How tax planning services actually work and what they will cost you

How tax planning services actually work and what they will cost you

SmartAsset: Financial Advisor Tax Planning Services

SmartAsset: Financial Advisor Tax Planning Services

Not all financial advisors offer tax planning services, but many will include them as an offering to manage your overall financial plan. Financial advisors who offer tax planning services will likely offer some or all of the following services:

  • Preparation of tax returns, including rental property and partnership returns

  • Maximize tax deductions

  • Planning tax-loss sales of securities, usually towards the end of the year

  • Ensure best use of capital gains tax rates

  • Plan to minimize taxes in retirement

In addition to preparing for retirement and death, a financial planning tax advisor can also help assess the tax effects of other major life events. Some of them may include marriage, parenthood, and divorce.

In addition to these tax-specific services, tax planning financial advisors can help you with other personal finance matters. These can include insurance, college savings, portfolio management, debt management, small business financial plans and more. In addition to taxes, financial advisors may specialize in other areas, including investment management, retirement planning, estate planning, and divorce.

Tax planning fees for financial advisors

Like other financial advisors, those who specialize in tax planning use several different compensation models. Some are salaried employees of large financial institutions, but most use one or more of the following means to generate income:

  • Flat rate : These advisors charge a one-time service fee to generate an annual tax plan. This can allow the customer to ask questions and sometimes get the updated plan for the year.

  • Hourly rate: Tax planning financial advisors can charge anywhere from $100 to $400 per hour, depending on their level of professional certification and experience and the complexity of the client’s situation, to provide tax advice.

  • Percentage of assets: Financial advisors who also manage a client’s investments may receive a commission of 1-2% of assets under management.

  • Sales commission: Advisors who advise on mutual funds, insurance, annuities and other products may receive a commission from product salespeople. It can be difficult to tell how much an advisor earns in commissions without asking the advisor.

Note that many tax planning advisors use a combination of one or more of these compensation plans. For example, an advisor may receive a commission as well as a percentage. Additionally, costs vary by location. Advisors in and around major cities typically charge significantly more than those in smaller towns and rural areas.

Selecting a Financial Advisor for Tax Planning

SmartAsset: Financial Advisor Tax Planning Services

SmartAsset: Financial Advisor Tax Planning Services

Many financial advisors who specialize in tax have complementary areas of expertise. For example, they may be lawyers or chartered accountants. Several professional certifications can indicate that a financial advisor is likely to do a good job as a tax advisor. Here are some of the most important:

  • Chartered Accountant (CPA): This is the top certification in accounting, requiring an extensive course of study, passing a rigorous exam, and obtaining a CPA license.

  • Personal Finance Specialist: This is a certification that CPAs can earn by studying, gaining experience, and demonstrating in-depth knowledge of personal finance.

  • Enrolled Agent (EA): The EA designation is granted by the Internal Revenue Service and allows its holders to prepare tax returns as well as advise clients on tax matters. The EAs are all former IRS employees, who have also passed an exam. However, EAs are not necessarily as well equipped as other financial advisors to guide clients’ non-tax affairs.

In addition to this, people with tax concerns can consider advisors with high-level certifications such as Certified Financial Planner and Chartered Financial Analyst. These well-trained and rigorously tested professionals can be expected to have a thorough understanding of taxes and their role in personal finances.


Financial advisors can help clients with tax matters by preparing returns, suggesting tax reduction measures and making the most of deductions. They can also be important when planning for retirement, estate planning and developing an investment strategy.

Tax planning tips

  • Tax planning can get complicated, but many financial advisors can simplify these issues and help you prepare for tax issues with your overall financial plan. Finding a qualified financial advisor doesn’t have to be difficult. SmartAsset’s free tool connects you with up to three financial advisors who serve your area, and you can interview your matching advisors for free to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, start now.

  • Use SmartAsset’s tax return calculator to see how much you’ll owe or will owe based on your personal finances, and you can start planning from there.

  • If you plan to itemize, be sure to keep all of your receipts for at least a few years after your deposit. It is not uncommon for the IRS to review returns three to six years before the return it is actually verifying. And depending on the deductions you take, like the home office deduction, your return may be more likely to trigger an audit.

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