A tax accountant is a finance professional specializing in taxes while also being competent in core accounting skills, like reading and understanding financial statements. A tax accountant’s job involves helping clients file tax returns to the Internal Revenue Service and state tax agencies.
To help you find out how to become a tax accountant, this guide will go over:
- What Is a Tax Accountant?
- Path to Becoming a Tax Accountant
- Tax Accountant Salaries
- Pros and Cons of Tax Accounting
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.
Other 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 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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Path to Becoming a Tax Accountant
The first step towards becoming a tax accountant is usually getting a degree in accounting. An accounting degree makes becoming a certified public accountant (CPA) easier since the CPA test covers many of the same things you’d learn while getting an accounting degree. However, other degrees in areas like finance, economics, or business can still provide a good foundation for going into an accounting career.
“Most people enter tax accounting through a public accounting firm as their first job out of college,” says Buffardi.
So unlike certain careers where you need to establish a specialization during college, you can often 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 is a specialty you enjoy and want to pursue.
>>MORE: Experience what it takes to work at a Big Four accounting firm with KPMG’s Career Catalyst: Tax Virtual Experience Program.
Most tax accountants choose to get a certified public accountant (CPA) license since this is the most widely accepted certification for accountants.
“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 getting a CPA include:
- Having 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.
- Maintaining their CPA license by completing continuing education hours annually
It is 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 a degree in accounting or relevant work experience proving 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.
>>MORE: Learn about the different ways to become a tax preparer.
A crucial soft skill in tax accounting is attention to detail — tax forms must be filled out carefully, and financial documents need to be read and understood thoroughly to ensure nothing is missed.
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
As an accountant, the most important hard skill is understanding the generally accepted accounting principles (GAAP). These standards form the foundation of all accountancy, even tax work.
However, tax accountants should also have specific technical 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
>>MORE: Check out some key accounting skills you need on your resume.
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 your own clients and provide them with a high level of service while still keeping your business afloat.
Tax accountants can also go back to school and gain higher 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.
For example, “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).
Tax Accountant Salaries
A tax accountant’s salary varies depending on the company they work for, how experienced they are, and their location. According to data from the U.S. Bureau of Labor Statistics, accountants and auditors across all specializations, locations, experience levels, and industries have an average salary of $83,980.
However, tax accountants are just one specific type of accountant, so their salaries may be different. For example, Glassdoor estimates that the average salary for tax accountants is around $72,200. However, those with less than a year of experience earn around $63,900 annually, and those with more than 15 years of experience average $96,300 per year. Payscale is slightly more conservative, estimating average annual salaries of around $58,600 for tax accountants.
However, it is important to note that tax accountants may have overtime pay during busy seasons, annual performance bonuses, and stock shares. Additionally, for accountants who own their businesses, average pay depends on how much they choose to charge for their services.
>>MORE: Check out some of the best-paying finance careers.
Pros and Cons of Tax Accounting
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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 the immediate gratification of helping clients navigate difficult and confusing tax situations, and you form strong working relationships with your clients. Tax accounting also allows you to build upon valuable skills that can help you in many aspects of your professional and personal life.
“It reinforced the value of determination and perseverance and it helped me to become forward-thinking,” says Buffardi.
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 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.
Accounting is a career that requires a significant amount of data entry, and filling out tax paperwork may begin to feel monotonous after a while, especially in times outside of the busy season.
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