Tax Prep vs Tax Strategy – What’s the difference?

IS there a difference between tax prep and tax strategy?

A lot of entrepreneurs I speak to have a frustration around tax affairs, and I think a lot of it comes from misunderstanding.

There is a huge difference between hiring someone to prepare your taxes, and to strategize your taxes. Knowing that difference is key to hiring the right professional for your company.

What is Tax Prep?

Simply put, tax prep is Plug and Play. Your tax preparer is going to log in to your QuickBooks online (which I hope is nice and tidy for them!), or your finance spreadsheet. 

They take that data, plug the numbers into their tax software, and file your return.

I’ve talked about how useful QuickBooks Online is before, but if you prefer to use a spreadsheet, my Know Your Numbers Now template is just the thing.

Now, I am in no way dismissing the amazing work that tax preparers do, because they have to go through an entire process to get cleared by the IRS. But essentially, tax prep is data entry.

They are literally just working with the data you provide them.

Sometimes I will speak with an entrepreneur who is frustrated that their tax person didn’t advise them about a particular deduction, or a specific way to save taxes. I always ask – What was your agreement with this person?

If your contract states they’re completing tax prep, then that’s what you’re going to get.

Tax Strategy is Big Picture Planning

A tax strategist will take time to sit down with you and not just plan for the return they’re currently filing. They will take a holistic look at your business, and your life. 

They’re going to be looking at your retirement plans, and how you’re saving for your kids’ college fund.

They’re going to look at ways to legitimately lower your tax bill that DON’T involve running out and buying a bunch of stuff at year end!

 A tax strategist is going to talk you through smart investments that will help your business now and your finances tomorrow.

Who should you hire?

When you meet with someone to look after your taxes, you need to straight up ask them: 

“Will there be any strategy involved? And if so, how does that look for my business?”

Our money is so personal to us, and when we look at hiring someone else to take care of it, we need to know we’re getting the right fit. Some questions you should ask a potential tax strategist include:

• How do you do your tax strategy?
• Are we looking at retirement plans?
• Are we looking at today’s money?
• Are we looking at my financial future?

When I meet with clients for my Virtual CFO services, and we start talking about the things I’m going to help them with, I get a fire in my belly. I honestly light up, because this is my passion, and it flows out of every pore.

I love what I do, and when someone loves the job you’re hiring them for, they’re going to bend over backwards to give you a kick-ass product or service.

This is the kind of passion and drive you need to find in your tax professional, so you can be sure they’re going to do what’s best for you and your business!

So, Should you look for Tax Prep or Tax Strategy?

There’s no right or wrong answer here; it all depends on what you want for your business. There’s absolutely nothing wrong with hiring someone purely to prepare your tax returns.

Tax strategy is a higher level service, so I’m sure you know that means you’ll be paying more for it.

We need to know exactly what’s going on when it comes to our money, so whether you want to invest in a tax preparer or a tax strategist, my training on YouTube is going to help you understand what you need.

If your business isn’t bringing in a huge revenue right now, hiring someone to just take care of the data and tax returns may well be enough for you. But if you’re an entrepreneur with a ton of cash left over every month, you’ll likely want to invest in a tax strategist to help you invest that cash wisely.

I know taxes can seem scary and overwhelming, which is why I strongly suggest you take a few minutes to check out my YouTube video on this. It will really help you get your head around your tax professional options. And, of course, you can always drop me a message on Instagram. 

I would love to know a little more about what you do, and help you reach your goals!