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What Separates Tax Preparers from Tax Advisors?

I have been preparing returns for 15 years now, and one of the greatest things I’ve been able to give to clients is something we only started a few years ago.

The notion of a tax projection - while seemingly obvious - eludes most tax preparers (including us for many years), making us just that: preparers. In order to fulfill our maximum potential as tax advisors, we must be doing tax projections for clients.  Or, at least we should be informing clients that tax projections could help them prepare for the following year and save potentially thousands of dollars in tax savings.

Of course, this seems to say that doing a tax projection is better than doing no tax projection. However, the reality is a bad tax projection is just as bad as doing no tax projection…or worse.

What Constitutes a Good Tax Projection?

A good tax projection starts with having accurate information, which is sometimes readily available, sometimes not available at all or sometimes acquired by doing some work.

Having information available and doing work to make it available are the easy parts. It is most challenging when information is not available. When information is not available or is not made available, we are effectively trying to complete a job with one or both hands tied behind our back. We can do it, it’s possible, but like I said earlier about projections, it can be as worthless as doing no projection. Yes, we can make educated guesses and that’s fine, but why would we make educated guesses when we can have actual year-to-date numbers in front of us, making our chances for over or underestimating minimal?

This may mean the client will have to allow access or a financial advisor may need to allow access to see such information. But if we’re not going to give them the best possible product, are we doing them a disservice?

If the options are between 1) providing some information and have a superior product, or 2) withholding that information but having an inferior product, I feel that most clients would opt for the latter.

Getting the Full Picture from Tax Projections

Tax projections can be an amazing tool for clients to potentially realize thousands of dollars in tax savings. They can also provide information as to what their tax liability will be for the year.

However, this ability can only be completed if your tax advisors have the most up-to-date and accurate information about your income, expenses, and account balances. Otherwise, we are only providing a partially accurate report.

It is true a financial advisor could fill in the blanks, but why would we provide a partially accurate picture when that is now our best product? I’m suggesting whenever possible providing the complete picture will provide a complete tax projection.

Scott Grandfield, EA ®, NTPI Fellow

Grandfield Tax & Business Services, Inc.

Check the background of this firm/advisor on FINRA’s BrokerCheck.