Advisers Match Clients With Tax Pros

Arden Dale for the Wall St. Journal writes:  This tax season, advisers are taking on the role of matchmaker.  With a new complicated tax regime in place, advisers say it is more important than ever that their clients are paired with the best tax professionals who know the tax code inside and out and whom they can connect with personally. That is especially true for wealthy taxpayers who face tax increases on income and investments as well as limits on deductions under the American Taxpayer Relief Act. And, a recent setback to an effort by the Internal Revenue Service to raise tax-preparer standards adds urgency to the search for sound tax advice. 

"It's coming up more," said James R. Miller, president of Woodward Financial Advisors Inc. in Chapel Hill, N.C., whose clients often turn to him for help finding accountants and tax attorneys.

Recently, Mr. Miller recommended an accountant who helped save a client $100,000 on his tax bill. The client's most recent return showed he hadn't properly reported the depreciated value of rental property sold during the tax year. The accountant saw the error and filed an amended return. Now the client, a corporate executive who always had done his own tax returns, vows never to go it alone again, Mr. Miller said. 

Impeccable credentials are the bottom line when looking for a good accountant. A designation either as a certified public accountant or enrolled agent are a must, according to Bernard Kiely, an accountant and financial planner in Morristown, N.J., who has lectured to advisers on behalf of The National Association of Personal Financial Advisors, an association of fee-only advisers. Enrolled agents are an elite group of tax specialists recognized by the IRS.

Many tax preparers hold neither of these credentials. The IRS has tried to protect taxpayers against the incompetent and unscrupulous with a requirement it enacted a few years ago for tax preparers to obtain identification numbers and go through testing and continuing education.

In January, a federal court blocked the IRS from enforcing the requirements, but this month the court clarified that the IRS can still require preparers to have an identification number. The IRS said it plans to appeal. 

Personal chemistry is also important when choosing a tax professional, whether it be an accountant or attorney. Advisers do best when they recommend tax pros they actually know, so that they can be sure they are making a good match for a client.   "These are long-term relationships," said Abe Schneier, senior technical manager at the American Institute of CPAs. "Your CPA or tax attorney will probably know more about your personal life than just about anybody else out there." 

Any tax professional an adviser recommends ought to be able to handle the stress and strain of an IRS audit.   "They should be able to sit with the IRS auditor and intervene on behalf of the client," Mr. Kiely said.

To get to know tax advisers, Jim Holtzman, a wealth manager at Legend Financial Advisors Inc. in Pittsburgh, attends events sponsored by the local Chamber of Commerce and a branch of the American Institute of CPAs. Then, he chooses some to invite out breakfast or lunch. "It's to get a comfort level," he said. 

Equally important is to know the needs of the taxpaying client. Some want a tax adviser recognized in the community as a leader in his or her field, or who has given back to community, said Kevin M. Reardon, an adviser at Shakespeare Wealth Management Inc. in Pewaukee, Wis. Some clients will communicate only by email, while others want meetings in person and information on paper. 

On Friday, Mr. Reardon is meeting with long-time clients--a retired 76-year-old dentist and his wife--and an accountant he thinks might be a good fit. Mr. Reardon has worked with the accountant and knows her socially through her children, who are the same age as his.

"I wanted to make sure I had someone who would take a little extra time with him and his wife," Mr. Reardon said.