When it comes to risk, we all have different levels of comfort. Skydiving? Yes. Eating raw meat? No. Travelling to a foreign country? Sure! Hiking in 95-degree weather? Not a chance.

We often throw around the term “risk tolerance” in the world of finance, specifically when it comes to investing. Whether or not you have a financial advisor, you probably have some idea of your own financial risk tolerance—consider your savings and investment portfolio if you aren’t sure.

One area of risk that is too often overlooked is choosing your tax preparer.

You wouldn’t pick just anyone to be your doctor, manage your finances, or even walk your dog, so why would you trust any old accountant with your taxes?

The tax code is always changing

Tax code is ambiguous, and requires interpretation, which means leaving the fate of your taxes in the hands an interpreter. If your CPA or accountant is conservative, they’ll be more cautious when it comes to interpreting the tax code, which can lead to a disconnect between their conservative nature and the higher risk tolerance of, say, an entrepreneur.

What’s the risk?

When jumping out of an airplane, we understand the risk: There’s a minimal possibility of injury. When dealing with investments, we know there’s a chance we could lose money—big or small, depending on your risk tolerance. And with taxes? The risk is audit.

What an audit actually means

Across the board, professional tax preparers disagree on the deductibility of certain items and the viability of certain strategies—they also aren’t often motivated to take liberties when it comes to filing taxes. An audit could mean more work for them, sure, and worse, it has the potential to damage their reputation, provoke fines and, in the worst cases, revoke their Tax Preparer Number.

For you, on the other hand, a worst-case scenario likely means an audit and paying extra tax.

However, because so much of the tax code is open to interpretation, your best-case scenario could mean beaucoup savings.

Decisions and Deductibles

When approaching taxes, you should always, always, always be honest and fair. You should be able to clearly articulate the reasoning behind any decision and deductible. And remember, like all business decisions, the buck ultimately stops with you. You need to find a tax advisor who can help you make informed decisions that match your risk tolerance.

Does your tax preparer help you do that?

Meet with Mark for straight-forward, practical advice on how to save on next year’s tax bill.

Risky Business: Tolerance and Taxes