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Are You Relying on Your CPA Too Much?

It’s a well-known fact that the CPA (Certified Public Accountant) is the profession that is most respected when it comes to giving advice to wealthy and non-wealthy individuals alike. One of the best ways to maximize your retirement is to minimize the taxes you pay on your investment income. But could it be that many retirees are relying on their CPA too much to help them do this?

What time of year do most folks visit with their CPA? Around April 14, right? Generally  speaking, most accountants are super-busy during this time of year. One CPA told me that during pre-tax time he often works 12 to 14 hour days while eating “intravenously.” But, as good as that is for the CPA’s business, it may not be in your best interest.

When your accountant is preparing your tax returns in 2010, what year is he preparing them for? For 2009, of course. If any mistakes were made in 2009, is there anything that can be done about them in 2010? Most often, the answer is no, especially when it involves taxes related to your investments. Most CPAs tell me that they are doing damage control, trying to make the best out of the decisions their clients made last year.

Just as most financial planners are not tax specialists nor licensed as such, most CPAs are not investment specialists nor licensed as such either. Sure, most of them know enough about investments to be able to offer general guidance. However, when it comes to the selection of specific investments, they should refer you to a financial planning professional who is licensed and certified to discuss investments.

I am not saying that you shouldn’t have an accountant. If you have to file a tax return, you definitely should hire a CPA. Pete, my CPA, has saved me a lot of tax dollars that I would otherwise have thrown to the wind. However, because accountants are so busy during the tax season and they can’t change last year’s circumstances and may not be licensed to discuss investments even if they could, it may be in your best interest to work with a financial planner who is also versed in tax issues.

My clients tell me that they find value in the fact that I work with their CPAs throughout the year. So, while their accountants are doing damage control for last year’s taxes, I am working with them proactively to make sure that this year’s situation turns out as well as possible.

If you would like to know whether you are paying too much tax on your investments, contact us for a complimentary review of your tax returns and your investment portfolio.