A tax accountant is a finance professional specializing in taxes while also being competent in core accounting and finance skills, like reading and understanding financial statements. A tax accountant’s job involves helping clients file tax returns to the Internal Revenue Service (IRS) and state tax agencies.
To help you learn how to become a tax accountant, we’ll go over what a tax accountant is, the education and certification requirements to become one, and the pros and cons of this career path.
What Is a Tax Accountant?
Tax accountants help companies adhere to local, state, and federal tax guidelines to avoid penalties. Handling someone’s taxes is a big responsibility, as the accountant and client could face serious consequences if everything isn’t handled properly.
“I always tell my clients that I look at the forest through the trees, as well as each individual tree,” says Elizabeth Buffardi, CFP®, CPA, President of Crescendo Financial Planning and Certified Member of the Alliance of Comprehensive Planners. “The reason is that you have to know the rules (the forest), and you have to know where the proverbial line is (trees) so that you don’t cross over it and cause a huge problem for your clients.”
Within the forest and the trees, though, tax accountants advise companies and clients on ways to maximize tax returns and save money. For example, if a company meets certain environmental or energy standards, it may qualify for tax breaks.
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What Does a Tax Accountant Do?
Common responsibilities of a tax accountant include:
- Preparing tax documents
- Analyzing financial statements
- Reviewing expense reports and transaction details
- Investigating discrepancies in financial data
- Advising clients on ways to improve financial standing and take advantage of available tax benefits
Where Do Tax Accountants Work?
There are three main places a tax accountant can work, though the paths to get to each are similar:
- They can work for themselves by establishing a limited liability corporation (LLC), providing tax preparer and accounting services to their clients, such as individuals and small businesses.
- They can work for accounting firms like EY or KPMG, providing accounting services to corporate clients of the firm.
- They can work in-house for a company, providing accounting services exclusively to that company.
Additionally, tax accountants can specialize in a specific industry or subfield of accounting. For example, tax accountants can also work in forensic accounting, focusing primarily on analyzing tax documents to find evidence of fraud or illegal activity. Tax accountants may also work as auditors, checking a company’s tax paperwork to ensure everything is reported correctly and that reporting processes are efficient and accurate.
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Tax Accountant Salaries
A tax accountant’s salary varies depending on their employer, level of experience, and location. According to data from the U.S. Bureau of Labor Statistics (BLS), accountants and auditors across all specializations, locations, experience levels, and industries have an average salary of $86,740.
However, tax accountants are a specific type of accountant, so their salaries may differ slightly. Glassdoor estimates that the average salary for tax accountants is around $71,900. However, those with less than a year of experience earn around $61,500 annually, and those with more than 15 years of experience average $90,600 per year. Payscale is slightly more conservative, estimating average annual salaries of around $59,900 for tax accountants.
It’s important to note that tax accountants often receive additional forms of compensation, such as overtime pay during busy seasons, annual performance bonuses, and stock shares. Also, salaries for accountants who own their businesses depend on how much they choose to charge for their services.
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Path to Becoming a Tax Accountant
The first step toward becoming a tax accountant is getting a degree in accounting. An accounting degree makes it easier to become a certified tax accountant, since the certified public accountant (CPA) test covers many of the topics and skills you’d learn through an accounting degree program. However, a degree in other areas, like finance, economics, or business, can still provide a good foundation for an accounting career.
“Most people enter tax accounting through a public accounting firm as their first job out of college,” says Buffardi.
Unlike some careers where you need to establish a specialization during college, you can typically choose to go into tax accounting once you’ve entered the workforce. However, taking tax-centered courses during school can be a good way to determine if it’s a specialty you enjoy and want to pursue.
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Tax Accountant Certifications
Most tax accountants pursue CPA licensure since this is the most widely accepted certification in accounting.
“This is a stand out on a resume because it shows you have taken the time and made a great effort to pass the CPA exam,” says Buffardi.
The steps to obtaining a CPA include:
- Completing a bachelor’s degree with at least 120 college credit hours
- Showing proof of at least two years of relevant work experience (depending on the state)
- Passing a four-part CPA exam that covers tax processes, auditing, and accounting ethics.
You also need to maintain your CPA license by completing continuing education hours annually.
It’s unlikely that someone without a CPA could work in tax accounting at an accounting firm or even in-house with a large company. However, certain small businesses may accept accountants with only a degree in accounting or relevant work experience that proves their skills.
Tax accountants can also get a license directly from the Internal Revenue Service (IRS) and become enrolled agents. Becoming an enrolled agent gives the tax accountant more freedom to file tax returns across different states. This certification involves registering with the IRS and passing an exam on tax regulations and ethics.
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Required Skills in Tax Accounting
Beyond this, tax accountants should have skills like:
- Analytical thinking to uncover and solve problems
- Time management to handle the busy season
- Communication skills to work effectively with co-workers and clients
- A love for problem-solving to help clients navigate tough tax situations
Hard and Technical Skills
However, tax accountants should also have specific accounting skills like:
- Deep knowledge of local, state, and federal tax regulations
- Familiarity with accounting software, including QuickBooks and Microsoft Excel
- Experience with asset management to help clients understand their taxes and finances
- Data entry competencies
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Tax Accounting Advancement Opportunities
The career advancement path for tax accountants working in an accounting firm is moving up a corporate ladder.
“Many of my friends who I had met in public accounting stayed in public accounting and became partners at their firms,” says Buffardi.
Others may focus on building their businesses and establishing LLCs. This route can be challenging, though, since it requires you to find and service your own clients while keeping your business afloat.
Tax accountants can also go back to school for advanced degrees, such as master’s degrees in accountancy or Master’s of Business Administration (MBAs). Some accountants go so far as to become tax attorneys, taking their tax expertise into the legal realm.
“Having a CPA and a [doctorate in jurisprudence] JD is very powerful,” adds Buffardi.
Ultimately, the skills you learn as a tax accountant are highly transferable and can take your career in many directions.
“I started out in the tax department of a public accounting firm,” says Buffardi. “Then I worked at a family office, where the family ran hedge funds as a business. Having a tax background was one of the reasons they hired me; they really valued my public accounting experience.”
Additionally, once you have a CPA license, it’s easy to focus on different areas of accounting or transition into planning and management roles within a business, such as becoming a certified management accountant (CMA).
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Pros and Cons of Tax Accounting
One of the best parts of working in tax accounting is how transferable the skills are and how versatile the career path can be.
“It gave me an excellent base of knowledge that allowed me to go in any direction I wanted,” says Buffardi. “Once you have that solid base, then you can go into related fields such as any type of accounting, technology, law, financial services and investments, just to name a few.”
The work itself is also incredibly rewarding. You get immediate gratification from helping clients navigate difficult and confusing tax situations, and you form strong working relationships with them.
Tax accounting isn’t without its faults, though. The most significant drawback of any career that involves taxes is the busy season.
“I remember at the start of tax season, I would have at least 10-20 returns on the floor of my cube waiting for my attention,” says Buffardi. ” By the time March came, the number of returns would easily double.”
While the busy season brings long hours and hectic schedules, it can also make the rest of the year feel a little less exciting.
“After all the excitement of tax season, the summer always seemed very boring,” says Buffardi.
Ultimately, an accounting career requires a significant amount of data entry, and filling out tax paperwork may begin to feel monotonous after a while.
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