When you want to make sure that you’re reducing your tax liability as much as possible, working with an experienced tax advisor is often the best option. Whether you’re worried about being audited by the IRS, want to ensure your business is taking full advantage of tax credits and deductions, or have a more complex question about tax laws and regulations, it’s important to work with someone who can offer guidance that will help you stay legally compliant and minimize how much money you pay in taxes.
However, the line between what counts as Steuerberatung and what doesn’t is often blurry and unclear. For example, if you aren’t a designated tax professional, it’s illegal to provide guidance on any strategies that could be considered practicing before the IRS (such as tax avoidance). On the other hand, merely discussing a general strategy might be too close to tax advice for some to feel comfortable with. This is why it’s helpful to think about the scope of tax planning as a spectrum.
On the far end of the spectrum, there is general tax information. This is typically what you would expect to find on a basic government website or in a textbook. This information can be helpful, but it is not specific enough to offer actionable advice.
At the other end of the spectrum, there is a discussion of or analysis of specific tax strategies. This can be done without the advisor crossing the line into tax advice if they are careful to provide clear context and clearly state that they aren’t providing a recommendation at this point.
This can be a valuable service to clients, especially as they move into the consideration phase of their tax strategy. The advisor can explain the risks and benefits of a particular strategy and what they may need to do to implement it.
For many people, life changes can be complicated from a tax standpoint. For example, major events like marriage, divorce, or having children can have a significant impact on savings and income. Tax advisors can help their clients navigate these changes to ensure they are getting the most out of retirement accounts, maximizing tax credits and deductions, and avoiding any surprises come tax time.
A good tax advisor can also be beneficial for helping you keep up to date with the ever-changing rules and regulations around personal and corporate taxes. Changes in laws are often imposed by the federal or local governments in an attempt to stimulate economic growth or address budget deficits, and they can affect everything from income tax rates to real estate property taxes.
It’s worth noting that a tax advisor can only offer help with specific aspects of your financial life. For example, they can help you figure out your deductions, file your taxes, and make sure that you have the documentation needed to support tax credits and deductions. They can’t, however, help you make investment decisions or perform executive level management for your business.