It’s that special time of year to gather your documents, report your income, maximize your deductions, and determine if you’ll owe the IRS or get a refund. And it doesn’t matter if you’re a first-time filer or an experienced pro — it can be one of the most confusing and stressful parts of the year. That’s because the US tax code is complex, with many pages, rules, statutes, strategies, and opportunities to consider. And to complicate things further, the average person has no formal tax or financial training to help them navigate that complexity.

Fortunately, you can file confidently using the guidance and support of a tax advisor and financial advisor. 

But if you work with both advisors, who should you call first? On the one hand, your tax advisor will be the one actually gathering documents, preparing, and filing your return, but on the other hand, your financial advisor can help you identify unique strategies or tax-saving tips to take advantage of in the first place. 

In other words, they both play a critical role in your tax situation, but where should you begin?

First, What Does A Tax Advisor Actually Do? 

A tax advisor or tax preparer is a professional who specializes in preparing and filing tax returns.

They know the laws and rules governing taxes and can help taxpayers get the best possible refund or lowest possible liability. In addition, tax preparers can help individuals, businesses, and organizations with their tax issues, ranging from basic income tax preparation to more complex business tax situations.

Their services can include additional items, like paying your quarterly estimated taxes throughout the year if you’re self-employed or offering advice on different tax-saving strategies like establishing a retirement plan for your business. Still, generally, the process revolves around collecting your tax documents to prepare and file your return for the prior year. 

So at a high level, your tax advisor’s work is backward-looking as they review your situation for the prior year and analyze your tax liability for that year. This is a critical service as they help you prepare and file your return for the prior year, but it typically doesn’t involve looking ahead to optimize future years. 

In addition, most tax professionals will ask questions, analyze your financial situation, crunch the numbers, and ensure you pay the least taxes possible. For example, your tax advisor may start by evaluating your current financial situation by asking about any life changes that may have happened, such as marriage, births, or relocating for work. And an efficient tax preparer may even look back at prior years’ returns to uncover deductions you may have forgotten while ensuring you don’t get in trouble with the IRS by catching mistakes or missed opportunities. 

But ultimately, tax advisors will be focused on the past, looking back to the prior year as they help you gather your documents and prepare your tax return. And while that’s an essential service, it’s only half of the tax equation.

Next, What Does A Financial Advisor Actually Do? 

Alternatively, a financial advisor will help you look to the future as you identify different tax strategies and opportunities you have available — the other half of the tax equation.

A financial advisor can help you optimize your tax situation by advising you on the most beneficial strategies for reducing your tax liability. Advisors are trained to look beyond the current year’s taxes and identify ways to reduce taxes in future years. This could include strategies such as utilizing retirement accounts to reduce your taxable income, taking advantage of various deductions and credits, or getting more efficient at timing capital gains and losses over the years. Financial advisors can also provide essential guidance regarding retirement planning and investments from a tax perspective, helping you optimize your tax situation in the short and long term.

For example, your financial advisor may help you decide whether using a Roth conversion strategy in the current or following year makes sense. 

They’ll start by projecting your income for the current or following year to identify your marginal tax bracket. This involves a detailed analysis of all your expected yearly income, including wages, self-employment income, investment income, and more. 

Then, they’ll look to your future retirement date as they project your income and tax situation during retirement. This starts with a look at your expected income sources during retirement, including pensions, Social Security, and investment income.

Once they know your current rate, and your expected rate in retirement, they can compare the tax rate at which you could convert Roth funds today versus the tax rate you could withdraw pre-tax funds in retirement if you didn’t convert them. Ultimately, if the rate you’ll pay today is lower, they may advise you to plan and execute Roth conversions today to lower your total tax bill over your lifetime. But, if the rate today is higher, they may advise you to hold off on Roth conversions until a lower income year. 

This is one of many examples of why a financial advisor can be a great asset to have in your corner to help make informed decisions about your money as they closely examine your present and future financial situation to come up with smart strategies for the upcoming years. Through careful planning, you can be sure that you’re making the most of your money each year and begin to create security for yourself in the long run. In addition, financial advisors are experts at seeing things from a different perspective as they help assess what impacts decisions made now may have on your future finances. 

So ultimately, a financial advisor will help you create a tax strategy for years to come by focusing on the future instead of the past.

It Doesn’t Matter Who You See First, As Long As You See Them Both.

As long as you set aside time to meet with your tax advisor and financial advisor, who you see first is not critical. However, you do not want to wait until the end of the year to meet your financial advisor. You should meet with your financial advisor as early in the year as possible, to go over ways to maximize your tax savings for the entirety of the year to come. 

The critical piece is to understand that they each play a specific role in helping you optimize, plan, and prepare your taxes each year. 

Your tax advisor will take the lead on preparing and filing your current return and ensuring you’ve maximized all available deductions and credits for the prior year. They’ll want to review your income statements for the year, including W-2s, 1099’s, and more. They’ll also need to collect documentation for all your deductions, like your 1098 for home mortgage interest or college expenses and receipts for charitable donations and medical expenses. Your tax advisor is looking at the year after it is over, which limits the tax breaks that they can find for you.

Alternatively, your financial advisor will look to the future, both in the existing year and for upcoming years, helping you understand and identify the various tax strategies you can use to pay the least in taxes while still reaching your financial goals. They will look at the bigger picture, effectively zooming out to understand your entire tax situation now and in the future. By doing so, they can identify specific strategies, like Roth conversions, tax-loss or tax-gain harvesting, and contributing to pre-tax retirement accounts that will help you save the most in taxes over your lifetime.

“Many people might not think of tax strategy as falling under the duties of a financial advisor, however, some Certified Financial Planners do have tax expertise and do take the time to make sure that a client is able to get every single tax break that they qualify for," says Sean Gates, CFP, EA, founder of Lifestyle Wealth. "Tax preparers usually look ONLY at the current year to find applicable tax breaks, and rely on imperfect client prompts, whereas a financial advisor is able to proactively and holistically apply tax strategies that support the deductions a tax preparer would take. Surprisingly, when I opened up my boutique advisory firm, I noticed (upon review) that even professionally prepared tax returns, approximately 65 percent of them had missing deductions and/or filings, or factual errors, on them. It’s always good to have a second pair of eyes look over forms that are being submitted to the IRS,” Sean continued.

When Do People Choose to Meet With Their Advisors?

While there is no one-size-fits-all approach to meeting with your advisors, there are some typical times to consider.

For example, many individuals choose to meet with their financial advisors at the beginning and the end of each year to discuss tax strategies. By meeting at the beginning of the year, you can set your focus for the year and identify which strategies to execute. Then, by meeting at the end of the year, you have a final chance to execute any last-minute strategies before the December 31st cut-off. 

Alternatively, many people meet with their tax advisor in February or March once they’ve gathered all their tax documents for the prior year. This allows them to get their documents to their tax advisor with plenty of time to finish and file before April 15th.

Seeking professional advice is always a great option to ensure no deductions or credits slip through your fingers. 

With the help of your advisors, you can get trusted information on optimizing your tax situation and ensure that the right amount of money stays on your side of the ledger. In addition, laws related to income tax may change from time to time, so consulting a professional regularly can help you save significant amounts over the long run. Ultimately, getting tips from experts and professionals will take away most of the guesswork in filing your taxes and executing tax strategies!

In the end, tax season can be hectic and confusing, but working with a tax advisor and a financial advisor can help you simplify and streamline the process.

With the help of each professional, you can optimize your tax situation and get the most money back. A tax preparer will look back on your previous year to ensure you’re filing accurately, while a financial advisor looks ahead to set up strategies that will benefit you in the long run. The key is understanding how these professionals have different roles and using each of them to figure out what’s best for you financially. 

If you’re looking for a financial advisor to help you identify and execute tax strategies for not only this year, but the years to come, use our search tool to find a financial advisor near you today! And make sure to make a free AdvisorCheck membership to get insights like this delivered straight to your inbox.

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Written by Anders Skagerberg, CFP

Fact checked by Billy Quirk

Reviewed by Leonard Kim

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