By Jake Withnell, CFP®
Working with both a financial advisor and a CPA can be a great way to ensure your finances are in order. But keeping these professionals in silos instead of allowing them to work together is a common mistake that can lead to inefficiencies and lost opportunities when it comes to lowering your lifetime tax liability.
When your tax advice is coordinated with your financial advice, you can make the most out of your money by utilizing a holistic strategy tailored to your needs. Here are just a few of the reasons why your financial advisor and CPA should work together.
Your Finances Require a 360-Degree View
At JGP Wealth Management, we take a holistic approach to helping our clients. That starts with creating a detailed financial plan that focuses on a variety of topics, including retirement planning, cash flow, lending, estate planning, tax coordination, education planning, charitable, and asset management/investments.
Our team of experienced professionals functions like a family CFO working to make sure all aspects of your financial affairs are organized and synced together. We take great pride in our work and are confident in our abilities. Yet we understand that we don’t know everything, and we value working with other professionals who can assist our clients. A CPA, for instance, is an expert in the field of taxes and can offer unique insights that help us come up with the best plan of action.
The Role Your Financial Advisor and CPA Play in Your Taxes
While financial advisors and CPAs have different jobs, an integral part of their work revolves around taxes. Approaching the topic in different ways, they often have unique perspectives to add to the discussion. Let’s discuss how each approaches this important topic:
A financial advisor will approach your taxes as one component of your overall financial plan. Taxes will be a key component to get right, just like it is with investments, retirement income, and estate planning.
The goal of a financial advisor is to take advantage of tax-planning opportunities so you can lower your lifetime tax liability. This includes determining the right investments for the right type of accounts, the best ways to distribute your investments to generate a retirement income, and more complex tax strategies like Roth conversions and tax-loss harvesting opportunities.
A certified public accountant (CPA) will take a detailed look at your taxes, with a particular focus on the tax situation in the current year. They want to review all of your income and categorize it properly, as well as ensure you’re taking full advantage of all deductions offered to you. There are a number of tax credits and deductions that have detailed requirements, and a CPA can see if you qualify.
The Benefits of Working Together
There are a number of benefits when you combine the knowledge of a financial advisor with that of a CPA. The financial advisor will be able to look at your big-picture planning opportunities, while the CPA will bring an intricate knowledge of the tax code and the necessary rules to follow.
A few examples of how a financial advisor and CPA may be able to help reduce your tax burden:
- Roth conversions. If you have most or all of your investments in tax-deferred accounts like a traditional 401(k) or IRA, consider if you should convert a portion of your funds to a Roth IRA while you’re in a lower tax bracket. You will have to pay taxes on the amount you convert, but once the funds are in a Roth IRA, they can continue to grow without paying taxes, and distributions are also tax-free (as long as you follow the applicable rules). Speaking of rules, this is a fairly complex strategy and it would be helpful to combine both your financial advisor’s and your CPA’s expertise to properly implement it.
- Gifting opportunities. If you are charitably inclined, there are a number of ways your gifting can save you money in taxes. Two popular ways to give while saving on taxes are a donor-advised fund (DAF) or a qualified charitable distribution. At JGP, we also focus on gifting highly appreciated stocks with a low tax basis. This option can be combined with a DAF to help you avoid capital gains and gift more to the charities you care about. Your financial advisor can work through the implications of what that gift means to your financial plan, while the CPA can manage the tax implications of that gift as it relates to your tax return.
- Tax harvesting. It never feels good to see a loss in your investments. There is a silver lining, though. If you have a loss in a taxable account and you sell it, you can offset the amount you lost against any investment gains you may have, or even against your earned income (up to certain limits). A financial advisor can help identify the best investments for tax-loss harvesting, while a CPA can help ensure you are following the tax code and not inadvertently subjected to the wash sale rules.
We Can Help You Save on Taxes
Contact us now to get started at JGP Wealth Management, and let us team up with your CPA to help implement the best tax strategy for your unique situation. Reach out to me at 503-446-6450, email email@example.com, or schedule an introductory phone call online.
Jake Withnell is a financial advisor at JGP Wealth Management, an independent, fee-based financial advisory firm in Portland, Oregon. Jake is known for going the extra mile for his clients and for his passion for working tirelessly to help his clients find solutions to their financial concerns so they can confidently live out the life they want. He prioritizes listening and understanding as the foundation of his relationships with his clients, and his highest hope is that they can spend more of their time and energy on their passions knowing he is watching over their financial future. Jake specializes in serving business owners, Nike executives, and retirees, and plays a key role in JGP’s portfolio management process, building and analyzing financial models, and conducting client cash flow analyses.
Jake graduated from Eastern Washington University with a bachelor’s degree in professional accounting and finance. He is a Certified Public Accountant (CPA) and a CERTIFIED FINANCIAL PLANNER™ professional. Jake’s claim to fame is his time playing tight end for the Eastern Washington University Eagles, all while earning four-time Big Sky Conference First Team All-Academic honors! Jake values giving back to his community and does this by volunteering with the Children’s Cancer Association, Family Building Blocks, and New Avenues for Youth. In his free time, Jake takes advantage of the many outdoor activities the Northwest has to offer, such as trail running, mountain biking, and hiking. He loves traveling and spending long weekends at his family beach house in Seaside, OR. To learn more about Jake, connect with him on LinkedIn. You can also watch his latest webinar on 6 Ways to Maximize Your Nike Employee Benefits.