Handling your taxes is an arduous task for anyone, but it can be even more so if you have a complex financial portfolio – and expect to owe a big tax bill at the end of the year.

While you can’t avoid taxes entirely, there are tips and strategies to minimize what you owe and keep as much of your hard-earned money as possible. Tax professionals, such as CPAs and tax strategists, play an essential role in this area of your finances.

But what’s the difference, and which one is best for you? Let’s dive into the complexities of a tax strategist vs CPA in this comprehensive guide. 

Tax Strategist vs CPA: What’s the Difference?

While both a tax strategist and a CPA can assist you with the financial headache surrounding your tax payments, they serve two very different purposes. Before you start researching how to find a tax strategist or a CPA, you need to know if you need one or both of these folks on your team. 

Here is a quick breakdown of what to expect from each one.

What is a CPA?

In most cases, a Certified Public Accountant (CPA) handles general tax filings including annual federal and state income tax filings, and estimated tax payments. Many people visit these professionals at the beginning of each year to handle their tax preparation which is due on or about April 15th of each year. CPA’s services may extend beyond this basic offering. They can assist in IRS audits and sometimes (but rarely) offer tax projections for future tax years.

What is a Tax Strategist?

A tax strategist is a more specialized professional who assists in the strategy around your money as it relates to your tax situation. This can be things like pre-tax vs Roth 401(k) contributions, optimizing Roth conversions in an opportune tax year, completing multi year tax projections to spot future opportunities, and even implementing specific investment, real estate, or gifting strategies to benefit your tax situation today and many years in the future. Tax strategists tend to hold CPA, EA (enrolled agent) or other financial certifications like a CERTIFIED FINANCIAL PLANNER™ designation. Generally speaking, they focus more on the tax planning strategies for high-income earners that can minimize your spending to the IRS. The goal is simple: Keep up with the laws and regulations while eliminating as much of your tax burden as possible. 

One important difference that should be noted is their field of vision. CPAs tend to be concerned with the fallout of things that have already happened in your financial portfolio, making them reactive. A tax strategist has a mind for the future, enabling them to be proactive in avoiding the need to spend that money in the first place. Long-term optimization vs rear view reactions.

Who Can Save You More on Taxes?

With the basics of how the two roles differ, it’s time to ask the real question: Who can save you more money?

The truth is that CPAs can benefit just about anyone because they help with the logistics of filing. This is one annual chore that many people dread doing, so it may make sense to send it out to a tax professional instead. It’s a good idea to have a CPA on call for any financial planning or auditing required.

Meanwhile, not everyone will benefit from a tax strategist. Sometimes, portfolios and financial situations are too simple to create the opportunities needed to reduce tax liability. Tax strategists become more and more valuable with the increased complexity and increased size of your financial situation. This complexity grants them additional avenues to help you save on taxes. 

Generally speaking, tax strategists are good for high-income, high-net-worth individuals. This often includes tech professionals with RSUs and other non-salary benefits, since you may want to reduce taxes on RSU income. It may also be beneficial if you have private investments such as real estate, since the tax nature of these investments often helps more in the future than at the time of investment. Tax strategists can also help point out other deductions that may be missed on your tax return (like rental property depreciation and basis adjustments) and coordinate with your CPA to help get filings done correctly. 

Tax strategists are also valuable assets for small business owners. If you have a side hustle or dream of starting a business in the future, this opens the door to plenty of opportunities for tax advantages that a strategist can help you capitalize on. For example, qualified small business stock (QSBS) can provide up to $10 million or 10 times the adjusted basis of QSB stock (whichever is larger) sold during the year of tax-free gains if you’re the founding member of a start-up who has a successful exit.

Win the Tax Game with Consilio Wealth Advisors 

Tax strategy is just one part of the overall game – and what should be one component of a larger, more comprehensive wealth management plan. When it comes to financial planning, you also need to factor in your cash flow, risk management, a game plan for retirement, and portfolio management to make the most of your investments. 

If you’re at a point where a tax strategist makes sense for you, Consilio can help you grow your personal wealth, reach your goals, and achieve financial freedom. We specialize in working with tech professionals from companies like Microsoft, Meta, Amazon, and Google – and we can help you extract every dollar you deserve from your compensation.

Schedule a call with us today to learn more about how we can help you reach your financial goals!

DISCLOSURES:

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

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No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. All investments include a risk of loss that clients should be prepared to bear. The principal risks of CWA strategies are disclosed in the publicly available Form ADV Part 2A.

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Past performance shown is not indicative of future results, which could differ substantially.

Consilio Wealth Advisors, LLC (“CWA”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where CWA and its representatives are properly licensed or exempt from licensure.