Investing in a tax plan can feel like a risk for taxpayers who are used to filing their own tax returns or focusing on basic compliance. In theory, you may see the benefits of a proactive approach where you implement strategies that will result in tax savings years down the line. But when it comes to taking the leap, you may find yourself held back by hypotheticals: What if the tax strategies don’t work? What if the investment doesn’t pay off? What if after all this time and money, I don’t see real savings or worse—there’s an error on my tax return?
Even though the point of working with a Certified Tax Planner is to avoid these outcomes, it’s understandable if you are experiencing hesitation before following through with your first tax plan. Fortunately, many tax planners have begun implementing warranties: a clean and simple way for you to mitigate risk and to know exactly what to expect from your tax planner.
- Warranties ensure you and your tax planner start off on the same page.
If you have never leveraged a proactive tax plan, you may be unsure of what to expect. A warranty provides clarity on what the tax planner will deliver as part of the tax plan, what the review process will look like, and how long you have to give the go-ahead for implementing it. Tax planners don’t expect you to become an accounting expert through this process or to understand tax law—they know that you are putting a tremendous amount of trust in them to accurately interpret your finances and make a thoughtful recommendation. This is why proactive tax planners ask for very detailed information and documentation from you—they need to get a full picture of your current financial situation and future potentialities for increasing tax savings.
Unlike basic tax preparation services where your provider is simply filling out tax documents for you, a Certified Tax Planner is analyzing your records and thinking years down the line about how to save you—and even your beneficiaries—the most money possible. By putting a warranty in place, you start off with an opportunity to ask questions about the process and ensure you are on the same page as your tax planner.
- Warranties protect the interests of both the taxpayer and the tax planner.
A warranty is meant to benefit both you and your tax planner. You want to make sure that you’re satisfied with your tax plan—and so does your tax planner. You want your tax savings to outweigh your investment in your tax plan—which is your tax planner’s entire goal and what differentiates them from a standard tax preparer. Your tax planner wants to ensure they are paid fairly for their effort—and you want to make sure they have an incentive to be thorough and provide you with the best possible results.
What’s the takeaway here? You and your tax planner have the same goals. Putting this all into writing removes ambiguity and takes the pressure off because if any questions come up in the future, you both have an objective document you can refer to to settle the matter.
- Warranties clarify what to do if you are dissatisfied.
Ideally, this is a scenario you’ll never have to deal with, but as you dive into the tax planning process, just knowing that you have a contingency plan in place can give you the confidence you need to get started. A warranty will clearly outline the circumstances under which a taxpayer can submit a complaint and what the tax planner will offer to compensate you.
In a standard warranty, you should see elements like:
- A time limit: Once the tax plan has been submitted for your review, you’ll have a window of time within which you can decide not to move forward with the plan. Typically, this window will be 60, 90, or 120 days like most user or consumer agreements you’ll see in other industries.
- A step-by-step process for submitting a complaint: If you decide to request a refund or a revised tax return, how do you make that request? Via email? If so, which email address should you use? What do you need to include in that written request to ensure you get a refund? What if you want to talk to the tax planner first and see if there’s another solution to the issues you see? A warranty will outline this process for you so that from the very beginning there are no surprises.
- Available compensation: This is where you’ll see what conditions must be met for you to receive a refund (or another form of compensation like a revised tax plan) and how much that will amount to. Some tax planners may offer a full refund of the amount paid for the tax plan. Others may only offer a 50% refund if you are dissatisfied unless an actual mistake was made on the return. Again, the benefit here is that you will know these conditions in advance. Remember that a good tax planner never wants you to reach this stage, so they may include a clause that says you are required to give them a chance to review the tax plan with you in person before requesting a refund. This gives the tax planner a chance to prove the validity of their recommendations and gives you a chance to resolve any concerns.
Sometimes the requirements of a warranty can even push the taxpayer and tax planner to have conversations that clarify misunderstandings. In one real-life scenario, a taxpayer was working both with a Certified Tax Planner for the first time and with a financial advisor who was not a tax expert. The tax planner included in the tax plan a strategy for reducing future capital gains tax. When the financial advisor heard of this, they advised the taxpayer not to move ahead with the tax plan. They claimed, “I’ve been in the business 25 years, and I’ve not heard of anyone being able to avoid tax on capital gains.” Unfortunately, this was misinformation—but even a situation like this could be resolved if the taxpayer sits down with the tax planner, per the terms of their warranty, to review the concerns they have with the tax plan before requesting a refund. The tax planner would be prepared to show them which tax laws do in fact allow us to implement tax strategies to mitigate or eliminate capital gains altogether. The end result? A satisfied taxpayer and a tax planner who can celebrate a job well done.
Summary
By law, tax professionals are not allowed to guarantee the results of a tax plan, but they can provide a warranty that assures you they are willing to be held accountable for mistakes on a tax return and are willing to provide compensation if you are dissatisfied and do not want to move forward with the tax plan. Sometimes this written reassurance is all that is needed to give the taxpayer the confidence they need to try a new tax strategy that could save them thousands of dollars.
Want to learn more about how proactive tax planning can benefit you? Reach out to a Certified Tax Planner today.
