Somehow, we believe that CPAs are the best people for tax help, but they are not trained as tax strategists. They help you understand the principles of how to account for and audit business transactions.
An accountant is not trained as a tax strategist. An accountant is trained to understand all of the principles of how to account for transactions for businesses and how to audit to make sure everything is accurate and correct. The requirements that need to be followed in terms of financial documents that get created and a public company such as Tesla or Amazon. These are publicly traded companies, so they have to follow the Securities and Exchange Commission requirements to report what’s called a 10-Q. They do quarterly reports on their income and expenses. They show the balance sheet of what assets they have versus what liabilities they have and how things are changing over time.
These are known as Generally Accepted Accounting Principles or GAAP standards. Certified Public Accountants are well-versed in that stuff. They’re not necessarily well-versed in tax strategy, although a lot of tax preparers become CPAs so it places this amount of credibility in your mind that they’re particularly skilled or they’re special at something. They’re special at something. It’s just not necessarily a tax strategy.
I’m not discounting the fact that a CPA could do tax preparation and they do a good job. What I am saying is most accountants are not in the space of helping you get the maximum deductions because they’re mostly trying to get your accounting right so that you can file your tax returns correctly. You have to be the one who’s proactive to get tax strategy to happen.
You have to ask better questions. You have to ask things like, “I’ve learned about this deduction recently. How can I?” versus “Can I?” The word how will invoke an analytical moment in the brain of the CPA or tax preparer and they’ll say, “Let me think about that.” “What about this, that, and the other?” They may come up with a way for you to legitimately take advantage of that deduction.
This book Tax-Free Wealth by Tom Wheelwright, opens your mind. It’s well-written in terms of simplicity to understand the tax code and the basics of tax strategy. It will open your mind to the possibilities of things you could talk about with somebody who helps you with your taxes, whether that’s a CPA, which tends to be a little more expensive.

If you’re a business owner with lots of employees and maybe multiple entities and multiple locations, maybe you want a CPA because they can help you with your actual accounting work and preparing your financial statements. Maybe they’ve got a bookkeeper in the office that you’re working with that helps you make sure that everything is set up correctly to do your taxes.
Again, they may not be a tax strategist. I keep reiterating the word strategy because it requires that we ask good questions about what is possible in terms of legitimately saving on our taxes. No American is required to pay more than what is required of them. We’re only required to pay that which we are required to pay. If we don’t know the deductions there, we’re overpaying.
If we don’t file for the credit that’s available to us, we overpay. The good news is if you’ve missed some things, you can go back up to three years and amend prior tax returns to be able to get those dollars back. After three years, you’re dead in the water. If you’ve missed something for quite a long time because you’re unaware or your CPA didn’t know to ask about something that you’re doing, such as a side business, and you’ve been missing all these deductions, you’re dead. You can’t take advantage of that.
Documentation
It’s unfair unfortunately that the IRS can take up to seven years to audit you. They can go back up to seven years of your taxpayer life, review those things, come back and say, “We think you took a deduction that you don’t qualify for and we have to back that up with documentation.” The burden of proof is on us and that’s why some people get scared that I don’t have the right documentation. I don’t know how to document things. I don’t know what I was supposed to document. Who’s telling me these things? If this is you, then you should document things. You need to have things in writing. You need to have a physical file or a digital file backing up things that you say are deductible.
As a quick example, if you take a home interest deduction, if you have a mortgage on your house, you will have received a 1099, a physical document, and possibly a digital version of it from your mortgage lender. They’re required by law to give that to you. It shows how much interest you paid and you give that to your CPA or tax preparer. You hold it in your file if you’re doing your taxes and you hold on to that for seven years. In today’s world, we can digitize that and put it into a cloud so that it’s easy to get from anywhere in the world, but that’s what I mean by documentation. You have to have some document backing up the deduction that you took.
Enrolled Agent
To get back to my story from earlier, when I first was taking on the need for some support with my tax strategy and preparation, I found somebody who was not a CPA but was a strategist who had a designation known as an Enrolled Agent, EA. I asked him about this, “What is this Enrolled Agent?” I’ve heard that I need to have a CPA.
What I told you guys, he told me. He said, “An enrolled agent, unlike a CPA, is a specialist in tax strategy.” To get an Enrolled Agent designation, you have to go through some training and you have to pass some tests to get licensed as an Enrolled Agent. That means that you understand personal and business tax returns very well.
You have a simpler practice in that regard so you can focus on doing strategy with your clients to help them maximize their deductions. He said, “We ought to be meeting 2 to 4 times a year to make sure we maximize the deductions, so we know what trajectory you’re on with your business profits and we don’t over-deposit money into the tax system every quarter so that, so we don’t give a free loan to the IRS, but instead keep the cashflow in our possession, so you can maximize your returns.”
I said, “That’s brilliant. Let’s do this.” An Enrolled Agent is what’s better for most people. It’s not to say that it’s bad to have a CPA, but an Enrolled Agent is a great alternative because they specialize in tax. They don’t specialize in accounting and all the public-related stuff and the auditing, although they have to have accounting classes as well. These people specialize in tax planning and tax strategy.
An Enrolled Agent is a great alternative to CPAs because they specialize in tax planning and tax strategy.
Consider that. If you’re going to look for somebody to help you, if you’re at the very basic level, it’s free. You might go to H&R Block. You might go to your local library. Oftentimes, your local community will have people who understand tax to help you file your taxes properly and correctly for free. If you have a little bit of a side business, you might look for an Enrolled Agent. If you have a very sophisticated business and possibly considering going public yourself because you’re massive or at least you have the potential to be, maybe a CPA is the right place to be. There are different price points at each of those different levels.
Tax Returns
Just know that. It’s a good idea to become familiar with tax. Here’s something you may have never heard. I think you should read your tax returns. For real. They’re cool because the tax return itself gives you all the clues you need about the types of things you would want to talk about with your strategist. I’m dead serious about that. How many of you have read your tax return?
I’m sure most of you would say, “Do you know what? No. I don’t even want to look at that thing. I’m just glad it’s done.” I encourage you guys to let it become something as a part of your role as a student of money. Read your tax return. Your tax return will inform you about the things that are possible to deduct and things where you can get credits.
It’s just two pages on your personal tax return that give the summary of your entire tax situation. Various schedules go with it as well. It’s called, Schedule A, which is your itemized deductions, Schedule C, which is small business activities that you do that may have deductibility, and then a variety of other things that give just more detail about your line items on the two pages of your 1040. Your business return as well has some important things on it.
Episode Wrap-up
I recommend that you get familiar with your tax returns to help inform you about how to be better versed in how you talk to your Enrolled Agent, CPA, or tax preparer regarding your tax strategy. Back to some of the things I started with. Do you need a CPA? When does it make sense to get a CPA? CPAs are very helpful from an accounting perspective if you have a bigger business where you need audited financials or specifically prepared financials that you can’t get from a bookkeeper or do yourself. They aren’t necessarily tax strategists, although some are.
Enrolled Agents also are trained specifically in tax, but they are not necessarily trained as accountants. They can’t prepare audited financials. They can do bookkeeping for you if they’re versed in that, and they may or may not be strategists. A tax preparer who works at H&R Block and may have some basic training might not be an Enrolled Agent or somebody who does free help for your local municipality. They probably aren’t attack strategist either. They’re just trying to help you get the I’s dotted and T’s crossed. You need an EA or a CPA when you need a strategy. Usually, that happens when you’re a small business owner or starting a small business and you have different factors than you’re used to that are much more complicated so that you don’t miss deductions.
We’re going to wrap there, guys. I wish you a wonderful day. Thanks for tuning in. Please like, subscribe, and share this with your friends. If you have the opportunity to do a review, I’d be very grateful. If you like this content, let me know. If you do not like it, let me know what would you prefer to hear from me. I appreciate you, guys. I love you. Have a great rest of your day. We’ll see you in the next one.