8 Questions to Ask When Interviewing a CPA

By
Diane Zing, CSA
May 18, 2018
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Some people believe that one of the most frustrating words in the financial world is the word “taxes”. But it doesn’t have to be…and it actually shouldn’t be. Understanding the world of taxation takes enormous amounts of education, understanding and application. The average person doesn’t necessarily want to become an expert on taxes, but they certainly don’t want to pay more than they have to, either. Hence the reason many people and businesses reach out for help. Finding a tax professional can be complicated; hoping to find the right kind of tax professional for the services needed tends to be the number one challenge.

When starting a search to find the right tax professional, there are basically two major things to consider. Firstly, it’s important to understand the differences between the types of tax professionals. Secondly, it’s important to ask the right kind of questions to help discern if a working relationship with a particular tax professional is a good fit.

Start with having a basic understanding of a few different types of tax professionals.

TYPES OF TAX PROFESSIONALS:

Tax Preparer – A tax preparer can help individuals, families, and businesses prepare tax returns. They cannot represent clients during an audit. Their role is limited to tax preparation. A large percentage of the general population might find that a Tax Preparer is a match for their filing needs.

EA – An Enrolled Agent (EA) has passed an IRS examination that puts them in a position to not only help clients prepare tax returns, but they can also represent their clients in the event of an audit. Generally speaking, EA’s may tend to have more thorough knowledge and understanding in regards to tax preparation than that of a Tax Preparer. Individuals, families, and business owners might find that an EA is helpful due to the complexities that their tax preparation needs may entail.

Tax Attorneys – Tax Attorneys can not only prepare tax filings, but they can also represent their clients during an audit, as well as represent clients in court proceedings. Tax attorneys play a significant role in helping their clients through complications with tax liabilities, responsibilities, and other issues that may arise.

CPA – Certified Public Accountants are tax professionals who have a degree in accounting or a related field. They have passed the state CPA exam, and are able to perform a myriad of services for their clients. They can prepare tax filings, represent clients during audits, prepare and certify audit statements. They cannot, however, represent their clients in court.

There are additional types of tax professionals, but the above mentioned tend to be the most widely sought after by individuals, families, business owners, non-profit entities, and others.

Secondly, it’s important to ask questions that are relevant for finding a professional that might be best suited for the specific needs at hand. Here are a few questions to consider when interviewing a tax professional:

QUESTIONS TO ASK:

  1. What is your designation, or professional title?
  2. What industries or types of clients do you have?
  3. How many years of experience do you have?
  4. How many people do you have in your organization, and what are their roles?
  5. Do you help clients with tax planning strategies, as well as tax preparation?
  6. Do you work in collaboration with financial planners and other professionals?
  7. What kind of ongoing service model do you have?
  8. What is your fee structure?

When discerning which tax professional to work with, having a basic knowledge of the types of tax professionals might go a long way with helping to build a productive relationship, and subsequently, possibly more favorable tax solutions. Taxes are a major part of life, and having a strategy around how finances are built, managed, and maintained could possibly help significantly. It’s important to be responsible with taxes, and having a professional that can help discern taxation with efficiencies could have significant importance to overall financial planning.

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By
David McDonough
February 22, 2021

Preparation for retirement is extremely important, and it extends well beyond finances. In addition to knowing how you’re going to fund it, you also need to know what your time will look like when you say you’re done with being a wage earner. With this new lifestyle, you not only need to determine how to fill up the hours in the day, but you also need to determine what your new purpose is. This can be a pretty significant task, which becomes even more complicated when you add another person to the equation. That’s why you need to work on your retirement compatibility with your partner way before you stop working.

Retirement Compatibility is a tricky thing. Statistics show that half of the couples disagree on their retirement age —and a third don’t see eye-to-eye about their expected lifestyle in retirement[i]. This is troubling as there are a lot of logistics you need to determine in this new chapter of your life. Will you be retiring at the same time? Typically, only 1 in 10 couples retire together[ii]. If you and your partner are planning on retiring at different times, you may want to look into how this change affects your health insurance. You may also want to consider re-establishing household roles. Equally important, you will need to find common ground on your retirement budget as it will require commitment from both parties.

Oftentimes, the difficulties in transitioning from a wage-earner to a retiree can go beyond the logistics. Some experience a period of depression as they look for a new purpose in life. As tempting as it may be, that new purpose shouldn’t be your partner. If you don’t plan correctly, you will suffer from what I call too much togetherness. This can be a very real strain on relationships. Instead, look at your life as being divided into “You Time, Me Time, and We Time.” To aid in this transition, you may want to try winding down your career gradually in order to practice retirement. This can prove to be a benefit to both yourself as you experiment with this new stage in your life and your employer as you stay on to train and mentor your replacement.

Start working on your retirement compatibility with your partner with regular financial date nights. Start discussing how you envision that new chapter in your life. What type of lifestyle do you want to live? Will there be a lot of dinners out with friends or home-cooked meals watching your favorite television show? Will you be traveling or developing a new passion? Will you work part-time or volunteer? Communication is key. Share your plans with your partner so that the two of you stay on the same page and prevent incorrect assumptions from being made.

Retirement, a lifestyle of six Saturdays and one Sunday, can be either a wonderful time or a stressful transition, depending on your planning. Make sure you and your partner’s planning extends beyond finances to ensure a smooth and joyous new chapter in your lives.

[i] https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/couples-retirement-fact-sheet.pdf

[ii] https://assets.aarp.org/rgcenter/general/retired_spouses.pdf

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine what is appropriate for you, consult a qualified professional.

By
David McDonough
October 30, 2019

FIRE, an acronym for “Financial Independence, Retire Early” is trending as a new financial lifestyle.  In a nutshell, FIRE promotes extreme savings in your 20s, 30s, and 40s, with the goal of being able to live off passive income from the accumulated nest egg much earlier than typical retirement age.  Some proponents suggest saving 70% of your income until you have collected 25x your annual salary, cutting your working years in half.  Extreme saving is not a new idea, but the phrase has taken off in the last couple of years, creating a cult following online.

Putting aside additional savings to fund a “work optional” lifestyle is a fantastic idea in theory, but most Americans would find it quite difficult to only live on 30% of their income without making DRASTIC changes.  If you are willing to downsize, live with roommates in a cheaper part of town, eat beans and rice, drive an old car/take the bus, and limit purchases, you could be successful at FIRE.  However, this level of deprivation may cause unintended sacrifices that impact your social life and happiness.

Our take on FIRE is to find your happy medium.  For example, you absolutely should increase your savings rate incrementally every year if you can afford to do so, but initially choose an amount that’s attainable.  To help you get started, these are the questions we encourage clients to consider:

1) What is your current cash flow?

Do you have a firm grasp on how much you spend on monthly groceries?  Going out to eat? Gifts at the holidays for friends and family?  The key here is to consider all expenses, not just big-ticket fixed items like your car payment or mortgage.  Once you have an idea of how much you are spending compared to household income, you can then evaluate your current savings rate.

2) Where can you cut back to increase your savings rate?

Can you meal prep on Sundays to avoid going out for lunch during the week?  Can you stay in to watch a movie instead of going to a theater for date night?  Are you willing to have a “no-spend” week?  Some people use tracking software (our firm provides EMoney to our clients) to help set up electronic budgets to alert you when you are close to going over set categories of spending. Alternatively, can you bring in additional income via a side hustle?  Can you work additional hours at work to qualify for overtime pay?  Make an honest assessment to determine where you could potentially improve your cash flow on a monthly basis.

3) Are you debt-free, or leveraging debt appropriately?

A mortgage with a low-interest rate is an appropriate means of financing a lifestyle you want, while potentially building equity via real estate.  If you still have student loans or credit card debt, though, your increased cash flow should go towards paying this off ASAP. Just make sure you have 3-6 months of living expenses built up in an easily accessible emergency savings account as well.

4) Outside of your emergency savings, are your accounts keeping pace with inflation?

Historically, inflation rates average around 3% annually.  This means that your purchasing power decreases, as the cost of goods increases over time. Remember when you could buy a Coke bottle out of a vending machine for a dollar? Your parents or grandparents may even recall purchasing a soda for a quarter!  That’s inflation at work. If you’re planning to retire early, this means you need to account for inflation over several decades. The best way to maintain your purchasing power is by investing excess savings in the stock and bond markets and taking advantage of compounding interest over time. A Financial Advisor can determine the best investment strategy for you.

5) Are your investments in a diversified portfolio in line with your risk tolerance?

Trying to time the market to buy and sell holdings is incredibly difficult to do.  Diversification via broader index funds and investing consistently (to take advantage of pullbacks) has proven to be a more successful investment plan for most Americans.  The concern with the FIRE movement is knowing how risky you can or should be with your asset allocation depending on your time horizon to retirement.  For example, if you are closer to reaching your retirement goal, you don’t want 100% of your assets invested in the stock market.   A comprehensive financial planner can help determine how much risk you should be taking on by looking at your finances holistically, and ensuring portfolios are rebalanced regularly according to your needs.

The road to early retirement is still a long one, so you’ll need to regularly evaluate your progress, reassess as needed, and don’t forget to acknowledge small victories!

Our advice is to push yourself to save more, without going to the extremes of the FIRE lifestyle.  If you would like additional accountability, Trilogy offers progress checks through our Decision Coach process more frequently than annual reviews.  And if you need a road map to help find your path to success, reach out with any questions here.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine what is appropriate for you, consult a qualified professional.

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