Differences Between a Tax Preparer and a Tax Planner: Which One Should You Choose?

Differences Between a Tax Preparer and a Tax Planner: Which One Should You Choose?

People often think of tax preparation when they think about doing their taxes. As tax time approaches, people scramble to find savings and frantically rush to file their returns and avoid incurring penalties. However, a tax strategy is not just for filing your taxes every year. It can be an effective means of planning for the future and minimizing your taxes simultaneously. This is exactly where you need tax planning. 

So, then are tax planners different from tax preparers? In a nutshell, yes. The process of tax preparation is reactive, whereas tax planning focuses on the future.

While these words sound similar, each refers to a different aspect of taxation and has distinct meanings. As we go through each service, let’s see how they differ and choose the best one. 

What is Tax Preparation?


Preparing taxes is typically a one-time task. Normally, tax preparation takes place between January and April. A tax preparer or Certified Public Accountant (CPA) prepares tax returns before the deadline for filing. Tax preparation needs several documents that provide valuable information regarding income, investments, and retirement plan statements. The approach also considers multiple income streams, deductions, and charities. 

The role of a tax preparer 

A tax professional prepares the tax return by organizing and entering the previous year’s tax information. So you need to visit a tax preparer once or maybe twice a year. Their expertise in tax laws ensures that returns comply with the IRS regulations. So you can rest assured about meeting the federal and state regulations.

Tax preparers can offer general tax advice and tax-saving suggestions based on your previous records. A tax preparer can address general questions regarding the filing process. There will, however, be no proactive tax strategies to help you reduce your tax liabilities. The reason – Such meticulousness, detail, and planning fall into a more comprehensive process requiring more expertise and attention. 

Qualifications to look for in a Tax Preparer 

Preparer tax identification numbers (PTINs) are the primary requirement for preparing taxes. A PTIN needs no additional credentials or accounting experience. Some states require tax preparation certification, similar to a PTIN but do not signify expertise or competence. Tax preparation services can be provided for a fee by qualified tax preparers.

While anyone with a PTIN and the required state credential can prepare your tax return, it’s a prerequisite to be either a Certified Public Accountant (CPA), enrolled agent, or an attorney who can address things like IRS issues, payments, audits, and collection activities. 

Benefits of tax preparation

  1. Save more money. A tax professional understands tax laws and compliance. They maximize your tax deductions and credits.
  2. Save time. It takes a great deal of time and effort to prepare your tax return independently. A tax preparer can save all that time.
  3. Error-free returns. A mistaken tax return can have disastrous results. Errors can lead to audits and penalties. Additionally, you can reduce your risk for audit with tax preparation.

What is Tax Planning?


A comprehensive tax strategy will help you chart a course of financial behavior that will help you manage your taxes in the future. When it comes to tax planning, it’s less about your specific return and more about how to maximize it.

The role of a tax planning agency or tax planner 

Financial planning often entails a regular meeting with a financial planner and taking an active role in making decisions about your finances. Tax planning, on the other hand, is an ongoing process, one that shifts and changes as your goals do. A tax planner or tax planning agency integrates the changing financial dynamics and fosters an open and transparent relationship with its client. A tax planner will analyze your financial objectives, values, and future vision to create a personalized financial plan.

Creating a tax plan that meets your needs and considers your goals is essential. Few tax planning services like AOTAX have specific plans for businesses and individuals. They chalk out a plan considering both business and individual tax needs. The services vary from advisory services to business tax preparation and planning. All that so you can act fiscally responsible and tax-friendly.  

Qualifications to look for in a Tax Planner

While tax planners require a great deal of expertise and specific knowledge, they are not subject to any federal or state regulations. They need to hold a CPA for general tax planning or be an accredited tax advisor for sophisticated cases. The biggest asset for a tax planner is their industry knowledge regarding applicable laws and particular situations

Benefits of tax planning

  1. Reducing tax liability. An individual tax planner or tax planning agency focuses primarily on lowering liabilities or routing investments. When you have business income, planning throughout the year ensures you maximize tax credits, harvest losses from investments, and manage your wealth accordingly.
  2. Flexible estate planning. Don’t just leave your assets, but add a legacy to your heirs. You can lower your own and your heirs’ tax liabilities with tax planning.
  3. Know your investment returns. Your carefully thought-out investment plan can be ruined by expenses, capital gains, and even inflation, leaving you with considerably fewer returns than you anticipated.

Tax Planner vs. Tax Preparer

Tax preparation businesses cannot provide you with the expertise you need for tax planning. Planning your taxes and saving money are two ways tax planners can help you. A tax planning strategy must be implemented year-round to minimize your tax liability. 

Tax planners typically offer the following services:

  • Strategy for harvesting tax losses. 
  • Tax bracket management. 
  • Constantly plan other investment strategies which could get deserved returns while saving on taxes. 

Tax preparers typically provide the following services:

  • File tax returns.
  • Comply with state and federal tax laws.
  • Handle missed deadlines and resolution paperwork.

Finally, a tax planning agency is the best solution by weighing the differences. A tax planner will tailor the plan to meet your needs. They care about your individual or business financial goals and plan the future. Their meticulous planning strategies will help you reach those objectives while also fitting the taxation rules. Investing and taxes can sometimes seem out of reach. But not anymore with AOTAX. Get in touch today to get your free tax draft!