How Much Does a Tax Advisor Cost and Are They Worth it?

This is where a tax advisor can come to your rescue. A tax advisor can help you navigate the complex world of business taxes, ensuring that you stay compliant and take advantage of all the deductions and credits you’re entitled to.

What is a tax advisor and what do they do?

Bookkeepers and accountants are responsible for keeping track of a business’s financial records including expenses, income, and assets.

A tax advisor, on the other hand, works with you to reduce your taxable income and maximize your tax deductions. Also referred to as tax consultants, their ability to understand and interpret the confusing and lengthy U.S. tax code ensures you’re not overpaying Uncle Sam.

A professional tax advisor can do the following for your small business:

• Review your business structure and advise if and when you should restructure it.
• Keep you abreast of any changes in tax rules and regulations that may affect your small business.
• Assist you with itemized deductions.
• Prepare and file your business tax returns, both your federal and state returns.
• Review your business’s financial statements to determine your profits and losses for the year, as well as assets and liabilities.
• Represent you in an IRS audit.
• Provide guidance on payroll tax issues.
• Recommend strategies to reduce your tax liability, such as taking additional tax deductions and tax credits.
• Work with you year-round, not just during tax season.

How a tax advisors differ from other tax professionals

You may find that the label “tax advisor,” is used to describe other tax professionals, including Certified Public Accountants (CPAs), tax accountants, and tax attorneys.

Another type of tax pro that often acts as an advisor is the Enrolled Agent. Enrolled Agents are the ultimate tax experts who have passed rigorous IRS exams and background checks. They are “enrolled” because they’ve been granted special licensing to practice by the federal government.

Related resource: What’s an Enrolled Agent, and Why Should I Hire One?

One of the biggest differences between a tax advisor and a CPA is the educational level. A CPA holds a college degree and must pass the Uniform CPA Examination to be licensed. This prepares them to work with more complex financial matters as well as financial planning, forecasting, and analysis. Since they have several other higher-level responsibilities, CPAs won’t typically specialize in tax preparation and filing.

In addition, because of their extensive knowledge and experience, CPAs, tax attorneys, and Enrolled Agents charge higher fees than bookkeepers. These advisors are generally recruited by businesses who need assistance with more complex tax situations and reporting requirements.

There are also advisors who can assist you with your taxes and provide guidance for common business matters, who don’t carry specific qualifications or degrees. Their only responsibility is to keep abreast of the latest IRS laws.

Tax preparer vs. tax advisor

It can be very easy to confuse a tax advisor with a tax preparer. While a tax advisor can also prepare your taxes, they provide more services for their clients than a preparer.

A tax preparer, such as H&R Block, will prepare, calculate, and file your income tax return on your behalf. They will also help you find deductions and credits you’re eligible for and help you stay organized throughout the tax-filing process. Tax preparers are usually only available during tax season, between January and April.

A tax advisor takes the time to familiarize themselves with your finances and offer valuable advice that’s tailored specifically for your business. They not only go over your present tax forms with you, but they educate you on methods to reduce your future taxes. A tax advisor can assist with tax planning for your business throughout the year.

How much does a tax advisor cost?

A tax advisor’s knowledge and expertise do come at a cost. However, their fees can vary depending on your location, the complexity of your tax situation, and the type of advisor you hire.

Enrolled Agents charge an hourly rate between $100 to $400. One-time fixed fees can range anywhere from $25 to $1,200, depending on what services you need. A customized yearly plan carries an average cost ranging from $1,300 to $2,000 for several services.

A tax advisor may also use a sliding scale fee system, meaning, the more financial services you need, the more you’ll have to pay. Some may charge by the hour, completed tax return, or even by a percentage of your business’s assets.

Related resource: Pros and Cons of Hiring a Tax Professional

You may be curious about other options available to assist you with your taxes. For example, using do-it-yourself (DIY) tax preparation software, such as Turbotax Business, costs only around $90. However, your tax software can’t give you personalized guidance that may result in a higher tax refund or lower tax liability, like a professional tax advisor can.

Here at Bench, we also offer tax preparation services that include unlimited tax advisory support and filing services. You can call or email our team of experts as often as needed for one flat monthly fee.

How to find a tax advisor you can trust

With the uptick in the number of fly-by-night tax advisors and preparers in recent years, it’s essential that you practice due diligence to find someone who is reputable and trustworthy. After all, you’re entrusting them with your business’s sensitive financial data as well as your personal information.

Here are a few ways to begin your search for a tax advisor:

• If you already work with a bookkeeper for your other financial needs, they may either already have the experience to serve as a tax advisor, or be able to recommend someone who can.
• Ask for referrals from other small business owners in your network. Check with friends or colleagues, especially those who have previously worked with a tax professional.
• Search professional websites such as the National Society of Accountants and the National Association of Tax Professionals. Accountants on these sites may also offer tax advisory services for a lower fee.
• The IRS has a directory of Federal Tax Return Preparers. These personnel all hold professional credentials and have Preparer Tax Identification Numbers (PTINs). These are numbers issued by the IRS, required this for anyone who prepares federal tax returns for compensation.
• Make sure to check with the Better Business Bureau for any negative feedback on names that you are considering.

Selecting a tax advisor

Once you have a list of potential tax advisors, request an introductory meeting to ask questions and get a sense of their qualifications and experience. It’s a good idea to interview at least three advisors before deciding on a suitable candidate.

1. Review the advisor’s fee structure and make sure it’s reasonable considering the services you are requesting of them. Verify whether they charge additional fees for other services, such as tax preparation.
2. Ask the advisor for their professional credentials as well as references from other small businesses they’ve previously worked with. They should be able to provide you with examples of how they’ve helped other clients save money on their taxes.
3. Verify that the advisor is up-to-date with the current tax laws and changes.
4. Check that the advisor has a Preparer Tax Identification Number, or PTIN. The IRS also requires this number on your income tax returns. Selecting an advisor without a PTIN is risky since they may be dishonest or inexperienced with filing returns.
5. The IRS requires paid preparers who do more than 10 returns for clients to file electronically. If the tax advisor does not offer e-file, it may indicate they don’t have as much experience in tax preparation.
6. Ensure that the tax advisor will still be available for your calls, emails, or visits even after tax season is over.

Find your tax advisor with Bench

Running a business is challenging enough without the added stress of keeping up with changing tax laws. If managing your own taxes feels overwhelming, or if you want to make sure you're getting all the deductions and credits you're eligible for, it may be time to hire a tax advisor. A qualified tax advisor can simplify the process and ensure you stay compliant with both state and federal tax regulations.

Tax season doesn't have to be stressful. With Bench Accounting’s unlimited tax advisory and filing services, your taxes will be handled by professionals. We’ll help you take advantage of every deduction and credit, and we’ll file your return for you. Plus, our unlimited services mean you can reach out any time during the year for advice or help.

When looking for a tax advisor, whether a CPA or an Enrolled Agent, it's important to find someone with experience that suits your business and whose fees fit your budget. Get recommendations from other small business owners or check tax professional organizations for trustworthy advisors.

A good tax advisor can save your business money, help you avoid mistakes, and make sure your taxes are filed correctly and on time—so you can focus on running your business.