Tax Planning Strategy: Who can provide and execute a tax plan for me?

HomeTax Strategy

Executive summary

"Dear Ami" is Steward’s money advice column. Submit questions here.

Dear Ami,
Who can provide and execute a tax optimization plan for me? I’d love to outsource both the planning and execution/administrative work, if possible.
- Tax Optimizer

In this week's advice column, we give "Tax Optimizer" guidance on how to offload both their tax planning and admin.

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Table of contents

Written by
Ami Shah

Ami Shah is the CEO of Steward, a personal finance tool helping mid-career professionals to make the most of their money by investing smarter and saving on taxes, with minimal time and effort.

She's a Certified Financial Planner®, Harvard Business School and Harvard College grad. She served as a wealth and asset management consultant at McKinsey & Company and as a white-glove wealth advisor to ultra high net worth families. Ami started Steward to bring the clear, structured, and evidence-based set of rules white-glove wealth advisors use with ultra high net worth clients, to more people beyond the 1%.

More about
Ami Shah

Dear Outsourcing Optimizer,

The good news

You're onto something. People have nearly religious debates over ~1-2% differences on investment earnings...but taxes can translate to massive ~20-40% differences on their earnings from both your income and investments. That's why white-glove advisors are so focused on helping their ultra high net worth clients optimize their taxes. In fact, many describe tax optimization as their greatest value, above and beyond investment strategy.

This makes sense not only from a "cold hard numbers" lens, but also a life happiness lens. When I first got married, one of the best pieces of advice I got was "outsource drudgery" and that same advice applies here. If you love the nitty-gritty of tax law, go forth and DIY. But if you find "dealing with taxes worse than drinking gasoline", in the words of one Steward user, this could be a prime space to outsource. You're already channeling your inner Richard Branson by exploring where and how you can delegate.


Okay, so here's

The bad news

Unfortunately the planning and the execution/admin work you're looking to outsource, aren't often under the same roof, so you'll have to do a bit of "quarterbacking" between:
(a) financial planning software or wealth advisors to take on the planning work (finance-speak: proactive tax optimization strategies) 
and
(b) Turbotax / CPAs/ Accountants to take on the execution and administrative work (finance-speak: filing your taxes)

Accountants / CPAs are one of the top 3 specialists that we recommend at Steward to families in addition to getting financial plan support (see details below)

Why isn't there "all-under-one-roof" provider?

1) Filing takes so much time

In practical terms a lot of CPAs and accountants get so bogged down by the filing itself, they don't have time to poke their head up to develop the more proactive and creative tax ideas that clients are looking for. No shade thrown here - the tax law in the US is ridiculously complicated, and so the filing alone is a full-time job. But it does result in a common criticism from folks working with services from tax software like TurboTax to big accounting firms - "they aren't coming to me with proactive strategies, even if I badger them about it constantly!"

2) How CPAs get paid

CPAs and accountants often don't have a view of the clients' full financial pictures (assets, goals, etc.) and charge by the hour - so there's an unfortunate dis-incentive for clients to take the time to run through all that with them 

3) The "Shoot the Messenger" effect

In serving as a white-glove financial advisor, I found that many of my peers, particularly the best ones, avoided tax filing themselves at all costs since it's pretty thankless "shoot the messenger" style work where whoever is filing is always coming bearing bad news (taxes!). Adding insult to injury, it's ripe for conflict since - bluntly - often clients' missing deadlines gets put back on the CPA. There are exceptions here, but I'll say the "taint" is so strong, I know some planners who are reluctant to even recommend CPAs for fear of clients' getting upset later, let alone doing the filing themselves!

The standard reaction to any email from someone/something involved in filing your taxes

A three-step solution for you

1) Start by figuring out the right set of tax strategies for your unique financial situation. We started Steward precisely to provide a personalized to-do list for how, where and when to save on taxes and invest smarter in plain-English, with minimal time and efforts. Our goal was to try to help families in the no man's land between DIY and a white-glove wealth advisor. We take ~15 minutes worth of inputs from you, to help you figure out which tax strategies you're eligible for, and how to integrate this tax strategy with your broader financial picture so the tax tail isn't wagging the dog. As I write this we're still in free early-access mode, and you can sign up to give us a try here

Other strong options that you could consider are Facet Wealth ($1,800-$6,000 a year) and Vanguard's Personal Advisor Services (.30% of assets per year, so if ~$1,500-$3,000 per year, if you're at $500K-$1M in assets). We love Vanguard's low-fees but it unfortunately is more focused on investments vs. tax strategies, and can feel targeted at retirees / near-retirees. You could also look into hiring a white-glove wealth advisor (most charge ~1.0% of assets per year and require a minimum of $1M in assets under management, so ~$10,000 a year minimum). We share more about the 3 lines in the sand to ensure you're finding the best trustworthy advisor here, alongside resources of where to even start looking.

2) Then determine if you can execute those strategies DIY via Turbotax, or if you'd like to go even further to find a CPA to help you. Clear triggers for me that it's time to move past Turbotax is if you've paid a significant tax penalty in the last year, if you're starting to have more complicated tax returns with rental properties, K-1s, etc.; or if TurboTax is making you reasonable and you're ready to spend the extra $1-4K to have an accountant take this off your plate. Check with your state's CPA society, the Accreditation Council's Web site for an accredited tax adviser or preparer, or the National Association of Enrolled Agents' directory. 

3) If you go forward with hiring a CPA, I'd narrow it down to a list of ~2-3 folks to do a quick e-mail or phone interview. Schedule these outreaches outside of peak tax deadline season (March through mid-April, September through mid-October), so to get faster and more thorough responses.

You can narrow down your candidates in advance by checking their credentials with third-parties, so you know you're talking to trustworthy and qualified candidates.


To help you narrow down your list in advance:
- Ensure each candidate is either an enrolled agent, accredited tax adviser (ATA), accredited tax  preparer (ATP), certified public accountant (CPA).
- Check your state's CPA society, the Accreditation Council's Web site, or the National Association of Enrolled Agents' directory to verify that he or she is licensed, is a member in good standing, and has had no disciplinary action taken against him or her.

An interview guide to help you hire the best:

1) How long have  you been in practice? You want someone who has been preparing returns long     enough (i.e. several years) to anticipate problems or IRS challenges.

2) Do you have any specialties/areas where you differentiate from other CPAs/accountants? Who is your ideal client? This is a good spot if they've dealt with similar folks to you in profile (i.e., income level, any tax complications you have like rental properties, incentive stock options, etc.).

3) How do your charge and what's a rough estimate of what my charge will look like (understanding that it might vary with complexity)? You probably won't get an exact number, but a tax preparer should be able to provide you with an estimate. You're looking for somewhere between $1K for an average CPA to $2-4KK for a complex return. Find out if he or she charges an hourly rate or flat fee and whether that fee will cover everything or will there be add-ons for planning meetings and calls throughout the year. Avoid anyone whose fees are based on a % of  your refund. That's a surefire indication that they'll try to bend the rules and go outside of the letter of the law. Insider scoop: I've had several CPAs admit to me they charge based on a "PITA factor" (will you be nice to work with...or a pain-in-the-***!), so keep that in mind here too! 

4) What's your  timeline for filing each year? What's the date they're going to help you file by.

5) Will you handle my return directly?  A common issue is hand-off to less experienced associate. If the preparer is part of a firm and will not be preparing your return personally, ask if he or she will review it after  the associate completes it. This principle is drawn from my smartest clients back at McKinsey, the major consulting firm I worked out of undergrad. They'd sit through our fancy proposal presentations from McKinsey's "partners", but then proceed to grill the "engagement manager", i.e. the young guy or gal on the ground who would actually be doing the work for them! You want to know you can trust the person actually doing the work. Same rule applies in finding a CPA.

6) In a worst case scenario, would you represent me before the IRS?  If you are audited, you want someone who will defend your return. Run out door if answer is no.

7) Are you familiar with filing a backdoor Roth IRA? This is the type of advanced tax strategy, you'd want them to be capable of! A great litmus test if they're able to handle more sophisticated tax strategies. If they immediately say you're too high income to use this strategy, without any further questions, I'd have my antennae up. You can learn more about the Backdoor Roth IRA strategy here - one of the top plays in the ultra wealthy's playbook and recently made famous by Peter Thiel - before you make this ask! 

Written by

Ami Shah

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