What kind of tax professional to look for?

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elwing
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What kind of tax professional to look for?

Post by elwing » Wed Jul 11, 2018 12:44 pm

I've got general investing and planning down, and basic taxes down, but I want to start looking at our after retirement tax situation (mostly related to state taxes and different rules about taxing 401k contributions vs distributions), and I think I might need professional help - or at least someone more familiar with the laws to bounce ideas off of. What kind of professional would I look for? a CPA? a tax lawyer? And where should I look? Most of my contemporaries are looking for divorce lawyers, so they're not really going to be able to recommend someone, because that's my first go to.

Thanks!

alfaspider
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Re: What kind of tax professional to look for?

Post by alfaspider » Wed Jul 11, 2018 1:06 pm

How complicated is your situation?

Hiring a tax lawyer would be more important if you have a complicated financial situation with potential legal uncertainty. For example, if you control multiple offshore entities, are a partner in many partnerships, or have a sufficient net worth that the federal estate tax is a relevant consideration. I suspect if you were in that position, you'd already have a relationship with the professionals who set those interests up. You'd also want a tax lawyer if you are looking to litigate any tax positions. If your situation is relatively vanilla and you are looking for someone to model different scenarios, a CPA is likely to make more sense. On average, CPAs are much more likely to have strong quantitative skills than lawyers. However, there are a decent number of practitioners out there who have both a CPA designation and a JD.

Sounds like you probably only need a CPA, but keep in mind that different CPAs and tax lawyers are not created equal. I am a tax lawyer, but my expertise is mostly corporate and international taxation- I couldn't help you at all on something like state estate tax. Make sure you find someone with particular expertise in retirement planning.

Jack FFR1846
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Re: What kind of tax professional to look for?

Post by Jack FFR1846 » Wed Jul 11, 2018 1:49 pm

There are multiple places you could turn.

A tax attorney will likely cover all the bases. Maybe one visit will be enough. Bring all of your information and be organized (you don't want to be paying $300 an hour while you search your folder of random information). My mom (she's 82) recently visited her attorney who told her "spend some of your money now" in order to avoid state estate tax which still exists. He told her how much to spend. She's since put in an order for a new car and will help with my son's college tuition. Had she not visited, she never would have looked at state estate taxes.
Bogle: Smart Beta is stupid

afan
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Re: What kind of tax professional to look for?

Post by afan » Wed Jul 11, 2018 2:51 pm

From what you describe a tax attorney would be wholly inappropriate. It is not clear that you need a tax professional at all.

I suggest you first post your questions on here. There are a lot of very knowledgeable people on the forum and we don't even know that your issues are complicated.

If you describe your situation you may get guidance on where to find your answers and you might get everything answered right here.

I gather it depends on where you live. In my area I would not be able to find a tax attorney for $300/hour.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

elwing
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Re: What kind of tax professional to look for?

Post by elwing » Wed Jul 11, 2018 3:07 pm

I'm not sure that it's all that complicated, but may be borderline skirting state tax laws. We're not at estate tax amounts, although we will be for state purposes if we stay in PA.

Basically, hubby and I have earned (and contributed to 401ks/403bs) in multiple states. A good portion of that will be from PA - which taxes money *before* it goes into the 401k (ie, not the same as federal tax treatment - 3.07% on gross income, in addition to local taxes: 1% on gross, but doesn't tax when it's paid out). However, we still have a large amount contributed from previous states that follow(ed) the federal treatment. I have already figured out that if we do retire and withdraw in PA, we're obligated to pay income tax on any amounts we withdraw that we didn't already pay PA tax on. However, we're seriously considering moving to another state after (early) retirement where they follow the federal tax code - resulting in us basically paying state tax twice on a fairly large chunk (estimated 75-80% of it by the time we retire) of our 401k/IRA/403b. I'm sure that's not a unique situation, but to my mind more complicated than just running numbers. Although the running numbers part may come into it if we're deciding if the "cost" is worth it or not.

alfaspider
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Re: What kind of tax professional to look for?

Post by alfaspider » Wed Jul 11, 2018 3:15 pm

afan wrote:
Wed Jul 11, 2018 2:51 pm

I gather it depends on where you live. In my area I would not be able to find a tax attorney for $300/hour.
It's not location per-se, but where the attorney falls in the market. A high-end corporate tax attorney at a large law firm will often charge well over $1,000 an hour. A CPA who mostly does individual tax returns and maybe got a JD at night on the side but never really practiced law might be $200 an hour. That said, you generally won't find high-end tax attorneys outside of major cities.

pshonore
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Re: What kind of tax professional to look for?

Post by pshonore » Wed Jul 11, 2018 3:27 pm

You might try to find an Enrolled Agent.

MichCPA
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Re: What kind of tax professional to look for?

Post by MichCPA » Wed Jul 11, 2018 3:46 pm

alfaspider wrote:
Wed Jul 11, 2018 3:15 pm
afan wrote:
Wed Jul 11, 2018 2:51 pm

I gather it depends on where you live. In my area I would not be able to find a tax attorney for $300/hour.
It's not location per-se, but where the attorney falls in the market. A high-end corporate tax attorney at a large law firm will often charge well over $1,000 an hour. A CPA who mostly does individual tax returns and maybe got a JD at night on the side but never really practiced law might be $200 an hour. That said, you generally won't find high-end tax attorneys outside of major cities.
You are going to have a tough time finding a CPA for $200 even without a JD. I have an engagement letter sitting in front of me that has $225 for manager level up to $500 for partners. Staff levels are lower, but you don't do consulting with staff level people. That is in an average COL area. Start with your applicable state department of treasury/revenue and look for the instructions for their 1040 equivalents. That and a google search will narrow down your questions on taxability. For recommendations, do you have an investment/ wealth management person? They will typically have someone they will refer.

alfaspider
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Re: What kind of tax professional to look for?

Post by alfaspider » Wed Jul 11, 2018 3:58 pm

MichCPA wrote:
Wed Jul 11, 2018 3:46 pm
alfaspider wrote:
Wed Jul 11, 2018 3:15 pm
afan wrote:
Wed Jul 11, 2018 2:51 pm

I gather it depends on where you live. In my area I would not be able to find a tax attorney for $300/hour.
It's not location per-se, but where the attorney falls in the market. A high-end corporate tax attorney at a large law firm will often charge well over $1,000 an hour. A CPA who mostly does individual tax returns and maybe got a JD at night on the side but never really practiced law might be $200 an hour. That said, you generally won't find high-end tax attorneys outside of major cities.
You are going to have a tough time finding a CPA for $200 even without a JD. I have an engagement letter sitting in front of me that has $225 for manager level up to $500 for partners. Staff levels are lower, but you don't do consulting with staff level people. That is in an average COL area. Start with your applicable state department of treasury/revenue and look for the instructions for their 1040 equivalents. That and a google search will narrow down your questions on taxability. For recommendations, do you have an investment/ wealth management person? They will typically have someone they will refer.
I'm talking about a solo practitioner, not a firm. Your EA is pretty cheap for a firm big enough to have at least three tiers of people working on an engagement. But to be honest, I'm mostly familiar with fees for large law firms and the Big4. With any hourly practitioner, someone who can answer your questions accurately off the top of their head is likely much cheaper that someone "cheap" who bills you for hours of research.

afan
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Re: What kind of tax professional to look for?

Post by afan » Wed Jul 11, 2018 4:20 pm

An enrolled agent could run the numbers and tell you the tax consequences of retiring in place vs. the new state to which you might move. Then you can compare and decide what to do. I gather you have chosen your alternate state and it does have a state income tax?

There are no legal issues. You don't need.a.tax lawyer.
Assuming they knew the tax laws of multiple states, a stretch to say the least, a financial planner might be able to help.

But this is really a pure tax question, so I agree with the suggestion of an enrolled agent. Experts in tax, many CPA's are not, cheaper than lawyers or accountants.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

alfaspider
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Re: What kind of tax professional to look for?

Post by alfaspider » Wed Jul 11, 2018 4:26 pm

afan wrote:
Wed Jul 11, 2018 4:20 pm

But this is really a pure tax question, so I agree with the suggestion of an enrolled agent. Experts in tax, many CPA's are not, cheaper than lawyers or accountants.
It's worth noting that there is no requirement than an enrolled agent know anything about state and local tax. They are primarily tested on their ability and understanding of federal tax return filing.

MichCPA
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Joined: Fri Jul 06, 2018 9:06 pm

Re: What kind of tax professional to look for?

Post by MichCPA » Wed Jul 11, 2018 4:43 pm

alfaspider wrote:
Wed Jul 11, 2018 4:26 pm
afan wrote:
Wed Jul 11, 2018 4:20 pm

But this is really a pure tax question, so I agree with the suggestion of an enrolled agent. Experts in tax, many CPA's are not, cheaper than lawyers or accountants.
It's worth noting that there is no requirement than an enrolled agent know anything about state and local tax. They are primarily tested on their ability and understanding of federal tax return filing.
In fairness, there is nothing on the Uniform CPA exam about state and local taxes either.

alfaspider
Posts: 1363
Joined: Wed Sep 09, 2015 4:44 pm

Re: What kind of tax professional to look for?

Post by alfaspider » Thu Jul 12, 2018 7:51 am

MichCPA wrote:
Wed Jul 11, 2018 4:43 pm
alfaspider wrote:
Wed Jul 11, 2018 4:26 pm
afan wrote:
Wed Jul 11, 2018 4:20 pm

But this is really a pure tax question, so I agree with the suggestion of an enrolled agent. Experts in tax, many CPA's are not, cheaper than lawyers or accountants.
It's worth noting that there is no requirement than an enrolled agent know anything about state and local tax. They are primarily tested on their ability and understanding of federal tax return filing.
In fairness, there is nothing on the Uniform CPA exam about state and local taxes either.
Yes, and there's nothing about taxes at all on the bar exam :mrgreen:

bradpevans
Posts: 206
Joined: Sun Apr 08, 2018 1:09 pm

Re: What kind of tax professional to look for?

Post by bradpevans » Thu Jul 12, 2018 12:48 pm

elwing wrote:
Wed Jul 11, 2018 12:44 pm
I've got general investing and planning down, and basic taxes down, but I want to start looking at our after retirement tax situation (mostly related to state taxes and different rules about taxing 401k contributions vs distributions), and I think I might need professional help - or at least someone more familiar with the laws to bounce ideas off of. What kind of professional would I look for? a CPA? a tax lawyer? And where should I look? Most of my contemporaries are looking for divorce lawyers, so they're not really going to be able to recommend someone, because that's my first go to.

Thanks!
In m opinion you want something like what these folks do: https://www.retirementelevated.com
They DO operate under a AUM model, so fair warning. Some of the offerings are listed here: https://www.retirementelevated.com/courses/

At least in my town they did a one hour "pitch", then you could sign up for more, which was ~3 hours each in two session. So put in about 7 hours and < $50. I did NOT sign up (i'm 52 currently)

Their niche* seemed to be: about 1-5 million in assets and about 3-10 years away from RMDs. Their strategy is do develop an income stream for your needs. This considers all the typical things: buy a SPIA, defer SS/collect SS, do Roth conversions, keep you in 0% LTCG situation, drawdown from taxable / tax-deffered / Roth, etc / how your SS is taxed / implications of muni bonds / leaving a legacy / charitable giving / DAF / etc.

It struck me that 'spending down' is more complex than accumulating. Thats what they work at.

Brad in Michigan

* (my guesses here)
If you have < 1Mil, they probably can't save you enough to warrant
If you have > 5mil, then you will be living well (and paying a lot of taxes)
if you are too close to RMDs, you can't shift enough money to Roth / Charitable to have enough impact

afan
Posts: 3566
Joined: Sun Jul 25, 2010 4:01 pm

Re: What kind of tax professional to look for?

Post by afan » Thu Jul 12, 2018 1:43 pm

alfaspider wrote:
Wed Jul 11, 2018 4:26 pm
afan wrote:
Wed Jul 11, 2018 4:20 pm

But this is really a pure tax question, so I agree with the suggestion of an enrolled agent. Experts in tax, many CPA's are not, cheaper than lawyers or accountants.
It's worth noting that there is no requirement than an enrolled agent know anything about state and local tax. They are primarily tested on their ability and understanding of federal tax return filing.
Yes. But all the enrolled agents with which I have dealt, a small number I grant you, do such taxes. It would not be much of business if they held themselves out to be able to prepare federal income taxes but directed clients elsewhere for their state and local taxes.

This is not even a complicated question. Some patience and a standard consumer tax prep program, Turbo Tax or its competitors, could provide the tax numbers, but the OP wanted to talk with someone. An enrolled agent who did not know how to do taxes in the states in question would not be a good choice. But, again in my experience, enrolled agents who do federal tax returns for individuals also do state returns.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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