Thursday, June 7, 2012


As a tax preparer, and online tax authority, I am often asked, “What is your best tax advice?”  I have given it much thought and decided the best piece of tax advice I can give anyone is DO NOT ACCEPT TAX ADVICE FROM ANYONE OTHER THAN A PROFESSIONAL TAX PREPARER.

I usually continue my answer by saying "don’t listen to your brother-in-law, your cousin Manny, your auto mechanic, your neighbor or co-workers, or a guy you ride to work with on the train".

But I also mean don’t listen to a broker, banker, insurance salesman, or other “financial professional”.

Many people in the various financial industries may be experts in their particular field, but know absolutely nothing at all about federal or state income taxes. Well maybe not nothing. They may have a little knowledge about taxes – but a little knowledge can be truly dangerous.

I am a tax professional, but I know next to nothing about insurance and would not think to offer unsolicited advice about what type of policies or how much coverage you should have.

When you are given advice from a so-called financial professional always consider the source.  Remember, an insurance broker is a salesman, as is a stock broker and, to a degree, a banker. They make their money by selling you something. So take anything they tell you regarding taxes with several grains of salt.

To be honest, in many cases a financial professional providing tax advice is doing so out of a genuine desire to help you, and sincerely think he/she knows what they are talking about. But there are those out there who are only interested in making a commission by selling you an annuity or other investment and give you false tax advice to try to convince you to give them your money.

Anytime you are given tax advice from a financial professional, or anybody else, be sure to run it by your tax professional before taking any action. 

Many times I have asked a client, after the fact, why they did something that was tax stupid – and was told “my banker” or “my broker” or “my insurance agent told me to do it”.  Or, when asked why they did not do something that was tax smart, they tell me their banker, broker or agent told them they couldn’t.



Peter Reilly said...

I think I have to express some moderate disagreement with you here. In part it depends on what you mean by "accept advice". Often people in particular fields learn quite a bit about the tax issues in that area that most preparers will never get exposed to. They might be able to alert someone to possibilities or nuances that many preparers would be unaware of or they might be able to alert someone to the fact that their preparer has screwed up.

Robert D Flach said...


It is true that some financial professionals are indeed extremely knowledgeable, and perhaps even expert, in the tax aspects of their particular field. However I have found that this is more the exception than the rule.

I still say a taxpayer should review any advice provided by a "financial professional" with a tax professional before taking any action.


K A Friedhoff said...

I couldn't agree with you more on this subject. Commission-driven professionals are more often than not putting the words 'tax benefit' or 'tax advantage' or 'tax strategy' in their industry-speak. On the other hand, tax professionals and preparers are bound by ethical law not to mix pay-off with pay-out just as accountants are not to mix the accounting of books with auditing services. I have had too many clients come to me, this past year especially, with ill-advised tax maneuverings that had irrevocable consequences. - K. Friedhoff