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6 Ways a Tax Advisor Can Help You Save Money

With the monster of inflation rearing its ugly head like never before, people are looking to save a buck wherever they can. Walking the aisles of your local grocery store is scarier than walking through that haunted house your college roommates insisted on every Halloween. (The price of eggs? Now that’s frightening.)

But there are still ways to cut back and save some dough—even during tax season. Working with a tax advisor can save you precious time and money. That’s probably why more than 72 million tax returns were filed with help from a tax professional during the 2023 tax season.1 

Yes, a tax advisor will charge you for their time and expertise, but with all the ways they can help you save money on your taxes, you’ll likely come out ahead—even after you pay their fee.

So, we’re going to explore six different ways a tax advisor can help you save money. But first, let’s make sure we’re on the same page about what a tax advisor actually is and what services they provide.

What Is a Tax Advisor?

A tax advisor is a financial expert who is educated and (often) certified in tax accounting and tax law. They know taxes like the back of their hands, staying on top of all the latest tax code changes, tax credits and deductions so they can help you save as much money as possible on your taxes.

Most people know a tax advisor can file your personal tax return for you, but that’s just the start of all the services they can provide.

Tax advisors can also help you with year-round tax planning and strategizing to help you save on taxes when you make big financial moves (like buying your first rental property or starting to make retirement withdrawals).

Own a small business? Tax advisors can guide you through small-business tax rates, estimated taxes, and which small-business tax deductions you qualify for. And some tax advisors even offer bookkeeping services. Sweet!

How Can a Tax Advisor Help You Save Money?

Alright, folks—let's dive right in. Here are six ways working with a tax advisor can help you save on your taxes:

1. Year-Round Tax Planning

A lot of tax advisors offer tax-planning services throughout the year. They can take a look at your tax situation and any major financial moves you plan on making during the tax year—like moving to a new state, buying a home, doing a Roth conversion, or starting retirement. Then they can advise you on how those moves will affect your taxes and help you form a plan to save as much on taxes as possible.

This is where a tax advisor’s expert knowledge of the tax code (including any tax credits or deductions that could save you money) come into play.

Even if you don’t expect any major financial changes for you or your small business this year, it’s always good to have a tax advisor who can provide ongoing support. Part of their job is to keep up with the latest tax news and changes so they can answer any questions you have and offer timely advice when life throws a curveball into your financial situation.

2. Avoiding Costly Mistakes

Tax advisors can help you steer clear of the most common tax mistakes—mistakes that often lead to overpaying, getting a huge refund, or getting audited. Some of those mistakes include choosing the wrong filing status on your W-4 or your tax return, not reporting all your income sources, and making costly math or data entry errors.

 Don’t let taxes overwhelm you. Connect with a RamseyTrusted tax advisor.

When you’re dealing with so much paperwork and so many numbers, it’s easy to miscalculate or plug in the wrong data from your W-2 or 1099 forms. One small mistake can potentially make a huge impact on how much you owe Uncle Sam, or even raise a red flag with the IRS.

A tax advisor knows how to read all those tax forms and what to look out for. They can make sure your return is accurate so you can file with confidence.

Now, if you got a huge refund or owed the IRS last year, a tax advisor can show you how to adjust your tax withholdings to get closer to that sweet spot where you’re paying almost exactly what you owe to Uncle Sam throughout the year—no more and no less.

A lot of people think getting a big refund is a good thing, but think about it—that just means you’ve been loaning the government your money all year for free! No thank you. There are better things you could be doing with that extra money each month, like paying off debt or saving for your kids’ college.

3. Tax Credits and Deductions

You can save a lot of money with tax credits and deductions, but trying to keep up with all the latest eligibility rules and changes can be a nightmare.

Some people pay more taxes than they should because they don’t claim all the tax credits and deductions they qualify for—while others risk an audit because they try to claim credits or deductions they don’t qualify for.

Part of a tax advisor’s job is knowing all about how you can save with tax credits and working with you to see if you should take the standard deduction or itemize.

Maybe you’re a single dad who has questions about the child tax credit. Or maybe you’re a new small-business owner trying to figure out which expenses you can deduct. No matter your tax situation, a tax advisor’s expertise and knowledge of the tax code can make all the difference when it comes to taking full advantage of those credits and deductions.  

4. Tax Impacts of Investments and Assets

A good tax advisor is constantly looking for ways to help you save on your current-year taxes and ways you can save more in the long run (especially when it comes time for your retirement).

Although it’s usually a financial planner or investing pro’s job to advise you on the how, when, where, and why of your investing journey, a tax advisor can give you a better idea on how your investment choices will affect your taxes, both now and at retirement.

For example, let’s say you started an amazing new job and you want to roll over your traditional 401(k) funds from your previous job’s retirement plan into your new employer’s plan. Should you stick with a traditional account? Or jump in and do a Roth conversion? A tax advisor can help you understand your options and go over how each will affect your tax bill.

When it comes to your retirement savings and financial goals, you want to be as informed as possible so you can make the best decisions.

And the same goes for managing the tax implications of your assets. Let’s say you bought a piece of land for $25,000 a couple of years ago. Thanks to the booming housing market, that land is now worth $100,000. When you sell it, you’ll be paying capital gains tax on that $75,000 profit.

There are ways to avoid being taxed on your capital gains. But you’ll need to work with a tax advisor to have a plan set in place before you purchase or sell an asset. For example, if you purchase assets through a qualified retirement account like a 401(k) or a Roth IRA, you won’t have to pay any capital gains taxes at all.2

Making uninformed investing choices or playing chess with your assets can be risky—especially if your goal is saving money on taxes! Why risk playing the game by yourself when you could let a tax advisor be your coach?

5. Small Business Taxes and Services

Many tax advisors are CPAs—certified public accountants. CPAs specialize in preparing and filing your business’s federal, state, and/or local tax returns. They can make sure your quarterly taxes are filed correctly and on time, keeping you from having to pay late payment penalties. You won’t have to worry about tax issues sneaking up on you.

CPAs can also provide other services for your business:

  • Tax Advice and Planning: CPAs can give you advice about what business expenses are deductible and other ways you can minimize your tax burden throughout the year. They can also help with long-term planning by looking at your business financial goals and working with you on a plan to reach those goals.
  • Payroll and Bookkeeping: A CPA will make sure your team is paid on time and that all payroll taxes, insurance and retirement withholdings are deducted correctly. They can also help with bookkeeping—making sure your vendors are paid on time, invoices get sent, and accounts receivable are collected.
  • Audit and Assurance Services: A CPA audit is not the same as getting audited by the IRS. In fact, having a CPA audit your business’s finances and economic data is a great way to avoid getting called in front of the Spanish Inquis . . . sorry, we mean the IRS. And assurance services? That’s just a fancy way of saying that a CPA gathers all of the relevant info that a company’s decision-makers need—and assures that they understand it—so they can make good decisions for the business.

Put all these services together and it becomes clear: Hiring a tax advisor who has the CPA initials behind their name is one of the best moves you can make as a business owner.

They can take care of all the math so you can focus on the things that make your business stand out from the crowd—your brand, your amazing employees, and the services you provide to your customers.

6. Audit Assistance

Going through an audit might be your ultimate tax season nightmare, but it doesn’t have to be as scary a situation as you might think. Working with a tax advisor can take the stress of an audit down a few notches.

First of all, letting a tax pro handle your taxes helps to lower your risk of an audit because of the expertise and knowledge of the tax code they bring to the table. Plus, they do this for a living! So they’re much more likely to catch any mistakes and miscalculations on your tax return that could pop up as red flags to the IRS.

But let’s say you receive a letter from Uncle Sam asking you to clarify something on your return. A tax advisor can take a look at the letter and help you understand what’s going on. They’ll make sure you know your rights and work with you on how to respond.

And if you get an IRS audit letter? Don’t panic. Take a deep breath. If you don’t already have one, now’s the time to connect with a tax pro and let them know your situation. They can help you gather all the documents you’re going to need and act as your representative, answering phone calls, attending in-person meetings, and stepping in as the middleman between you and the IRS.

You may end up receiving a bill from Uncle Sam, but if you’re working with a tax pro, they can make sure you don’t end up paying more than you should.

Let a Tax Advisor Help You Start Saving Today!

The thought of owing Uncle Sam a ginormous tax bill or going through an audit is enough to give anyone heartburn. But you don’t have to face all the potential tax pitfalls alone!

The RamseyTrusted program can connect you with a tax advisor who has the eye of an expert. They can help you avoid costly mistakes on your return and find ways to help you keep more of your money out of the government’s hands.

 

Next Steps

  1. If you’re ready to connect with a tax expert, check out our RamseyTrusted tax pros. They have years of experience and stay up to date on all the latest tax code changes so they can help you save more money.
  2. Any great tax advisor knows good communication is key to serving well. Take a look at 8 Questions to Ask Your Tax Advisor for ideas on what to ask your tax pro before and after you decide to work with them!
Find a Tax Pro

Frequently Asked Questions

If you’re still on the fence about whether to use online tax software or a tax pro, allow us to clear the air.

Tax software has come a long way in the last few years, but it’s still geared toward people with a simple tax situation: a W-2 or 1099 tax form, no major life changes (like moving to a new state or having a baby), taking the standard deduction . . . you get the idea.

Chances are your taxes are more complicated than that. You should consider working with a tax advisor if:

  • You have a complex tax situation (You made a lot of taxable investments outside of your retirement accounts, own rental property, owe taxes in multiple states, made a Roth conversion)
  • You had major life changes this year (you got married, bought a new home, had a baby, moved to a new state)
  • You’re not confident about filing your taxes
  • You want to save time (and who doesn’t?)
  • You own a business
  • You’re looking for ways to save money on your taxes

You may have other reasons for considering a tax pro. Maybe you’re still wrapping your head around how inflation has affected your tax bracket and tax rate. Or maybe you could file your taxes on your own, but you just don’t want the hassle. Do what works for you!

Sometimes it just makes sense to get the advice of a professional. Especially if they can help you keep more of your hard-earned money out of the hands of the government.

The average cost for a basic tax form preparation is about $220.3 That covers a standard 1040 and state return with no itemized deductions.

But tax preparation could cost anywhere from $100 to $600 (or more) depending on how complicated your tax situation is, whether you’re just filing your personal taxes or you have small business taxes, and how your tax pro charges for their services.

The more complicated your tax situation is, the more time it’ll take to prepare your return. And we all know, time is money. But chances are, if you have more than just a W-2 and one or two 1099 forms from a small side gig you’re crushing on the weekends, you’ll make back any money you pay for a tax advisor’s services (and then some) with the money they can help you save on taxes.

The best tax advisors make it their business to know the latest changes and trends happening in the world of taxes so they can help you understand how those changes affect you and your return.

But there’s more to choosing the right tax pro than just their tax expertise. Here are a few more qualities you should look for when hiring a tax advisor:

  • They’re qualified and have the right certifications for your tax needs. Look for a pro who’s either an Enrolled Agent (EA) or a certified public accountant (CPA). EAs and CPAs both go through extensive training, testing and continuing education to maintain their credentials and stay up to date on tax laws and regulations so they can better serve you.
  • They’re available all year. When life happens, having a reliable tax pro who’ll pick up the phone to answer your tax questions in September (not just January through April) can make a huge difference.
  • They’re proactive in communicating with you. A good tax pro will take the initiative to stay in touch throughout the year, keeping you informed and answering any questions you have.
  • They can help you with small-business taxes. Own a small business? You’ll be glad you have a tax pro who has experience working with small-business owners and can help you navigate through small-business tax rates, estimated taxes, and which deductions you qualify for as a business owner.
  • They can be trusted with sensitive information about your finances. It’s important that you find a tax advisor you can trust with all the nuts and bolts of your financial situation. Trust is the foundation of any strong relationship—including your relationship with your tax pro!

Fun fact: Every single RamseyTrusted tax pro is either an EA or a CPA. They’re tax advisors who have years of experience in the field and they’re around to serve all year with taxes, bookkeeping and more. If you’re ready to get started, connect with a RamseyTrusted tax pro today!

Your tax advisor will probably ask you to be prepared to share the following information with them:

  • Identification information for you and your dependents: That means having Social Security or Individual Taxpayer Identification Numbers (ITIN) with dates of birth for anyone who’ll be on your tax return. This way, your tax advisor can verify who you are, and the IRS won’t send back a tax return because the numbers don’t match (it happens a lot).
  • A copy of your most recent tax return: Although things can change from year to year, having a copy of last year’s return can give your tax advisor an idea of what deductions and tax credits you qualify for and save you both some time in the process.
  • Income statements and tax forms: Once you gather your W-2 from your employer or all those 1099 forms (if you’re a freelancer or independent contractor), your tax advisor will need copies of those tax forms in order to file your taxes.
  • Proof of expenses: If you plan to itemize your deductions this year instead of taking the standard deduction, you’ll need to have documents on hand to prove those expenses. Hope you saved your receipts!

To make sure you have everything you need to file your taxes, you can also download our free Tax Prep Checklist.

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Ramsey Solutions

About the author

Ramsey

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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