If you’re a tax and accounting professional, you’ve likely found yourself answering numerous questions related to your clients’ tax returns. Whether it’s advising on residential energy tax credits or restructuring a partnership, your knowledge and expertise beyond the tax return are valuable. That’s why many accountants are embracing the profitable shift to tax advisory services.
But what is a tax advisor and how do you become one? Chances are you already have the foundation – you just need a shift in mindset and insight from accountants who’ve made the leap. Let’s take a look at what tax advisory is and how you can take advantage of this approach to serving clients.
What are tax advisory services?
While traditional tax compliance includes federal, state, and local tax preparation, tax advisory services go beyond the tax return and into the world of tax strategy and optimization.
From analyzing financial information to providing forward-looking guidance, tax advisors help their clients understand the impacts of their financial decisions and offer advice on how to maximize their tax position, all while taking into account business or personal financial goals.
Types of tax advisory services include:
- Guidance on federal, state, and individual income tax returns
- Advice on federal and state corporate tax returns
- Understanding the tax consequences of acquiring or divesting business assets
- Restructuring or reorganizing corporations and partnerships
- Estate planning, including preparation of wills and trusts
- Federal, state, and local individual and/or corporate tax planning
- Understanding the tax implications of real estate transactions
- Personal financial planning
- Income tax planning for executives, including employee compensation and benefit plans
- Investment planning
- Understanding the tax implications of gift and charitable contributions
- Understanding the tax impact of income and deductions, contributions, major purchases and investments
- Tax insight into college saving programs
- Retirement planning programs
- Representing clients in tax negotiations and disputes with the IRS
- Representing clients in IRS, state, or local audits
- Property tax assessments
- Succession planning
- Tax advice to executors and trustees
- Tax credit reviews to determine maximum allowable credits (e.g., research and development credits)
- Trade and customs tax services and guidance
- Transfer pricing evaluation, documentation, and modification of existing policies
- Tax valuation services
What does a tax advisor do?
A tax advisor helps clients minimize tax risk and optimize their financial decisions to reduce overall taxes paid. With a deep understanding of ever-changing tax legislation, a tax advisor ensures their clients remain compliant with state and federal tax regulations, even if they have complex financial circumstances.
Think of a tax advisor as your guide on a complicated tax journey. They can search for tax deductions and credits, reduce your taxable income, or increase your tax refund. With an expert tax navigator at the helm, both individuals and businesses can successfully achieve their financial goals with less tax exposure.
What is the difference between an accountant and a tax advisor?
Tax advisors provide guidance to their clients to help them reduce their tax liability and keep pace with changing tax laws. While accountants often focus solely on preparing and filing tax returns, tax advisors develop personalized strategies to reduce risk and optimize the latest tax laws to their clients’ advantage. Whether it’s utilizing tax credits or uncovering tax deductions, tax advisors are up to date on the latest tax related legislation and can minimize taxes while ensuring their clients remain compliant.
Typically, tax advisors have more experience and education than accountants and are well-versed not only in accounting, but in tax law, finance, and business strategy. In addition to being a certified public accountant (CPA), they may also have an enrolled agent designation or a financial advisor certification. They may even be a tax attorney.
How to become a tax advisor
If you are considering a shift in your career in tax, the first step to becoming a tax advisor is cutting ties with hourly billing and shifting to a value pricing model. This shift places your unique knowledge and expertise at the center of your value proposition.
Most tax and accounting firms build their business model on the number of tax returns completed. However, they are often answering tax-related questions and providing guidance for clients throughout the year—without being compensated for it. If you find yourself in this position, it’s time to shift to an advisory-based business model.
Remember: Your knowledge and experience is unique. Clients are willing to pay a premium when they understand the value being provided. Meaningful year-round client relationships reinforce that you are not just a transactional expense, but a committed partner. That is how today’s accountants can build successful and sustainable businesses that thrive long-term.
Shifting to an advisory business model provides your clients with the guidance and support they are looking for, while enabling you and your staff to use your knowledge and experience to your advantage.
What are the different kinds of advisory areas within tax?
Tax advisors help businesses and individuals minimize tax liabilities and create tax strategies in a variety of areas.
Property tax: Tax valuation advisors use their expertise to provide guidance and recommendations on property value to individuals and businesses.
Sales tax: Sales tax advisors identify and recover sales tax refunds, reduce future tax liabilities, and provide expertise during sales tax audits.
Audit: An audit advisor reviews and verifies the financial records of an individual or company and provides recommendations to reduce the risk of audit based on this information. Audit advisors have a major role in the decision-making process for many businesses as they ensure that companies comply with tax laws.
Chartered tax: A Chartered Tax Professional (CTP) assists individuals and businesses with optimizing various income tax scenarios and filing income tax returns for individuals, small businesses, partnerships, and sole proprietorships.
Transaction tax: For companies contemplating a large transaction it is important to develop a comprehensive strategy to understand the tax implications – this is where transaction tax professionals come in. They provide guidance in business decision making by researching tax-saving opportunities and analyzing transactions prior to tax filings. They also translate the various tax aspects and complexities of cross-border situations and supply chain transactions, as well as related analysis.
Mergers & acquisitions (M&A): As a specialty focus, M&A tax specialists assist businesses with mergers, acquisitions and divestitures. Every M&A deal has tax implications—from due diligence to negotiations to final closing. During each stage, M&A tax specialists analyze and quantify tax assets, risks, and contingencies to support the financing and strategy involved with buying, selling, and combining companies.
No matter the tax area, tax advisors can help both businesses and individuals:
- Maximize pre-tax contributions
- Reduce tax penalties
- Analyze tax scenarios
- Take advantage tax credits and deductions
- Examine previous tax returns
- Optimize tax strategy
By thoughtfully researching tax law, tax advisors use their knowledge and expertise to benefit their clients. To take advantage of this opportunity, more and more accounting firms are shifting to an advisory-based model.
Making the transition to advisory
If you want to modify your firm’s current offerings, Thomson Reuters has you covered. Thomson Reuters Practice Forward® is the program of choice for numerous accounting firms looking to make the shift into tax or accounting advisory services. Our proven roadmap includes access to over 160 tools, including proposal templates, pricing calculators and checklists, paired with personalized consulting to help you:
- Implement and execute a proven tax advisory sales process
- Identify and package your firm’s tax advisory services
- Develop a pricing strategy for tax advisory
- Standardize business best practice tax advisory delivery
- Transition existing clients to tax advisory relationships
- Uncover client tax advisory opportunities
Each Practice Forward consultant is experienced in successfully guiding firms like yours through the Practice Forward process. Start your journey to tax advisory services today.
For more information on advisory services, read “Accounting advisory: What you need to know.”