Tax consultants, also know as tax advisors, are experts in tax law, planning and compliance. They serve businesses and individuals alike by staying current on new tax law and positioning taxpayers for short and long term tax optimization. A tax consultant typically expands on the role of tax preparer. While tax consultants prepare tax returns, they also often work closely with clients throughout the year to ensure client tax liability is minimized. Tax consultants are strong written and verbal communicators able to explain tax law and strategies in a way that is accessible and easy for clients to understand. Tax consultants work for public accounting firms, law offices, financial consulting firms and many even have their own independent tax preparation and consultation businesses. In all settings, tax consultants can be expected to perform duties that include:
Producing written content is a significant part of the job, as tax consultants must communicate their research findings including changes in tax laws that create opportunities for new tax strategy. Because a tax consultant may have many clients affected by the same issue, the ability to draft a well-written and concise letter is often the most effective means of disseminating information to a number of different clients.
Tax consultants generally hold bachelor’s degrees in accounting, finance or a related field; however, because no formal certification is required, individuals often take on advisory roles after years of experience in another tax related profession. Ultimately, professionals with both formal education and tax experience are best positioned for these careers. Obtaining licensure as a CPA demonstrates the formal education and professional experience needed to support a future as a successful tax consultant. However, Internal Revenue Service employees may have years of experience, yet no formal education and be very well suited for advisory roles allowing them to obtain positions as tax consultants because of their relevant experience alone.
Postgraduate education can also be beneficial to the tax consultant career path, and many pursue a Master of Science in Taxation. An option for more advanced postgraduate study is through a Juris Doctor degree in taxation program. This advanced degree provides an in-depth knowledge of tax law and allows graduates to practice as tax attorneys.
There are several professional designations that compliment the tax consultancy profession well. Each of these is offered by different governing bodies and involves unique certification requirements.
Accredited Tax Consultant
The most relevant certification to the tax consultant profession is the Accredited Tax Consultant (ATA) credential. This designation demonstrates that a professional has advanced knowledge in complex tax planning subjects, including estate and retirement planning. To achieve the designation, a candidate should have at least five years of experience in a tax-related profession, with at least 40% of the work dedicated to tax planning and consulting. There are no minimum education requirements to be considered for an ATA credential. The candidate will be required to pass a thorough exam consisting of 100 multiple choice questions. The exam questions cover ethics, tax preparation, client consulting, bankruptcy, compliance, regulation and more.
The Internal Revenue Service (IRS) issues an Enrolled Agent (EA) license to representatives who prove themselves to be competent in tax matters. Upon passing a qualifying exam, they will be allowed to represent their clients before the IRS for tax issues including audit, collections and appeals. This is beneficial license for a tax consultant because only lawyers, certified public accountants and enrolled agents may represent taxpayers before the IRS.
A tax expert can become an EA by passing a thorough examination that covers all facets of the United States tax code. They can also become an EA if they have five years of experience as an IRS employee who has continuously interpreted and applied the tax code in their position. A background check will be performed on all EA candidates, which will include verifying references and reviewing financial information.
Although an EA license is granted by the U.S. Department of Treasury, the National Association of Enrolled Agents (NAEA) represents the EAs collectively as a group. The NAEA provides advocacy and public awareness services to the EA members.
Certified Public Accountant
Likely the most common designation held by tax consultants, but also the most respected, a Certified Public Accountant (CPA) must meet education, experience and testing requirements. CPAs are well known for their ethical responsibility and extensive knowledge of tax and accounting matters. Although some requirements differ between states, all CPA candidates will require certain minimums under the Uniform Accountancy Act:
Once obtained, a CPA must take continuing education courses annually to keep their license current. Tax consultants can benefit from obtaining licensure as a CPA because of the increased professional opportunities available and trusted reputation associated with the designation.
The national organization supporting CPAs is the American Institute of Certified Public Accountants (AICPA). The AICPA provides members with education, leadership, and professional resources to help manage their businesses and professional matters. In addition to the national organization, each state has its own organization designed to represent the CPAs licensed in that state.
The salary range for a tax consultant can vary greatly depending on location, experience, education and achieved designations. According to Robert Half Company, an entry-level accountant specializing in tax services in a small public accounting firm should expect to earn $45,125 as a starting salary in 2011. The same position in a mid-sized firm will pay around $47,875 and those in large firms can expect $54,375.
By obtaining relevant certifications and experience, annual salaries can be increased significantly. According to the AICPA, accountants who have obtained licensure as a CPA earn ten to fifteen percent more annually than accountants who have not achieved this designation.
A tax consultant can specialize in many areas, including estates, businesses, sales / use tax, and engineering, among others. Each specialized consultant will be proficient in different tax planning strategies for their particular clientele:
Estate Planning: Consultants who specialize in estates will help clients plan their estate in such a way as to minimize estate tax for the client’s heirs. This can be done using many different strategies, such as making annual tax-free gifts to multiple friends and family members to reduce the value of the estate or by creating a Credit Shelter trust to double the estate tax exclusions for married couples.
Business Tax Consultation: Tax consultants specializing in business entities will help clients strategize to minimize income taxes owed by the business and shareholders, as well as tax planning for closely held businesses. These consultants are experts in business structures and establish closely held businesses as a means to eliminate double taxation at the business and individual level once profits are transferred to the owners.
Sales and Use Consultation: Sales and use tax consultants are increasing in popularity as many business taxpayers have found that this is an often overlooked area of tax planning. Often businesses will discover that they are being taxed on products and services that should not be taxable. For example, many states do not charge sales or use tax on repair expenses associated with manufacturing equipment. However, without any notification otherwise, vendors unfamiliar with state specific tax policies may mistakenly charge tax to these large manufacturing companies. Sales and use tax consultants will ensure accuracy and compliance in filing sales and use tax returns.
Engineering Tax Consultation: There are many Federal and State programs designed to provide tax benefits to companies performing research to develop new products, patents, prototypes or processes. The process to claim these credits can often be time-consuming, but economically worthwhile. Engineering tax consultants are employed to ensure that all of possible credits are received.
Tax analysis is typically associated with the title Senior Tax Analyst, as this is a senior position most often found in large business organizations including investment funds brokerages, non-profit organizations, and educational institutions, although jobs are also available at accounting firms and with the IRS.
Tax analyst is generally not a first job for new college graduates, as many organizations are looking for someone with at least a year of accounting or related experience. Many organizations prefer applicants who are CPAs, especially for senior positions. Tax analyst jobs are usually highly specialized and designed to cater to the many different types of tax obligations a larger organization is likely to have. There are a number of titles held be tax analysts working in specialized roles:
Income Tax Analyst: An income tax analyst is simply a tax analyst who focuses on income taxes, including understanding income tax laws and how to comply with them. Responsibilities may include:
Depending on the size of the organization, a tax analyst may deal with all income taxes or the organization may hire analysts specifically for federal taxes or state taxes.
International Tax Analyst: For organizations with international operations, an international tax analyst focuses specifically on international tax compliance and reporting for foreign operations, including tax planning, research, foreign tax credit projections and audit activities. Job duties may include:
International tax analysts can earn the designation Certified International Tax Analyst (CITA) through the American Academy of Financial Management (AAFM). Applicants for CITA must meet two of these requirements:
Property Tax Analyst: Timely and accurate return filings, assessment review, appeals filings and payment of property taxes is the purview of a property tax analyst. Job responsibilities may include:
Payroll Tax Analyst: A payroll tax analyst needs to understand the laws and regulations concerning payroll administration and paying payroll taxes and have an overall knowledge of all payroll deductions, federal and state withholdings, and check processing.
Job responsibilities of a payroll tax analyst may include:
The American Payroll Association offers a Certified Payroll Professional (CPP) designation that would be well suited to these more advanced analyst positions. Transactional Tax Analyst: A transactional tax analyst combines the responsibilities of several of the other types of tax analysts. Transactional taxes include sales and use tax, business and occupation tax, gross receipt tax, and property tax. For businesses that operate internationally, transactional taxes include GST in Canada and value-added taxes (VAT) in many other countries. Responsibilities include:
Fund Tax Analyst: Another opportunity for tax analysts is with mutual funds, hedge funds, and investment partnerships. In addition to dealing with federal, state, and foreign tax laws and tax filings, these fund tax analysts or investment tax analysts also prepare year-end tax reports for investors.
IRS Tax Analyst: The IRS also hires tax analysts to fulfill job duties that include: