With CPAs Stretched Thin, Financial Advisors Might Be the Key to Easing the Burden This Tax Season
The financial landscape has changed dramatically in recent years. With more complex tax laws, shifting regulations, and an increase in freelance and gig economy workers, individuals and businesses are relying more heavily on CPAs to manage their taxes and finances. On top of that, the COVID-19 pandemic created additional complications like government stimulus packages, tax breaks, and other financial assistance programs that required a high level of expertise. As a result, the demand for CPAs has surged, yet the supply hasn’t kept up. The CPA profession is facing a shortage due to a variety of factors, including a large number of older CPAs retiring and fewer younger professionals entering the field. This has led to longer wait times for appointments, increased competition among clients, and, unfortunately, fewer available resources for tax advice.
Financial Advisors: The Unsung Heroes of Tax Season
Given the current challenges in the CPA profession, many individuals and businesses are turning to financial advisors for guidance on organizing and managing their taxes. While financial advisors are not tax professionals, they can offer valuable assistance in organizing finances and ensuring that tax-related decisions are made in alignment with long-term financial goals. Here’s why financial advisors might be the key to organizing taxes this season:
1. Holistic Financial Planning
Financial advisors take a comprehensive view of a client’s financial picture, including investments, retirement planning, and tax strategies. They help clients make decisions that reduce their tax burden while ensuring they are working toward their long-term financial goals. This could include tax-efficient investing, retirement contributions, or strategic use of tax deductions. While they cannot file taxes directly, financial advisors play a crucial role in the pre-tax planning process, setting clients up for smoother and more efficient tax filing.
2. Tax Strategy and Education
One of the core services a financial advisor offers is tax strategy. Advisors are experts in minimizing tax liabilities by suggesting tax-saving strategies such as tax-deferred retirement accounts, tax-efficient investment strategies, or taking advantage of available deductions and credits. They may also educate clients about potential tax implications of various financial decisions, ensuring clients are better prepared when it’s time to file taxes.
3. Collaboration with CPAs
Even though financial advisors aren’t licensed to prepare taxes, they often work closely with CPAs to ensure that all aspects of a client’s finances are optimized for tax season. This collaboration can be incredibly valuable, as it allows CPAs to focus on the technical aspects of filing taxes, while financial advisors handle the broader planning and strategy. The partnership can help prevent costly mistakes, like missing out on deductions or mismanaging investment accounts that trigger unnecessary taxes.
4. Personalized Service
Given the shortage of CPAs, many individuals and small business owners find it challenging to get the personalized service they need. Financial advisors, on the other hand, often have smaller client rosters, which allows them to provide more one-on-one attention. This personalized service can make all the difference, especially in a tax season filled with uncertainty and complexity.
Making the Most of Your Financial Advisor This Tax Season
If you’re struggling to find a reliable CPA this tax season, working with a financial advisor can offer many benefits. Here are a few steps to make the most out of your advisor’s expertise:
1. Start Early: Tax season can be stressful, so begin working with a financial advisor as soon as possible. The earlier you start, the more time you’ll have to make strategic decisions that benefit your tax situation.
2. Review Your Tax Strategy: Make sure your financial advisor has an understanding of your full financial situation, including all investments, savings, and business income. This allows them to craft a tax strategy that aligns with your financial goals.
3. Coordinate with a CPA: If you do find a good CPA, coordinate with them and your financial advisor to ensure everything is in place. The combined expertise of both professionals can make your tax filing much easier and more efficient.
4. Track Changes in Tax Laws: Your financial advisor can help you stay informed about any recent changes to tax laws that may impact your filing. Whether it’s new credits, deductions, or tax reform, being in the loop can help you take advantage of every possible benefit.
Conclusion
With the difficulty of finding a good CPA and the complexities of modern tax laws, many individuals and businesses are turning to financial advisors to help manage their finances this tax season. While financial advisors can’t prepare your taxes, they offer invaluable assistance in organizing your finances, creating tax-efficient strategies, and collaborating with CPAs to ensure the best possible tax outcome. But it is critical to find a financial advisor that will provide a holistic service for you and your tax needs. Financial Fit can help you find the right financial advisor for your needs to take the stress out of tax season and set you up for long-term financial success.