It’s tax time, meaning more work for me both personally and professionally. This year more than ever, I find myself talking to – and about -- tax preparers.
Tax preparers are a little bit like financial advisors, in that some are better than others, and credentials matter. If you need help doing taxes, you probably get what you pay for.
Alternatively, though, most tax preparers are alike in one major way. That is, they are concerned with minimizing their clients’ taxes in the current year. Seems like a good idea for everyone, right?
The thing is, not everyone should be worried about minimizing taxes now; they ought to be worried about minimizing taxes later. While always subject to change, it’s a fact that the current tax law expires in 2026. Without changes, this means tax rates will go back to the higher 2017 brackets.
In this environment, tools like a Roth IRA can be of great use, where you pay taxes now in return for not paying taxes later. Unfortunately, when tax preparers do suggest an IRA, it’s almost always a traditional IRA, since they want the immediate tax deduction.
Part of this is that some tax preparers are compensated in part by the amount of refund they generate. Gosh, imagine that, doing something that’s better for them than for the client.
This is why many people would be better served by a credentialed, fiduciary, financial / tax planner instead of the run-of the-mill tax preparer.
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