Working with Your CPA: A Team Approach to Tax Planning
Why coordination between your financial advisor and tax professional leads to better outcomes.
Tax season often reveals a gap in how families manage their financial lives. Your CPA sees your tax return. Your financial advisor sees your investment portfolio. But who sees the complete picture?
The most effective financial planning happens when your advisory team works together, not in silos. When your financial advisor and CPA coordinate throughout the year, not just at tax time, you benefit from strategies that neither could implement alone. Here's how this partnership works and why it matters for your family's financial success.
The Power of a Coordinated Approach
Think about the last time you filed your taxes. Did your CPA have visibility into your investment strategy? Did your financial advisor know about the tax implications of decisions made during the year?
For many families, the answer is no. Each professional works with incomplete information, which can lead to missed opportunities and unnecessary tax liability.
A coordinated approach changes this dynamic. When your financial advisor and CPA communicate regularly, they can proactively identify opportunities and avoid pitfalls. Tax-loss harvesting becomes more strategic. Retirement contributions are optimized. Charitable giving is timed for maximum impact.
The result? You keep more of what you've earned while staying fully compliant with tax law.
What Your Financial Advisor Shares with Your CPA
Effective coordination requires information sharing. Here's what your financial advisor should be providing to your CPA throughout the year:
Investment activity summaries including realized gains and losses, dividend income, and any tax-loss harvesting executed during the year. This helps your CPA prepare accurate returns and identify any issues before filing.
Retirement account contributions and distributions, including any Roth conversions, required minimum distributions, or early withdrawals that may have tax implications.
Charitable giving strategies, especially for donations of appreciated securities or qualified charitable distributions from IRAs. These require specific documentation and reporting.
Changes in your financial situation that may affect your tax liability, such as selling a business, receiving an inheritance, or significant changes in income.
Special Considerations for Energy Industry Professionals
For professionals in the energy industry, the coordination between your financial advisor and CPA becomes even more critical. Your compensation structure creates tax complexity that requires proactive planning.
Stock Option Exercises: The timing of when you exercise non-qualified stock options significantly impacts your tax bill. Your financial advisor needs to communicate exercise plans to your CPA so they can project the income impact and ensure adequate withholding or estimated payments are in place.
RSU Vesting: When restricted stock units vest, the income appears on your W-2, but the cost basis reporting on your 1099-B is often incorrect. Your financial advisor should provide accurate cost basis documentation to your CPA to prevent overpayment of taxes.
Deferred Compensation Elections: Decisions about deferring compensation should be made with input from both your financial advisor and CPA. The timing of when you receive this income can significantly affect your lifetime tax liability.
ESPP Sales: Employee stock purchase plan sales require careful analysis to determine the ordinary income portion versus capital gains. Without proper documentation, you risk paying more tax than necessary.
We maintain detailed records of all equity compensation transactions and proactively share this information with our clients' CPAs to ensure accurate reporting.
Questions to Ask Both Professionals
To ensure your advisory team is working together effectively, consider asking these questions:
To your financial advisor: "Do you communicate with my CPA about my investment activities?" and "What information do you share with my CPA and when?"
To your CPA: "Do you have everything you need from my financial advisor?" and "Are there tax strategies you'd recommend that require coordination with my investment portfolio?"
If either professional seems reluctant to coordinate with the other, that's a red flag. The best outcomes come from advisors who see themselves as part of a team working for your benefit.
How We Approach CPA Coordination
At Advocates Wealth Planning, CPA coordination is built into our service model. We believe it's essential for comprehensive wealth management.
Before major financial decisions, we consider tax implications and, when appropriate, loop in your CPA for their input. This might include decisions about exercising stock options, taking distributions, or making significant charitable gifts.
During tax season, we're available to answer your CPA's questions and provide any documentation they need. We also review completed returns to ensure investment-related items are reported correctly.
If you don't currently have a CPA, we can provide referrals to tax professionals who understand complex financial situations and value the coordinated approach we take.
Taking the Next Step
Whether tax season is approaching or you're planning for next year, now is a good time to evaluate how well your advisory team is working together.
Are your financial advisor and CPA communicating regularly? Is important information falling through the cracks? Are you missing opportunities because your advisors don't see the complete picture?
If you'd like to experience a more coordinated approach to your family's financial planning and tax strategy, we're here to help. Schedule a conversation with our team to discuss how we can work together with your CPA to optimize your financial outcomes.
FAQs
Frequently Asked Questions About CPA Coordination
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A: Yes. Direct communication between your financial advisor and CPA leads to better outcomes. They can share information more efficiently, identify opportunities, and avoid miscommunication that might occur if everything goes through you.
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A: Disagreements can actually be valuable because they surface different perspectives. A good advisory team will discuss the pros and cons with you and help you make an informed decision based on your specific situation and goals.
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A: At minimum, they should communicate during tax season. Ideally, they connect quarterly to discuss any changes in your situation and proactively plan for the year ahead. For complex situations like energy executive compensation, more frequent communication may be warranted.
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A: At Advocates Wealth Planning, CPA coordination is included as part of our comprehensive wealth management service. We view it as essential, not optional.
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A: Key documents include: realized gains/losses summary, dividend and interest income summary, charitable contribution records (especially for donated securities), retirement contribution and distribution records, and for energy professionals, detailed records of stock option exercises, RSU vestings with accurate cost basis, and ESPP sale information.
IMPORTANT DISCLOSURE INFORMATION
Past performance is no guarantee of future results. Different types of investments involve varying degrees of risk. Therefore, there can be no assurance that the future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended and/or undertaken by Advocates Wealth Planning (“Advocates Wealth Planning”), or any non-investment related content, will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Neither Advocates Wealth Planning’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if Advocates Wealth Planning is engaged, or continues to be engaged, to provide investment advisory services. Advocates Wealth Planning is neither a law firm, nor a certified public accounting firm, and no portion of its services should be construed as legal or accounting advice. Moreover, no portion of this discussion or information serves as the receipt of, or a substitute for, personalized investment advice from Advocates Wealth Planning. A copy of our current written disclosure Brochure discussing our advisory services and fees is available upon request or at www.theadvocateswealth.com. The scope of the services to be provided depends upon the needs and requests of the client and the terms of the engagement.
Please Remember: If you are an Advocates Wealth Planning client, please contact Advocates Wealth Planning, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently.