorous exam, and earning a CPA license.

  • Personal Finance Specialist: This is a certification that CPAs can earn by studying, gaining experience, and demonstrating a deep knowledge of personal finance.

  • Enrolled Agent (EA): The EA designation is awarded by the Internal Revenue Service and allows its holders to prepare tax returns and provide tax advice to clients. EAs are any former IRS employees who have also passed an exam. However, EAs are not necessarily as well equipped as other financial advisors to manage clients’ non-tax affairs.

Additionally, those with tax concerns may want to consult advisors with top-tier certifications such as certified financial planner and hired financial analyst. These well-trained and rigorously screened professionals can be expected to have an in-depth knowledge of taxes and their role in personal finance.

bottom line

Financial advisors can help clients with tax matters by preparing tax returns, proposing tax minimization measures, and making the most of deductions. They can also be important in retirement planning, estate planning, and devising an investment strategy.

Tax planning tips

  • Tax planning can get complicated, but many financial advisors can simplify such problems and help you prepare for tax problems with your overall financial plan. Finding a qualified financial advisor doesn’t have to be difficult. SmartAsset’s free tool matches you with up to three financial advisors operating in your area, and you can interview your advisor matches for free to decide which one is right for you. When you are ready to find an advisor who can help you achieve your financial goals, get started now.

  • Use SmartAssets tax return calculator to see how much you owe or are owed based on your personal finances and you can start planning from there.

  • If you plan to file an individual statement, make sure you keep all of your receipts for at least a few years after filing. It’s not uncommon for the IRS to audit returns three to six years before the actual audited return. And depending on what deductions you take, such as B. the home office deduction, your return may be more likely trigger an exam.

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