Find the right tax advisor

True Story (names changed):  Marshall, a self-employed plumber, was getting married, and he had a deep, dark secret he didn’t want his bride to know. In fact he was so worried about this, he found himself waking up frequently in the middle of the night, in a complete sweat. Now his wedding date was fast approaching, and he had to confess to somebody.Marshall hadn’t filed a tax return-ever.You cannot imagine the relief on poor Marshall’s face when he found out that the statute of limitations required he file for the current year and two years back only. He had done the right thing the last time he woke up in a sweat. He called a local tax accountant with a very good reputation and an understanding demeanour. He explained that he just didn’t want to go into his new marriage with this terrible burden hanging over him.A week later, when his returns were filed, he just couldn’t believe that CCRA (The Canada Customs and Revenue Agency) actually owed him money! In fact, due to the application of tax credits both federally and provincially, Marshall was actually going to receive enough to finance a short honeymoon.Now that he understood how the tax stem could work in his favour, Marshall wanted to know more about what he had missed. Perhaps he could have claimed more, if he had known more about the rules. Had he only turned his tax files over to an advisor sooner!Moral of the storyTax filing is just one of those things. Everyone has to deal with it. Most people have difficulty doing so enthusiastically. While many pay an advisor to help them, they often pay their fees grudgingly. They perceive the entire experience like a double negative. The only thing worse than paying taxes is paying someone to figure out how much you have to pay.However, it is vitally important to choose your tax advisor with care, as this can be the most profitable long-term relationship you have with a professional during your lifetime. Start your relationship with your advisor by reviewing prior-filed returns, all the way back to 1985, to make sure you haven’t forgotten to claim an expenditure that’s tax deductible.Communicate with advisor

  • Communicate your financial planning goals, as well as your business objectives to your advisor.
  • Make sure the advisor has a keen understanding of where you want to be in one, two, five years and ten years.
  • Ask your advisor to help you keep current on tax changes specific to your personal affairs and/or your small business affairs for both current and prior years

This knowledge can be helpful in a tax audit in the future, and in planning for business expenditures throughout the year.Finding the right advisorTo find the right tax advisor you have to decide what it is you want from the service you seek. There are numerous levels of tax-preparation, tax-accounting and tax-planning services to choose from in the marketplace. Ask yourself which of these will best suit your needs today and into the future.It goes without saying that every taxpayer who pays for a professional service expects a tax return that is 100 per cent correct. However, there is a big difference between a return that is mathematically correct, and one that is done to your family’s best advantage over the long term.A Good ruleFind an advisor who will be as precious to your financial health as your doctor is to your physical health. Your tax advisor should be someone who knows you and your goals for your family and your business very well.S/he should be someone you trust implicitly, and who has earned your trust and respect by keeping up with the latest in tax law, and CCRA’s interpretation of the law, as well as your own personal, business and financial evolution.In short, your professional tax advisor can be one of the most important people in your lifetime. For this reason, you should take some time to define this relationship carefully.Action planTo find such a trusted advisor, consider this action plan:

  • Seek Referrals: Ask your friends and business associates for referrals. Check out the yellow pages and Chamber of Commerce or Board of Trade in your area for the names of well-respected tax advisors.
  • Expertise and Services Needed: Find out what level of expertise you need. It could be commercial tax preparation, accounting and auditing, corporate as well as personal returns, trust returns and estate planning.
  • Reputation and Experience: Interview at least three professionals in your area. This can include independents, partners in a partnership, financial institutions, and so on. It’s best to include one from every group to get the best overview of potential service, quality and price.
  • Ask Questions: Come to the interview prepared to ask your top three taxation concerns

Ask these questionsConsider asking the following questions when you interview prospective tax professionals:

  • What are the latest tax changes that will apply to my personal affairs/business operations this year?
  • What is the tax rate I will pay on each source of income I earn in the coming year?
  • What tax provisions should I be carrying forward from previous filing years?
  • What are the latest tax changes for our family unit to take advantage of?
  • How can our family members split income and transfer deductions and credits this year?
  • What are the retirement savings strategies we should be working towards?
  • How can we plan new investments outside our registered accounts to increase tax-deferred income sources?
  • How can we reduce tax withholding/tax installment payments this year?
  • How should asset acquisitions and dispositions be timed to make the most tax sense?
  • What audit-proofing procedures should we be putting in place this year

Listen wellWhen you ask your questions, take note of the way the answers are communicated to you. Can you learn from this person? Is the person willing to help you learn? Is the person interested in you and your business? Does s/he make suggestions to you? Does s/he have a strong background in taxation?Final steps

  • Find out about service: Ask about fees, guarantee of service, billing practices, errors or omissions insurance, size of organizations, additional services provided. What happens when errors occur?
  • Integrated services: Ask about the professional’s ability to interact with others: lawyers, financial planners, insurance advisors and so on, should you need these services.
  • Make the decision: Choose the advisor you are most comfortable with
  • Give a trial: Ask the advisor to complete a small job, to see if there is integrity behind the quality of the work, the ability to meet deadlines and to work with you on follow-up procedures.
  • Review the accuracy of the work: Listen and learn as the advisor explains the results of the work to you.

Evelyn Jacks is contributing editor of CARPNews FiftyPlus and President of The Jacks Institute, Canada’s leading trainer of tax professionals, or 1-800-30-JACKS.