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Tax time is no time to go cheap

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Ah, tax time. Isn’t it the most wonderful time of the year? Or is that just me?

I love watching everyone scurrying to get their last minute filing done. Oh and what about those people standing at intersections, wearing their Statue of Liberty or Uncle Sam costumes? It’s really the best of Halloween and Christmas rolled into one.

Well, not everyone agrees with me about all the Uncle Sams and Lady Liberties. “I sometimes ask people, ‘Do you want a guy in a costume to handle your taxes?’ Of course, the guy actually doing the paperwork probably won’t be the guy standing near the traffic, but he’s also not the person you want dealing with your bottom line,” says Gary Marriage, Jr., CEO of Nature Coast Financial Advisors and a professional advisor to CPAs.

“I know millionaires who go to these pop-up tax firms; they’d rather spend a few hundred dollars on their return than a grand or two with a skilled CPA,” says Marriage. “But this apparent savings comes at a cost, because a good accountant is likely to find many thousands of dollars in savings in a single tax return, and they are far less liable to make a mistake.”

Marriage offers additional tips for consideration this tax season:

Have your records handy and consider a long-term relationship

Not only is it advantageous to file taxes through a CPA, it’s also smart to have all relevant records readily available at your disposal – no matter who is helping you with your return.

“Not only do I strongly advise you to use a reputable CPA that you can trust, I also think you should try to establish a long-term relationship with him or her,” Marriage says. “Think of a financial professional as similar to a doctor or lawyer – the better they know you, the better off you’ll be. High-net-worth individuals have the most incentive for professional financial services, even if they’ve made a hobby of saving money by doing things their own way.”

More on this topic

High-income earners pay the vast majority of income taxes – don’t volunteer more 

Taxpayers with incomes exceeding $100,000 earn 60 percent of the country’s income, yet contribute 95.2 percent of the income taxes, according to recent estimates from Congress’s Joint Committee on Taxation. Additionally, those earning more than $100,000 – a bit more than 20 percent of taxpayers – pay for 75.7 percent of total federal taxes, excluding the burden on corporate and investment taxes.

“There are many high-income earners who are passionate about their careers and love what they do; they care more about their work than their income,” he says. “These tend to be the folks who need reminders that there are legal avenues available for protecting their hard-earned money.”  

High-net-worth individuals should consider CRAT

Many people, financial professionals with years of experience, do not know about Charitable Remainder Annuity Trusts, a form of financial protection that Marriage often teaches to CPAs. CRATs are a flexible and effective instrument used in financial and estate planning. A CRAT provides a significant tax shelter for any assets and property placed within it. That allows any assets in a charitable remainder annuity trust to increase in value without being taxed on the increase. A well-constructed CRAT can provide financial security for the annuitants.

“CRATs are surprisingly underutilized, but many CPAs I run into simply don’t know about it,” Marriage says. “It’s worth asking your financial advisor about, and if your advisor is unfamiliar with the structure, encourage him or her to look into it.”