A Certified Public Accountant (CPA) and a Certified Financial Planner™ (CFP®) are both tax planning professionals. However, the role each plays in shaping your financial future needs is commonly misunderstood.
In this article, you’ll learn how CPAs and financial advisors make a powerful team. You’ll be exposed to where each of their expertise lies, how they help one another, and how you can start leveraging their combined power yourself.
Financial Planning vs Accounting: How Each Approaches Taxes
Financial advisors and CPAs both play critical roles when it comes to managing personal and business finances. However, their approaches are not the same. Advisors use financial planning to get the “big picture” on taxes. CPAs, on the other hand, use their accounting skills for more “day-to-day” considerations.
Financial advisors often form lifelong relationships with their clients. As a result, they are thinking about your tax liability along a much longer time horizon. They look to maximize your lifetime investment returns while minimizing your lifetime tax bill to be paid to the IRS. They’re also thinking down the road on your estate planning and how to transfer more of your money to your beneficiaries rather than to the government. An advisor will be your taxation thinking partner when it comes time to transfer wealth to your loved ones or give to causes you believe in.
CPAs are typically hired on an annual, or per-project basis. They’re the ones who prepare your taxes and keep you compliant. They’ll make sure your taxes are filed correctly and on time, and they’ll help you take advantage of all available tax deductions and credits. Accountants can also use their deep understanding of the tax code to provide you with tax-efficient insights (ex: tax deductions specifically available to your business).
Please Note: We love working with CPAs! If you’re concerned a financial advisor is looking to replace your CPA, don’t be. We regularly work with clients and their CPAs to help them save on taxes on a short- and long-term basis.
Why Use a Financial Advisor for Taxes?
Comprehensive Investment Planning: Financial advisors help you develop tax-efficient investment strategies. They’re able to learn about you, and your unique financial situation to make individually tailored recommendations. They can advise on tax-advantaged accounts like IRAs or 401(K)s, or tax-saving strategies like tax-loss harvesting to offset your gains or the amount of taxes you owe.
Retirement Planning: On top of helping you keep retirement momentum with tax-advantaged accounts like a 401(K), financial advisors also help protect your retirement. They’re able to estimate your future tax liability in retirement, and devise strategies to help you minimize it. For example, they can advise you on tax-efficient withdrawal strategies as well as income-producing investments with lower tax rates.
Estate Planning: Financial advisors will also help keep taxes from eating away at your legacy. They can help minimize the tax liability of your estate by walking you through the gifting strategies, charitable donations, and tax-sheltered trusts that make the most sense. They’ll also help make sure you’re aware of the different tax implications associated with your assets (e.g., stocks, property, and retirement accounts).
Why Use a CPA for Taxes?
Tax Preparation and Filing: CPAs remove the headaches of compliance and tax preparation. You won’t have to worry about whether or not your taxes were done properly, or if they were sent out at the right time. Additionally, your CPA has your back in helping make sure all your applicable deductions and credits are used up.
IRS Representation: A CPA can represent you in front of the IRS should you be audited or have a tax dispute. They’re able to communicate with the IRS on your behalf and provide the necessary documents to properly support your tax position. CPAs can also help you reach a settlement or structure a repayment plan with the IRS.
Tailored Business Insights: With their deep understanding of the tax code, CPAs can provide you with insights to help your business save on taxes. This includes but is not limited to tax-efficient organizational structuring, research and development deductions and credits, and industry-specific tax credits and deductions. You can leverage these advantages further when you come prepared with the right questions to ask your CPA.
What Makes a CFP® and CPA Combination So Powerful?
By using a Certified Financial Planner™ (CFP®) and Certified Public Accountant (CPA) you’ll have all your tax bases covered. You get the big picture and day-to-day perspective on how to minimize your tax liability.
Both professionals can collaborate to make sure all aspects of your financial plan are aligned. They can also review one another’s recommendations and ensure they’re consistent with the objectives of your short- and long-term financial goals.
This duo can keep you covered regardless of the financial decisions you’re looking to make. That includes, but is not limited to filing your taxes, saving for retirement, planning your legacy, or selling your business.
Please Note: A Certified Financial Planner™ (CFP®) isn’t your average financial advisor. They’re fiduciary professionals held to the industry’s highest ethical standards. Unfortunately, unless you see the CFP® credential by your advisor’s name, you can not be sure they are legally bound to uphold your best interest.
How to Get Started With Snowpine Wealth
At Snowpine Wealth, we know planning ahead for taxes is paramount to your success. They’re often one of the largest expenses you have in retirement. That’s why we love taking them on with other tax professionals. As a CFP®, Ryan Smith has worked closely with CPAs to ensure client success for over 12 years.
By combining the power of a CFP® and a CPA, you’re able to take your tax planning to the next level. We’ll be able to work with your existing CPA, or put you in touch with one suited to your needs. Our professional network includes several well-vetted accountants equipped to handle a variety of individual or business tax preparation and filing needs.
If you’re ready to start building a powerful tax team that includes a CFP® and CPA, please don’t hesitate to reach out. You can call us directly at our office by dialing 801-534-4463, or you can schedule a free appointment online.
Snowpine Wealth Strategies does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Advisor. Fixed insurance products and services not offered through Commonwealth Financial Network®.