Tax accountants have advanced expertise in procedures that ensure client compliance with all applicable taxation laws and regulations. They also help individuals and businesses reduce their tax burdens through deductions, credits, management of investment gains and losses, and other accounting procedures.
As a professional specialization, tax accounting demands advanced mathematical proficiency and the ability to apply technical aspects of complex tax codes. Given these demands, the profession requires additional training beyond a general accounting degree. Many emerging tax accountants choose to complete this training in a master's-level accounting program with a concentrated taxation focus.
U.S. Bureau of Labor Statistics (BLS) data from May 2020 indicates strong prospects for accountants and auditors. Along with positive job growth projections, the median pay rate eclipsed $73,000 per year.
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Skills | Salary | Requirements | FAQs
What Does a Tax Accountant Do?
The tax accountant job description varies by professional context. These professionals interact with individual clients to prepare personal tax returns. They also work with businesses and tax-exempt organizations. In all cases, tax accountants make sure clients stay on the right side of all applicable laws and regulations. Other specifics of the role may differ among cases.
With individual clients, taxation professionals look at all income sources and seek deductions and credits that reduce their client's tax liability. These professionals also analyze clients' investment activity, asset holdings, and transactions, providing advice on managing associated tax implications.
Businesses of all sizes employ tax advisors and accountants. In smaller enterprises, tax professionals work toward objectives that resemble those of individuals preparing personal tax returns.
In larger companies, and especially publicly traded companies, tax accountants fill a more complex niche. They strategically direct incoming revenues and outgoing expenditures to create financial advantages. This takes on added importance if the company has shareholders who receive dividends or other direct financial benefits, which carry their own set of tax implications.
Tax-exempt entities such as charities do not need to pay taxes, but most need to post financial statements and tax returns each year. As such, these entities often hire tax specialists to ensure their operational activities adhere to tax-exempt status requirements.
Given this multiplicity of duties, tax accountants draw on many soft and hard skills. The following subsections explain crucial aptitudes in more detail.
Oral and Written Communication: Tax specialists need to convey dense, often complicated financial details in easy-to-understand terms.
Interpersonal Skills: In accounting firms and large companies, tax accountants often function within teams. Those who cultivate collegial interpersonal skills tend to have an easier time navigating cooperative environments.
The Ability to Inspire Confidence: Taxation accountants deal in complicated, technical tax laws that tend to confuse and mystify laypeople. Thus, they need to project an air of professional competence to win clients over.
Leadership: Given that many clients lack actionable tax insights and expertise, taxation accountants need to display self-starter qualities and take the reins on tasks with minimal client-side input.
Extensive Knowledge of Tax Codes: Tax laws apply at the federal, state, and local levels, and lawmakers change and update them regularly. Tax advisors and accountants require extensive, current knowledge of applicable details.
Auditing Training: Despite the best efforts of tax accountants, clients sometimes face audits. Capable taxation professionals recognize this and must apply their knowledge of auditing procedures to protect client interests.
Mathematical Proficiency: Taxation accountants draw heavily on mathematical skills including algebra, order of operations, ratios, and percentages in performing their duties.
Accuracy: Tax accounting is not a field that easily forgives mistakes, as even small errors and oversights can leave clients liable for serious financial penalties.
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A Day in the Life of a Tax Accountant
Typical duties vary for tax accountants, depending on the time of year. During tax season, specialists spend most of their days preparing client tax returns. A mini busy season recurs in the fall, when accountants finalize returns for clients who were granted extensions beyond the usual April 15 deadline.
At other times of year, tax advisors and accountants confer with clients to discuss the tax implications of their financial operations and business decisions. They also engage in professional development, attending training workshops and refreshing their knowledge of tax codes.
Many taxation accountants use their off-season time to handle administrative needs, such as:
Filing necessary tax and legal forms with the Internal Revenue Service (IRS) and other government agencies
Updating internal client profiles
Resolving correspondence and notices sent to clients by the IRS and other tax authorities
In team-oriented environments, workflow procedures typically include an open list of general tasks that require attention. Team members with free time can go into their workflow management platform and complete an available task.
Career Spotlight: Marie Spoto, CPA
Marie Spoto
Marie Spoto's career began with PricewaterhouseCoopers, where she performed full-scale audits and prepared financial statements for a variety of clients. Spoto furthered her skills as the manager of accounting at Wheaton College, where she oversaw the accounting department while reporting the college's income and expenses, including the endowment investments. She then spent eight years with the Hancock Timber Resource Group, where she coordinated and reviewed the client reporting and tax process for investment partnerships and limited liability companies.
Since 2011, Spoto has been providing tax, accounting, and consulting services to individuals and small businesses. She and her husband founded Spoto CPA, through which they enjoy serving and educating clients while providing impactful tax advice.
Spoto is a licensed certified public accountant. She holds a master of science in accounting and a master of business administration from the Northeastern University Graduate School of Professional Accounting.
Tax Accountant Salary and Career Outlook
The BLS projects demand for accountants and auditors to keep pace with national growth from 2019-2029. This would translate to over60,000 new accounting and auditing jobs by the decade's end. As the table below illustrates, tax accountants also earn competitive salaries.
Salary Expectations for Tax Accountants
According to job search website Indeed, the average U.S. entry-level salary was about $40,150 as of February 2021. Relative to this standard, tax accountants enjoy high early-career earning power. As explained in the table below, starting salaries for tax specialists average approximately $53,000 per year, which exceeds typical entry-level earnings by more than 32%.
Many other factors impact actual salaries, including experience, job function, and level of responsibility. Location also plays a major role, with professionals based in major cities tending to command an earnings premium that reflects their higher living costs.
Education level also plays a major role in determining compensation. BLS data from 2020 indicates that professionals with master's degrees earn 18% more than those with bachelor's degrees on average. They also enjoy lower unemployment rates: 4.1%, compared to 5.5% for bachelor's-only workforce members.
Next Steps on the Career Path
As a tax accountant's resume expands to include more experience, more career opportunities become available. Three major options include auditing, tax consulting, and managerial positions in accounting departments or firms.
Auditors usually work for government agencies like the IRS, performing thorough reviews of personal and business tax returns to ensure their accuracy, compliance, and legal validity. Tax accounting experience provides a valuable background, as auditors typically work on cases of suspected tax evasion. Auditors require a specialized certified internal auditor license, obtained by passing a standardized examination.
Tax consultants offer up their insightful expertise on a freelance basis, advising individuals and organizations on strategies they can use to reduce their tax burdens. Thus, instead of preparing returns, they focus more on helping clients navigate the complexities of tax codes when making important financial decisions. They also make strategic advisory contributions to business deals, especially acquisitions.
Accounting firms and companies that maintain internal accounting teams feature hierarchical structures that assign more responsibilities to senior members and fewer responsibilities to junior members. As tax accountants accrue experience, they can move into management positions. Some such positions have the potential to lead to senior executive and C-suite roles.
Where Can I Work as a Tax Accountant?
Tax accountants work in a multitude of locations, settings, and industries. These factors impact earning potential, advancement potential, and career opportunities. As such, emerging tax accountants should understand how these factors affect career paths, considering their own needs, preferences, and professional objectives accordingly.
Locations
Tax specialists live and work in every U.S. state, but location-specific factors can significantly affect their earning power and career opportunities. Jobs tend to cluster in higher numbers in large urban centers, while openings in smaller towns and rural areas are usually more limited as a natural consequence of population density.
Salaries also vary from one location to the next, with professionals based in major urban areas tending to earn more money. However, they also face higher costs of living, which aspiring professionals should factor into the balance as they weigh opportunities. Quality of life is another key consideration. School systems, healthcare, culture and recreation, and lifestyle factors all merit close analysis.
Settings
Many accounting professionals work in office environments by default. However, this appears to be changing. Thomson Reuters notes that the number of accountants working from home was rising even before COVID-19. The pandemic has accelerated that trend, making remote work a viable option for those seeking offsite opportunities.
In some cases, tax accountants work in client-based settings, visiting individuals in their homes or interfacing with enterprise customers in their places of business. As the economy continues to move toward globalization, international taxation continues to grow as a niche specialization. These roles often come with travel opportunities.
Tax Accounting Requirements
For those wondering how to become a tax accountant, the process covers education, licensing, and certification. The entire journey can take as little as 4-5 years, but most aspiring accountants complete the background requirements in 6-7 years. In many cases, this extra time goes into a graduate accounting degree, which can pay dividends in terms of higher salaries and enhanced career opportunities. Those who are looking to earn their degree at a quicker pace should learn more about accelerated MBA programs.
Frequently Asked Questions
What is the job description of a tax accountant?
A typical tax accountant job description covers the preparation of individual or business tax returns. As part of their duties, they also identify tax savings and strategic courses of action that may lead to future tax benefits.
What is the difference between a CPA and a tax accountant?
Most tax accountants are CPAs who specialize in taxation, having accumulated concentrated knowledge through experience, focused schooling, or both. Note that licensed or certified tax return preparers are not necessarily accountants, and they can only offer clients a limited set of services.
How do you become a tax accountant?
To become a licensed tax accountant, a candidate must complete at least a bachelor's degree in accounting and pass the CPA exam. From there, they can pursue entry-level jobs with a taxation focus, or supplement their general education with a specialized advanced tax accounting degree, MBA, or optional professional certification.
Where do tax accountants have the highest salary?
According to BLS data, the U.S. jurisdictions with the highest average pay rates for accountants and auditors are, in descending order, the District of Columbia, New York, New Jersey, Massachusetts, and California.
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