Tips for Building a Strong Tax Practice

Accountants and auditors are in high demand and are expected to be hired at a faster rate than average through 2024, according to research from the U.S. Bureau of Labor Statistics. At the same time, with a median salary of around $67,000 per year, these occupations will continue to pay much higher than the national average.

Given the job’s requirements, though, it is easy to see why skilled financial and tax experts are in high demand. They must juggle the rules and requirements of the law and all its complexities with the delicate needs of their employer. Accountants and auditors must do so with respect and tact, earning their client’s trust through total discretion and a willingness to solve complicated problems.

In short, the outdated image of the boring tax expert couldn’t be further from the truth. So what makes a good tax professional in the modern age? For the most part, the same basic rules still apply.

How People Choose Tax Services

One way to understand what separates a great tax service from the average is knowing how prospective clients tend to search for them. According to statistics from the IRS, more than 78 million income tax returns were filed by professional preparers in 2016, slightly more than at the same time in the previous year. That means any one tax preparer or business is likely facing stiff competition, but can still distinguish themselves through impeccable service.

Anyone looking for a tax preparer or advisor has many ways to search for one, but according to the Los Angeles Times, it often comes down to personal relationships. Most people start by asking friends and family members for recommendations, especially if they are looking for more specialized tax help. Some other common ways consumers may vet potential services include:

Checking credentials: Many people are familiar with the Certified Public Accountant title, and might simply prefer to work with anyone who can claim CPA status. However, there are some pervasive misconceptions about the CPA title. As the Los Angeles Times noted, licensed tax preparers don’t have to be accredited as a CPA, tax attorney, or enrolled agent. Rather, they simply need to possess a Preparer Tax Identification Number from the IRS. Most experts encourage clients to ask for a PTIN before signing on with any professional tax service.

Adhering to standards: One effective way to be recognized as a great tax professional is relatively straightforward: be honest. Informed clients will be cautious about who they disclose sensitive information with, and will not take kindly to even a hint of malfeasance. Tina Orem at Nerdwallet reminded consumers to only have their preparer sign a return after it has been filled out, not when it’s still blank. More broadly, it’s important for tax preparers and their clients to understand the gravity of the relationship—by signing a return, a licensed preparer is essentially affirming his or her confidence in all information provided. Anyone with a PTIN who is an enrolled agent, CPA, or tax attorney should be trusted to represent the client in court should any legal issues arise.

Competing on price: Quality service should be top of mind for anyone looking to have their tax returns prepared professionally, but that doesn’t mean they won’t shop around for the best deal. According to research from the National Society of Accountants, taxpayers paid $273 on average for a professionally prepared tax return in 2014. That included an itemized Form 1040 along with Schedule A and a state return filed as well. Without itemized deductions, the average fee was $159. Whether preparers charge less or more than these estimates depends on their ability to justify that price to the client.

Nailing the details: It’s often the little things that really distinguish great preparers from the middle of the pack. Important yet overlooked considerations, like asking for the prior year’s return or using E-file to send a completed return to the IRS, are all signs of a top-tier practice, and could serve as red flags if they aren’t noticed. The Los Angeles Times explained that asking for last year’s return and using it to prepare one for the current year demonstrates due diligence on the accountant’s part. And since E-filing is so easy, Nerdwallet noted that it could be cause for alarm if a tax practice doesn’t choose to do so.

Tax Practice in a Corporate Setting

If they don’t work as part of a firm helping individuals file their tax returns correctly or in a legal capacity, chances are anyone with advanced education and experience regarding tax practice works as part of a large firm. Accountants and auditors serve a number of vital roles in corporations spanning nearly every industry, from massive financial institutions to tech startups.

Getting a company’s financial records in order is a crucial role that consumes much of an accountant’s or auditor’s time in a corporate setting. But their roles are becoming more important than ever as corporate regulation evolves. According to many sources including Thomson Reuters, lawmakers around the world, at the behest of their constituents, have increasingly focused their efforts on introducing more stringent regulation, particularly in the financial services industry.

At the same time, major corporations everywhere are dealing with another new economic reality. Global economic growth has simply not lived up to previous expectations in the wake of the financial crisis that began in 2008. While most firms surveyed by Thomson Reuters agree that the financial situation has stabilized somewhat, they have come to realize that they must keep operations much leaner than before. That means lower headcounts in offices, less frequent updates to technology systems, and a bigger emphasis on retaining talent.

For tax professionals, accountants, and auditors, this trend is both a blessing and a curse. On one hand, a growing focus on regulatory risk from executives means internal auditors and tax experts could gain a much more important role in an organization. Whereas before, internal auditors may have been thought as little more than formalities by C-suite executives, it’s these routine checks that could save the company from a potentially disastrous encounter with government regulators.

Just last year, the Securities and Exchange Commission, which polices the actions of some of the biggest corporations in the U.S., announced it had filed a record-breaking 868 enforcement actions during the 2016 fiscal year. Those cases netted the SEC more than $4 billion in restitution and penalty fees from offending businesses. Some of the most notable cases, according to the SEC, were those involving whistleblowers from within the offending institutions. In many cases, whistleblowers are lower-level associates working in compliance-related departments as accountants, auditors, or tax professionals. These whistleblowers tend to bring the issue up with their company first, before being spurned and resorting to the SEC instead.

Whether these cases are a result of criminal malfeasance or just an honest mistake, the fact remains that government regulators are getting tougher on compliance, and the rising costs of meeting these new demands still pales in comparison to the multimillion-dollar penalties meted out to offenders.

More Than Regulation

Tax experts clearly play an outsized role in modern corporations when it comes to regulatory risk, but their expertise is increasingly being sought in matters related to corporate financial structure and strategy.

According to a report from investment analysis website Seeking Alpha, mergers and acquisitions are becoming increasingly common around the world and throughout many industries. In 2016, M&A activity was the third highest on record, while the previous year was actually the highest ever. In 2017, most financial analysts expect the pace of M&A to remain consistently high, and perhaps even shoot higher.

No matter where taxation professionals find their career taking them, they need to let their own expertise and unique skills guide them. Getting the best education possible, such as Northeastern University’s Online Master of Science in Taxation, gives anyone in the accounting or tax world a head start, but it’s largely up to each one of them to decide how they will truly stand out among the crowd.

 

Sources

IRS

U.S. Bureau of Labor Statistics

Nerdwallet

L.A. Times

Seeking Alpha