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:
- Conducting research on tax laws
- Strategizing with clients to minimize tax liability
- Communicating with clients to explain tax issues
- Preparing tax returns
- Estate planning
- Keeping clients compliant with their tax obligations
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.
Certifications and Associations
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.
Similar to a CPA, ATAs are required to meet annual education requirements to ensure the continuity of their certification. Although CPAs often need to obtain as many 120 credit hours during a three-year period, ATAs are only required to complete 90 hours of continuing education.
The Accreditation Council for Accountancy and Taxation (ACAT) is responsible for issuing the ATA designation. The ACAT provides a network for ATAs to communicate with one another, as well as educational opportunities.
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:
- 150 undergraduate / graduate credit hours of education
- A minimum amount of relevant work experience (usually one year)
- Passing scores on the rigorous four-part CPA exam
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 the U.S. Bureau of Labor Statistics, accountants serving as tax consultants and providing tax preparation and payroll services earned an average of $85,050, well above the overall average for accountants in general.
At the highest end of the salary range are likely those with years of experience helping clients keep more of what they earn, and a CPA or other credential to show for their time in the field. At that level, in the top ten percent, salaries come in higher than $128,680.
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.
May 2020 U.S. Bureau of Labor Statistics salary and labor market information for Accountants and Auditors is based on national data, not school-specific information. Conditions in your area may vary. Data accessed April 2021.
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:
- Maximizing tax deductions and/or credits
- Moving income from an entity in a high tax bracket to an entity in a lower tax bracket
- Deferring taxes to future years
- Taking advantage of current economy boosting tax laws
- Managing gains and losses on capital assets to offset each other
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 Analysts and Senior Tax Analysts
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:
- Assisting with federal and state income tax audits
- Calculating quarterly estimated tax payments
- Helping with tax planning for mergers and acquisitions, including due diligence reviews
- Maintaining the internal tax compliance software system
- Participating in the quarterly and year-end tax provision calculations and in overall business tax planning
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:
- Assisting with tax-planning and implementation strategies to reduce worldwide tax liabilities through the use of tax laws, regulations, rulings, and other legal precedents
- Helping maintain worldwide intercompany transfer pricing policies and procedures (the movement of products from one division of a company to another)- some large companies even hire tax analysts specifically to handle transfer pricing issues
- Researching and understanding U.S. international tax law, including foreign tax credits and foreign source income
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:
- A financial, investment, accounting, tax or economics related degree accredited by either the Accreditation Council for Business Schools and Programs (ACBSP), Association to Advance Collegiate Schools of Business (ACBSP), American Bar Association (ABA) or European Quality Improvement System (EQUIS), plus a minimum of three years of professional experience
- Either a government recognized degree or license, such as an MBA/Masters or Law Degree, PhD, CPA or other recognized designation, or a related degree from an AAFM-approved and accredited university program
- Completion of Online Executive Certification Training Programs with a designated law school
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:
- Preparing and filing property tax returns
- Analyzing property tax assessments and reconciliations
- Reviewing and processing property tax payments
- Dealing with property tax correspondence and notices from tax authorities
- Maintaining internal quality control policies and procedures concerning property taxes
- Researching issues around property tax compliance
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:
- Maintaining accounting databases that track payroll tax activity
- Making payroll tax deposits
- Filing payroll tax returns (both federal and state)
- Processing and filing W-2 forms (end of year forms reporting each employee’s income)
- Processing information on new employees, terminations, direct deposits, and W-4 forms (forms that employees fill out specifying number of withholding allowances)
- Maintaining policies and procedures to support the payroll tax filing process
- Researching and resolving payroll tax, compliance, and accounting issues
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:
- Preparing transaction tax returns for monthly, quarterly, and annual filings
- Interpreting and complying with state, local, and international statutes, regulations, and legislation
- Researching transaction tax issues and providing guidance on these issues
- Dealing with transaction tax audits.
- Assisting with the reconciliation of transaction tax general ledger accounts
- Configuring and maintaining transaction tax calculation software
- Developing, implementing, and improving processes for the calculation and collection of transaction taxes
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:
- Developing or interpreting guidance on program planning, execution, and evaluation in regards to taxpayer compliance, taxpayer account management or taxpayer education and communication
- Providing technical advice and staff assistance to executives, field managers, and employees in the assigned program area
- Interpreting, developing and coordinating analytical reviews of new policies, procedures and program requirements.