Tax Prep by Tax Planners

Tax season is upon us. Many will spend hours filing their own taxes using Turbotax or similar software. Others will get their taxes done at a discount tax preparer like H&R Block or Jackson Hewitt. And still others will pay hundreds of dollars to get them filed by a Certified Public Accountant. Here’s my advice: Get your Tax Prep done by Tax Planners.

Which leads me to our big announcement for 2024.

We Prepare and File Taxes

We prepare and file taxes. Our firm, La Crosse Financial Planning, does financial planning, investment management, estate planning, tax planning and tax preparation. That’s right; we are Financial Planners that also do your taxes in-house. So, while many financial advisors must respond to tax questions with, “I’m sorry, I can’t answer that; go ask your tax advisor,” we say, “As your tax advisor and preparer, here’s the answer.”

For a few years now, we have completed our clients’ tax returns to rave reviews. But we’ve always limited our tax preparation to our current financial planning clients.

For the first time and for a limited time, we are now offering tax preparation to the general public. If you’re already a client, thanks! Tell your friends and know that we are only accepting as many tax returns this year so that it does not interfere with our service to existing clients. If you’re not a client, let me share why you may want to get your taxes prepared by a tax planner, not just a tax preparer.

Tax Preparer Problems

Let me outline a few problems with working with a tax preparer instead of a tax planner, even if that tax preparer is you!

Mistakes and Missed Opportunities

When you’re working with a preparer or doing it yourself with software, there are several mistakes and missed opportunities that you can make.

Tax Preparer Registration: A Bar on the Floor.

Almost anyone can become a tax preparer. The only requirement to get paid to file taxes is to have a Preparer Tax Identification Number (PTIN). To get a PTIN, you must:

1. Create Your Account at IRS.gov
2. Apply for Your PTIN on a 5-15 minute application
3. Pay the $19.75 Fee
4. Get Your PTIN and get paid to file taxes.

Yes. It’s that simple. The bar for professionally preparing and filing taxes is so low that it’s on the floor.

Tax Preparer Basic Training

Most discount tax prep companies like H&R Block and Jackson Hewitt have an internal training program. But they are being trained on how to enter information into software. Discount tax preparers are essentially filling out your Turbo Tax for you and charging an extra $100.

Moreover, they are entering information provided by you into their system. So you have two parties, neither of which have had any real training in tax preparation and strategy, working together to try and maximize your refund. Talk about the blind leading the blind.

Tax Preparer Advanced Training

If you will use a tax preparer, you definitely want a Certified Public Accountant (CPA) or an Enrolled Agent (EA). They will not make the mistakes a basic tax preparer might make.

CPAs

The States regulate CPAs. They have a five-year accounting degree or equivalent and must pass a rigorous four-part exam including:

• Auditing and Attestation (AUD)
• Business Environment and Concepts (BEC)
• Financial Accounting and Reporting (FAR)
• Regulation (REG)

CPAs are just that, public accountants. While they get advanced education on personal tax returns, most of the education is in the accounting and auditing of businesses and corporations. In some ways, they are overqualified to be doing basic tax returns. This is why we’ve seen a trajectory of CPAs going away from personal returns or starting their minimum fees at $350 or $500 for the most basic return.

EAs

Enrolled Agents are licensed by the IRS directly. They are not to be confused with IRS Agents who work for the IRS. Enrolled Agents work for their clients and may represent them before the IRS if they get audited. You need a CPA, EA, or attorney to represent you. Other tax preparers cannot do this.

Enrolled Agents must pass a rigorous three-part exam to be licensed:

• Individual Taxes
• Business Taxes
• Representation, Practice, and Procedures

The Enrolled Agent exam focuses more on tax returns than the CPA exam. I always say that a CPA will know far more about corporate accounting and auditing, but an EA will have an equal footing on personal and small business tax returns.

Enrolled Agents must also complete 24 hours of continuing education each year. Do you study filing taxes for 24 hours every year before attempting yours? Perhaps it’s worth the extra money to hire someone that does.

Software

Many people mistakenly think that the software will do it for them. “I just you Turbo Tax. It gets me a great refund every year. The software doesn’t make mistakes.” This is only partially true.

The software will not make calculation mistakes. It can add perfectly. When people hear I’m an Enrolled Agent and prepare taxes, they often comment, “You must like math.” Whether or not I like math is irrelevant. I don’t do any math in a tax return. The software does the math, but I prepare the taxes.

Software only responds to your inputs. If you are unaware of an applicable deduction or credit, it will not find it for you. Many people miss tons of opportunities because they think the software has them covered. It doesn’t.

Isolated Information

Most CPAs and EAs are tax preparers only. They are not tax planners. Not because they aren’t smart enough but because that’s what you are paying them to do. They can’t properly plan for you because they don’t know your situation.

They get tax forms that report how much you’ve contributed to or withdrawn from your accounts, but they don’t know the balance in your 401(k) or Roth IRAs. Also,they don’t know what your Social Security Income will be or how much your pension benefit is before you claim it.

They can’t do tax planning because they have isolated information. Having your taxes done by a Certified Financial Planner who is also an EA or CPA will mean they will have a better tax planning perspective on your tax preparation.

Short-Term Focus

CPAs and other tax preparation companies are running a business. They make most of their money in three months and need to keep the lights on for the rest of the year with that revenue. They need repeat customers; the best way to do this is to maximize refunds.

As humans, most of us want a tax refund. We judge the quality of our tax preparation by the Total Refund Amount line, not by the Total Tax line for the year, let alone the total tax for your lifetime. Because of this, we have, as a society, trained CPAs and tax preparers to be short-sighted. We and they are focused on annual deductions, not lifetime savings. I have repeatedly seen bad advice from CPAs encouraging clients to save taxes this year only to pay far more later.

Get Your Taxes Prepared by a CPA CFP®

The best thing you can do with your taxes is to get them prepared in-house by your Certified Financial Planner team. We are not the only financial planning firm that does this, so this is as much of a plug for firms like ours as it is for us. But here are a few benefits of doing it this way.

Smooth Process

As your financial planner, I already have all your information and know all about you. I manage your investments and have access to your statements and tax forms. I don’t need to ask redundant questions each year. We don’t send out 10-page client organizers for you to fill out each year. We don’t need a separate tax meeting if you are already a full planning client. It is just an agenda item for our spring review.

If you’re not yet a financial planning client, we can still do your taxes, and the process is still very smooth. New tax clients often express how impressed they were with the tax filing.

Holistic View

For our planning clients, we already know the rest of your situation. We know your account balances and other income sources and keep that in mind as we are creating your tax strategy and filing your taxes. We know the opportunities out there and the ones that will apply to you.

For people who are not (yet) financial planning clients, we still see more than your average preparer. Most preparers just copy numbers from tax forms into the software without a second thought. But the numbers we get in Box 14 of your W2 or Box 7 of your 1099R mean something to us. We can probe for tax planning opportunities that others won’t see.

Planning Focus

We take a Tax Planning focus to our preparation. If it is better for you to pay more taxes this year to save taxes over your lifetime, we will recommend that and show you why. As we always say, we will pay every dime in taxes we owe, but let’s not leave the IRS a tip.

Conclusion

We talk a lot about taxes because they’re the largest lifetime expense most of us will pay. From here, you have two options

Learn More

If you want to know more, we have several episodes already published that you can go back and listen to, including:

• Episode 28: Tax Planning
• Episode 39: Health Savings Accounts
• Episode 40: Lifetime Capital Gains
• Episode 44: To Roth or Not to Roth
• Episode 51: Why Do I Need Tax Planning
• Episode 87: Should I Convert My IRA to a Roth?
• Episode 145: You May Need Tax Planning
• Workshop: Reducing Taxes in Retirement

Take Action

If you are already our client, you will receive proactive emails from us for completing taxes this year. If you are not, but this sounds interesting, and you want to know more about having us file your taxes, go to LaCrosse.Tax. Provided we are still accepting new clients, you can hire us there. Our current prices, including a two-year discount for new clients, are posted there.

Paying less taxes does not happen by accident. You need a plan. Let us make that plan with you and for you.

This article is educational only and is not intended to be investment, legal, or tax advice or recommendations, whether direct or incidental. Again, this is not investment advice. Consult your financial, tax, and legal professionals for specific advice related to your specific situation. Never take investment advice from someone who doesn’t know you and your specific situation. All opinions expressed in this article are those of the people expressing them. Any performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be directly invested in.