Switching tax preparers can be a normal part of financial life for wealthy clients. This just may not be the easiest time to find a new one.
College enrollment in accounting programs has been declining for years, culminating now in an historically tight labor market. About 136,400 openings for accountants and auditors are projected each year, on average, over this decade, according to U.S. Bureau of Labor statistics. Many of those openings are expected to result from the need to replace workers who transfer to different occupations or exit the labor force because of retirement or other reasons.
“Many CPAs have retired, merged or had sickness or death,” said Gail Rosen, a CPA in Martinsville, N.J. “Young people aren’t interested in a job that includes the pressures of tax season. The experienced CPAs left are receiving many calls from wealthy clients looking to form a relationship who will give them the time and attention they want.”
The shortage is impacting how accounting firms operate.
“Many CPA firms are no longer looking for or taking on individual tax preparation clients due to staffing issues,” said Bruce Primeau, a CPA and president of Summit Wealth Advocates in Prior Lake, Minn. “They’re looking for higher-margin business owner clients who present more opportunity for in-depth tax planning, financial statement preparation and perhaps audit revenue.”
The situation means clients need to be diligent when trying to find tax planners, advisors say.
“They probably should be an enrolled agent or CPA, and they should be communicative and be willing to discuss a situation with the client,” said Morris Armstrong, enrolled agent and RIA at Armstrong Financial Strategies in Cheshire, Conn. “Taxpayers need to realize that they can’t just drop off documents, but that they have to tell their story.”
“If you have foreign assets, a business other than sole proprietor, are a trust beneficiary, have invested in partnerships, that you better have [a preparer] who understands those flows regardless of your income,” Armstrong said.
“A tax pro needs to understand the nuances of the return. It’s not good enough to look at last year’s and try to mimic it.”
Wealthy clients need to make sure that when they engage a new CPA firm that all loss carryforwards and basis calculations from prior years are accounted for, Rosen said.
Fees should be commensurate, he added. “A too low fee may indicate a lack of experience,” Armstrong added. “There should be a timeframe for completion. ‘Two days before the filing deadline’ is usually the wrong answer. If a preparer makes liberal use of extensions, I’d ask why. A preparer should also be able to tell the client what the client is responsible for,” Armstrong said, adding that he probably wouldn’t use a preparer who didn’t employ an engagement letter.
When Joshua Hanover, managing director and office lead at CBIZ Marks Paneth’s Boca Raton, Fla., office, is introduced to a prospective client, “one of the key questions I ask pertains to their relationship with their previous tax professional,” he said. “I use our initial conversation to qualify whether I see potential in the relationship. If I hear that the reason they’re switching is due to retirement, it’s music to my ears. They’re not likely to be the type of client always looking for a less-expensive option or where the grass is greener.”
The prospective client should have their own list of qualifications they’re seeking in a preparer. At a minimum, Hanover said, vetting a tax pro should include confirmation of their credentials/licensure, credibility of their firm and a review of their records for disciplinary actions.
These, he added, are other considersations:
• Where did the introduction to that professional originate? Did the person making the introduction have a reason to make that particular referral?
• What does the professional’s practice looks like and how closely aligned is it with my situation?
• Does the tax pro have the ability to grow with me and handle my evolving needs? Does their organization have the resources to stay ahead of changing economics, business/financial cycles and evolving legislation?
• Is this the type of person I’d enjoy working with?
