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The United States Internal Revenue Tax Code was first established in 1939, and it has seen a number of major changes, additions, and revisions in the years since. This means it can be very complicated for individual citizens and business owners alike to prepare their tax documentation, make the appropriate payments, or receive a refund when owed. As the tax season approaches each year, the demand for assistance with tax preparation and consulting only increases.
This is where professional tax consultants come in, helping clients to file the correct information for their tax return and resolve any tax- or income-related issues that might have emerged since their last filing. Tax consultants fill an important role in industries including financial, accounting, enterprise, and technology sectors and beyond.
Today, we’ll take a closer look at the role of tax consultant, including the type of work these professionals do, the job outlook in the current employment environment, and the salary levels tax consultants can earn.
Tax consultant job description
A professional tax consultant will work with both individual clients and business entities to help them prepare their tax returns and related documentation. Due to a range of different factors—like changing tax codes and requirements, as well as major life events or business cycle fluctuations—preparing a tax return can be an in-depth and complicated endeavor. Without the right data or documentation, an inaccurate or incorrect tax return could result in an individual or business being audited, drawing out the time and cost necessary to resolve any tax issues.
A tax consultant works to ensure that an audit isn’t necessary, as it is part of the consultant’s responsibility to gather and analyze all the necessary financial, accounting, and tax data and paperwork necessary for the return. Consultants also help their clients fill out the necessary tax forms and documentation (such as 1040 forms for individuals or Form 1120 for corporate tax returns) using the collected financial records from clients. Tax consultants must also compare and align tax return filings with the proper tax codes, including those for specific types of business entities or relevant jurisdictions, as PayScale pointed out.
Tax consultants can work directly with their clients collaboratively to prepare the tax return. Typically, a business’s internal accountant or financial manager will take this approach to ensure they have full visibility into the tax consultant’s filing processes. However, clients can also turn their paperwork and documentation over to the tax consultant and have them do the bulk of the work for filing and preparation. This is a common process when tax consultants work with individual clients. In these cases, the client may not play a large role in actual filing preparation, but a tax consultant will review the prepared tax return with the client to resolve any issues or answer any questions ahead of officially filing it with the state or federal governing bodies.
While a large part of the tax consulting role revolves around tax filing and document preparation, this isn’t the only work that professionals in this job function engage in. As state accounting guide AccountingEdu.org noted, tax consultants also:
- Help businesses and individuals ensure they are compliant with current tax law. This includes ensuring alignment with relevant regulations not only ahead of tax return filing, but during other major processes as well (such as during a business merger or acquisition, or estate planning for individuals).
- Strategize with individual and enterprise clients to reduce any tax liability and maximize potential returns.
- Work with clients to address any issues in their tax preparation and return, including communicating with them to explain the cause of the problem.
- Study the tax code for local jurisdictions, as well as relevant state and federal tax codes. This is particularly critical as and after any changes or additions to the tax code take place.
- Maintain records pertaining to the work done and actions taken for each client account, including documenting tax payments and refunds.
In addition to working with clients to prepare their tax filing and returns, consultants will also help guide individuals and businesses through major events in a consulting capacity. For instance, these professionals may advise individuals on filing a joint tax return for the first time after marriage. They may also make suggestions to businesses to help them remain compliant with changing tax codes outside of tax season; or consult with enterprise leaders about how an acquisition might impact their financial year and tax filing.
Tax consultant vs. accountant, auditor, or advisor
While there is some overlap in the tax consultant role with other similar positions, there are some key differences to be aware of in tax-related professional roles.
For example, tax accountants and auditors may also be involved in examining financial records to ensure compliance with tax codes, helping to prepare tax returns and ensuring that owed taxes are paid in a timely manner.
A tax advisor, also known as a personal financial advisor, works with clients to help manage an array of different financial and accounting processes. They might include advising and strategizing with clients to help them meet their financial goals, guiding them around certain financial risks, and recommending potential investment opportunities. Tax advisors don’t typically engage in actual tax filing paperwork. Their role is more providing advice and guidance about financial and accounting processes like investments, insurance, mortgages, estate planning, property tax, retirement, and tax-related factors.
Tax consultant salary
As with any professional position, the average salary for tax consultants can vary considerably. This includes elements like years of experience, the industry in which professionals work, the certifications they hold, and more.
Overall though, the median annual wage for tax consultants was $54,440 as of May 2018, according to BLS data. During the same time period, tax consultants who worked in local government earned a median annual wage of $45,190. Professionals working in state government took home annual salaries of $52,950, and federal government tax consultants earned an average pay of $61,880.
The BLS shows that the lowest 10% of earners in the tax consultant role earned a median annual wage of $32,500 as of mid-2018. On the other end of the spectrum, the top 10% of earners earned average salaries of $101,120 or more per year.
Payscale provides a look at real-world tax consultant salaries from top employers. Currently, Deloitte’s Tax LLP offers an annual salary of $63,000 for its tax consultants. EY (Ernst & Young) on the other hand, provides a salary of $70,000 annually, and KPMG tops the list with a $73,000 annual salary.
Salary estimates and actual average salary can change according to the industry, the size and resources of the employer company, and the geographical location in which professionals work. Payscale data shows that tax consultants working in Los Angeles, for instance, earn over 25% more than the national average for tax consultant salary. Those in New York, Boston, and Chicago also earned more than the national average. However, tax consultants working in Houston and Dallas actually earned 4-5% less than the national average salary.
The years of experience a candidate has can also have an impact on the salary they earn. Entry-level tax consultants, or those with about a year or less of experience, typically earn an average salary range of $55,000 to $58,000 annually. Tax consultants toward the middle of their careers who have five to nine years of experience can expect to earn $71,000 annually. Those with 10-20 or more years of experience may earn annual salaries of $80,000 or more, depending on their location, employer, and working environment, according to Accounting.com’s Tax Consultant Salary Guide.
Career potential: Job outlook for tax consultants
Similar to salary estimates for these professionals, job growth forecasts differ, according to different sources.
The U.S. Bureau of Labor Statistics predicts a decline of 2% in the job outlook for tax consultants, equivalent to a loss of 1,400 tax consultant employment positions from 2018 to 2028. At the same time, BLS data predicts a 6% increase in the job outlook for similar professional roles like tax accountants and auditors through 2028.
However, a separate forecast on the career potential in this field from Projections Central predicts a considerable increase in demand for tax consultants. These researchers project a 10% increase in the job outlook from 2016 to 2026, with more than 10,300 positions becoming open by the end of 2026.
“Ever since the invention of taxes, individuals and businesses have needed tax professionals to help them navigate these systems,” the Tax Consultant Salary Guide stated. “As the population grew and tax laws became more complicated, the demand for tax consultants has grown. Sector growth may continue to increase based on these trends, though state data may differ.”
Becoming a professional tax consultant
To succeed as a tax consultant, there are certain qualities that are important for professionals to have. This includes strong analytical and research skills, alongside critical thinking, to help understand changing tax code rules. These skills also enable tax consultants to best strategize with their clients pertaining to addressing any tax issues and maximizing their potential returns.
Tax consultants should also be detail oriented to support accuracy in their filing and documentation. Strong organizational skills are also a plus for maintaining client case records and accounts.
Because tax consultants may work closely and collaboratively with their clients—particularly those in the enterprise business space—communication and interpersonal skills are important as well.
Although these characteristics lay the foundation, tax consultants must also have at least a bachelor’s-level degree in accounting, finance, taxation, or a similar area. State accounting guide website noted that some employers prefer candidates to also achieve accreditation or certification. The most common certification is the Accredited Tax Consultant credential, issued by the Accreditation Council for Accountancy and Taxation.
Professionals who want to expand their knowledge in this area and achieve higher-level roles in the tax consultant field should look to earn a master’s level degree. The Online Master of Science in Taxation from Northeastern University’s D’Amore-McKim School of Business is ideal for preparing to become a qualified tax professional. Students can gain the skills necessary to pursue an array of competitive professional roles, including the tax consultant, tax accountant, tax attorney, tax manager, financial planner, and auditor positions.
To find out more about how a Master of Science in Taxation could help propel your career, connect with one of our enrollment advisors today.