Switching tax advisors isn’t a big deal, but it does require planning. If you choose the right time, get all the documents handed over, and transfer the powers of attorney properly, you’ll make the switch seamlessly. Here’s the step-by-step process, including the most common pitfalls.
Good reasons to switch
Most business owners don’t switch because of a single mistake, but because, over time, the working relationship no longer suits them. Typical reasons include long response times, deadlines that are barely met or not met at all, a lack of digital processes, an advisor with no experience in your industry, or costs that no one explains clearly.
Sometimes the reason is a positive one: the company is growing, incorporating as a GmbH, hiring employees, or selling abroad. Then you need an advisor who deals with these matters regularly. And sometimes the current tax advisor retires, and the firm is dissolved or sold.
Before you switch, it’s worth having an open conversation with your current advisor. Some problems can be resolved with clear agreements. If not, an orderly transition is better for both sides than a partnership that’s merely limping along.
The right time
A switch is possible at any time, but not every time is equally good. It’s easiest when the annual financial statements and tax returns for the previous year are complete. Then the new advisor takes over a closed fiscal year and starts with clean opening balances.
- Bookkeeping: at the end of the month or quarter, so that no month is split
- Payroll: preferably at the start of the new year; otherwise, at the beginning of the month with the transfer of payroll accounts
- Annual financial statements and tax returns: after filing for the previous year, not shortly before a deadline
Switching in the middle of a tax audit or shortly before a filing deadline is not advisable. If it can’t be avoided, the new advisor should know about any pending deadlines right away and request an extension if necessary.
Review and terminate the contract
Tax advisory contracts are generally service contracts for professional services based on a special relationship of trust. Under § 627 BGB, such contracts can be terminated at any time in many cases. However, your contract may include notice periods or lump-sum fees, so read it carefully before terminating it.
Terminate the contract in writing and state the date from which the current advisor should no longer act for you. Say which tasks they should still complete, such as the advance VAT return for the last month or payroll through the end of the month. This way, there are no gaps and no duplicate work.
You should settle any outstanding invoices before switching. Under § 66 StBerG, the previous tax advisor may refuse to hand over documents until their fees and expenses are paid, unless that would be unreasonable under the circumstances. Under certain circumstances, they may also withhold their own work results.
The new advisor needs these documents
The more complete the handover, the fewer follow-up questions the new advisor will have to ask later. Request these documents from your previous advisor, preferably in digital form:
- Annual financial statements and tax returns from recent years, along with the tax assessment notices
- Fixed asset register with acquisition costs and depreciation to date
- Trial balance as of the switch date and open items for customers and suppliers
- Payroll records for the current year, employee master data, and required filings
- List of deadlines: outstanding tax returns, objections, applications, and appointments with the tax office
- Reports from previous tax audits and ongoing correspondence with the tax office
- Contracts with tax implications: articles of incorporation, loans, lease agreements with shareholders
If both advisors use DATEV, the accounting data can usually be transferred electronically. For this to happen, the previous advisor must release the data. Clarify this early on, because without authorization, opening balances must be transferred manually.
Transferring powers of attorney and access rights
The tax advisor represents you before the tax office based on a power of attorney. When switching advisors, the old power of attorney is revoked and a new one is issued; the new advisor usually handles this. Make sure that notices and correspondence are subsequently sent to the correct party; otherwise, they may end up with the old advisor for weeks.
Also think about other access rights: bank transaction feeds, access for transferring receipts, the company’s ELSTER account, and direct debit mandates for taxes. For payroll, there is also access to the health insurance funds and, if applicable, to industry funds.
By the way, the permanent extension of the filing deadline for advance VAT returns belongs to the business, not the advisor. It stays in place when you switch.
Special considerations for payroll
In payroll, a switch in the middle of the year is possible but requires special care. The new payroll provider must take over the current year’s payroll accounts, that is, all gross wages, taxes, and contributions to date for each employee. Only then will the annual figures, the wage tax certificates at year-end, and the notifications to social security be correct.
The company’s employer number for social security stays the same when you switch, as does its assignment to the health insurance funds and the accident insurance. However, the channels through which notifications and contribution statements are transmitted must be set up anew. Ongoing special cases such as wage garnishments, parental leave, partial retirement, or non-cash benefits should be listed explicitly in the handover list.
Briefly inform your employees if their payslips will look different in the future or be delivered in a different way. This will prevent follow-up questions in the first month. You can find out how we handle payroll on the Payroll page.
What the new advisor does in the first few weeks
A good new advisor starts with a review. They check the latest tax assessments, for example whether they are subject to review or whether objections are pending, reconcile the opening balances with the last financial statements, and set up a deadline calendar. If anything stands out, they raise it right away instead of waiting for the next financial statements.
Use the first meeting to look ahead as well: What are your plans for the next few years? What investments are on the horizon? Are there any changes in ownership or succession plans? The sooner the new advisor knows this, the better they can support you.
Pitfalls when switching
- Open objection periods: a tax assessment that arrives during the switch can become final without being reviewed
- Ongoing audits: the new advisor must know the current status before representing you
- Duplicate or missing advance VAT return: clarify in writing who handles the month of the switch
- Payroll in the current year: without complete payroll accounts, annual figures and certificates will be wrong
- Missing opening balances: without a trial balance, the new books start with gaps
- Forgotten access: bank feeds or receipt transfers keep going to the old advisor
Most of these pitfalls can be avoided with a simple handover checklist that the old and new advisors go through together.
Switch bookkeeping and taxes separately
A switch is also a good time to reassign tasks. Many companies give their ongoing bookkeeping and payroll to a bookkeeping firm and keep or choose a tax advisor for advance VAT returns, financial statements, and tax returns. The article Bookkeeping firm or tax advisor explains who may do what.
When you switch, GKM takes over the ongoing bookkeeping and payroll and coordinates the handover with your previous and your new tax advisor. How this works is explained on the page Catch-up bookkeeping and switching. If you don’t have a new tax advisor yet, we’ll put you in touch with one, free and with no obligation: Find a tax advisor.
Sources
Laws and bodies named in the article. The legal texts link to gesetze-im-internet.de, in German.
This article is for general informational purposes only and does not constitute tax or legal advice in specific cases. A tax advisor is responsible for tax-related questions.