Bear Mountain Capital Inc.

Do You Need A Tax Advisor?

| June 3, 2024

Blog | Planning Perspectives

Do you do your own taxes?


Recently, we had an opportunity to do a question and answer session with one of our valued tax partners, RAC CPA Group, PLLC. RAC CPA is run by Josef Dassler and Paul Saxton with offices located downtown, Seattle. We took the time to ask the questions that we thought would help our clients understand what is important when working with a tax partner and their outlook on the 2025 expiration of many of the tax cuts from the Tax Cuts and Jobs Act of 2017.

1. What do you find is driving clients to hire a CPA for the first time?

There can be a few reasons why someone may choose to reach out to CPA in preparing their taxes. One of the most common is a surprise tax bill. Other common reasons include a feeling of uneasiness if one did their return right, will the IRS come knocking or did they miss out on deductions/credits. Working with a CPA can help alleviate those concerns.

2. When is the best time to engage a new CPA or do tax planning with your existing CPA?

Generally, the earlier the better and/or before a taxable event occurs. There is very little that can be planned for after the fact. We advise clients to reach out to us whenever there is a change in circumstance (e.g., retirement, disposition/acquisition of investments, selling real property). Also, a great time to do tax planning is near year end where we have almost a full year of data in which refining tax projections is easier:  things like determining whether to make charitable contributions or making a qualified charitable contribution from a retirement account; or are there circumstances that warrant creating income, (maybe in the form of rolling over funds into a Roth IRA).

3. What do you see are the most common mistakes clients make when doing their own taxes?

In general, it’s deductions and credits that are not always highlighted with online services. We also see a lot of mistakes around depreciation and home offices, and the tax consequences of such.

4. What is the low hanging fruit in tax planning that you often advise clients to take advantage?

Are you maximizing the deductions for yourself? Maximizing retirement plans and other tax advantage plans (e.g., HSA)? Does bunching deductions make sense?  Loss harvesting and deferring income. There is no one-size fits all approach but working with a smaller firm you can achieve personalized planning to fit your goals/needs.

5. What are the most common causes of surprise tax bills?

Someone going out and working on their own for the first time and having to pay self-employment taxes. Or thinking their stock compensation is having enough taxes withheld – although companies are getting better about allowing employees to adjust their withholding on stock compensation. Another common cause is not understanding the tax implications of pass-through entities and passive income sources.

6. What are the overlooked benefits of working with a CPA? What don’t clients think about, when it comes to the value you deliver?

Peace of mind, creating long-term working relationships (over time we get to know your financial picture and can help create more customized tax planning opportunities); can help navigate the tax consequences of major life events; as well as being a resource and point of contact to resolve any IRS communications or issues. We like to be involved in tax planning and tax education throughout the year; just being a sounding board, think of us as a trusted adviser that can provide tax specific advice to the overall financial plan; don’t shy away from including your tax preparer/CPA in your financial planning.

7. What is your quick take on the 2025 expiration of the tax cuts from the Tax Cuts and Jobs Act of 2017?

The potential expiration of many items in the TCJA adds uncertainty for individuals and businesses, which complicates long-term financial planning. All Taxpayers need to prepare for differing scenarios and stay up to date on legislative developments. Perhaps of biggest concern is in regard to estate planning and starting that planning now to understand the potential outcomes/required action items. Overall, a good opportunity to engage with a tax professional to plan for multiple scenarios as the legislation is in flux.