Skip to Content
October 12, 2018 Article 1 min read
The distinction between tax preparer and tax advisor is an important one. Do you know the difference? To take a proactive approach to financial planning and wealth management, you should ask yourself these questions.

 People talking

Do you know the difference between a tax preparer and a tax advisor? Don’t worry if you tend to use the terms interchangeably — most people do. But the distinction is an important one. Tax preparers, as the name suggests, prepare returns. Tax advisors go beyond tax preparation and compliance and approach tax, and overall financial, planning proactively.

So, while a tax preparer can prepare your return, he or she isn’t looking at your tax situation as a component of a holistic wealth strategy the way a tax advisor does.

That’s not to say tax preparers don’t add value — they do. But individuals often find they’ve outgrown these professionals and need someone to look at their overall tax- and financial- planning picture.

Here are some questions to ask in determining if your tax professional is a preparer or an advisor:

  1. Does my tax professional call me other than to gather my yearly tax data?
  2. Does my tax professional inquire and advise me on personal balance sheet items — retirement planning, estate planning, stock options, etc.?
  3.  Am I getting proactive advice?
  4. Do I know, prior to filing my tax return, what my cash flow needs are?
  5. Do I feel comfortable calling my tax professional to discuss potential tax strategies and to better understand what will be my cash flow needs for the upcoming year?
  6. Does my tax professional discuss issues other than federal income tax — such as state and local tax issues, estate planning and trusts, business succession planning, and cash flow management?
  7. Is my investment portfolio invested in a tax-efficient manner?
  8. Do my tax professional and investment advisor strategize on what assets should be in my personal balance sheet, trust accounts, or retirement accounts?

Tax planning shouldn’t take place in a vacuum; it’s part of your overall financial picture. Someone needs to be quarterbacking your financial health with his or her eye on your personal balance sheet to ensure you meet both your short- and long-term goals. The best person to do that? A tax advisor.