Tax Lawyer vs CPA – When Do You Need a Tax Lawyer?
When it comes to getting professional tax help, a tax attorney or a certified public accountant (CPA) is probably going to be at the top of your list of who to contact. Depending on your situation, either will be perfectly capable of helping you resolve your tax issue. Yet there are certain situations where one type of tax pro is better suited than the other. The goal of this guide is to help explain these situations and why you might want to hire a tax attorney instead of a CPA or vice versa.
If you have a tax problem, Damiens Law Firm, PLLC can help. Our tax professionals have extensive experience handling a wide range of tax challenges, whether it’s resolving an unpaid tax debt, getting tax planning advice, or negotiating with a tax agency like the IRS. To learn more, contact us today.
Key Takeaways
- Both tax lawyers and CPAs are licensed tax professionals who can handle a wide range of tax issues.
- Tax lawyers are better suited for legal matters (including courtroom representation), while CPAs are better suited for financial matters.
- To become a CPA, a person must complete 150 credit hours of post-secondary education, pass the CPA exam, and obtain at least one year of accounting experience.
- To become a lawyer, a person must graduate from law school (earning a Juris Doctor degree) and pass the bar exam.
- If your tax question deals with the financial consequences for your business or personal finances, you should probably hire a CPA.
- If your tax question deals with the legal consequences of something you did (or could do) or involves tax collection issues, it’s likely best to hire a tax attorney.
What’s the Difference Between a CPA and a Tax Lawyer?
This is a commonly asked question, and for good reason: these are two completely different tax professionals, yet much of what they can do for clients overlaps with each other. The short answer is that CPAs focus on giving financial advice, while tax lawyers focus on giving legal tax advice. However, in other respects, their roles can overlap quite a bit.
To learn more about the differences, look at the paths you must take to earn these credentials.
How to Become a CPA
The exact requirements for obtaining a certified public accountant (CPA) license depend on each state, as there’s no national license for accounting. However, most states require individuals to do the following:
- Earn 150 post-secondary credit hours, including a bachelor’s degree in accounting or a related field. Because most college degrees only require 120 credits, many prospective CPAs take graduate credits (or earn a master’s degree in accounting) to fulfill the remaining 30 credit hours.
- Complete at least one year of accounting experience, often under the supervision of a CPA.
- Pass the Uniform CPA Examination, which consists of three Core sections (Auditing and Attestation, Financial Accounting and Reporting, and Taxation and Regulation) and one Discipline section of the individual’s choice (Business Analysis and Reporting, Information Systems and Control, or Tax Compliance and Planning).
- Complete the CPA application process for the state in which the individual wishes to practice. In addition to an application form, there are usually fees that need to be paid, and a confirmation of good moral character (which can include having a clean criminal history).
How to Become a Lawyer
The process for becoming a lawyer is similar to that of becoming a CPA in that the two big requirements include earning sufficient formal education and passing an exam. The exact process is also state-dependent, as there’s no national bar license.
That being said, most states require the following to become an attorney:
- Earn a Juris Doctor (JD) degree. This usually takes three years to obtain from an accredited law school. Most law schools require applicants to take the Law School Admission Test and earn a bachelor’s degree before enrolling.
- Pass the bar exam. This is administered over two days and consists of the Uniform Bar Examination or the Multistate Bar Examination plus a state-specific exam.
- Complete the bar application process for the state in which the individual wishes to practice. In addition to the application form, there will be fees that need to be paid and a confirmation that the applicant has sufficient character and fitness to practice law.
What Do CPAs Do?
A CPA is a licensed accountant who is trained to help individuals and/or organizations manage and/or improve their finances. This can include anything, from verifying the accuracy of the financial records, preparing and filing tax returns, providing tax advice, preparing financial statements, and forensic accounting.
What Do Lawyers Do?
A lawyer is a legal professional who’s licensed to represent clients and advocate on their behalf in court or other legal proceedings. A lawyer may also counsel their clients on the legal consequences of a particular action, such as a business acquisition, creating an estate plan, or what mistakes to avoid during a divorce.
Because the law is so vast, most lawyers prioritize working in one or a few areas of practice, such as corporate law, intellectual property, personal injury, civil rights, real estate, taxation, sports law, or family law.
Summary of What a Tax Attorney or CPA Can Do For You
| Tax Issue or Task | Can a CPA Help? | Can a Tax Attorney Help? |
|---|---|---|
| Preparing and filing tax returns | Usually | Sometimes |
| IRS audit representation | Sometimes | Yes |
| Offer legal tax advice | No | Yes |
| Negotiate with tax authorities | Sometimes | Yes |
| Represent clients in criminal tax matters | No | Yes |
| Represent clients in Tax Court | Rarely – only if they are a USTCP | Yes |
Who to Hire: Tax Attorney vs. CPA
For many tax problems, you can’t go wrong hiring either a CPA or tax lawyer. These include tax matters such as:
Other tax problems might necessitate hiring one over the other. Let’s take a look at when you might want to focus on one of these pros over the other.
When to Hire a CPA
If your tax question relates to improving the economic health of your business or personal finances, then a CPA is often a better choice. For example, if you’re thinking about starting a business and want to know which business form provides the biggest tax benefits, then a CPA is typically best. A CPA is also well-positioned to help you with:
- Tax return preparation and filing
- Bookkeeping
- Financial analysis
When to Hire a Tax Attorney
If your tax question involves legal uncertainty that can’t be quickly and easily answered by looking up a statute, regulation, or talking to a tax agency, then you likely need a tax attorney. For instance, if you believe the IRS improperly seized your assets because the applicable statute of limitations may have expired, you should retain the services of a tax lawyer.
Another reason to hire a tax attorney is if you’re facing potential legal trouble, such as being under investigation for filing a false tax return or being charged with tax evasion. In these types of situations, you need someone who can provide legal advice and represent you in case you end up in court. Not only will you want legal representation, but you also want to make sure your conversations with your attorney are kept confidential by the attorney-client privilege.
CPAs are also bound to keep their clients’ information confidential, but these protections aren’t as strong as those afforded by the attorney-client privilege. In other words, if a judge or prosecutor wanted to read what you told your tax professional in an email, it would be far easier for them to get this information if your tax professional were a CPA and not an attorney.
Finally, tax attorneys are often better than CPAs for helping in tax collection matters. This is because many CPAs focus on helping clients avoid tax debts rather than getting rid of them once delinquent taxes become a problem. Also, the resolution of the tax debt may involve the interpretation of tax regulations and legal case law. This means a tax lawyer might be better than a CPA if you want to:
- Fight a tax lien or levy (such as wage garnishment).
- Apply for an offer in compromise (or appeal a rejected one).
- Request innocent spouse relief.
- Consider bankruptcy.
When to Hire Both
There are situations where you’ll want the services of a CPA and a tax lawyer. Generally speaking, wealthy individuals and businesses can benefit from hiring a CPA and a tax lawyer.
If you’re lucky, you can find a tax lawyer who is also a CPA. If this isn’t possible, many CPAs have professional relationships with tax attorneys where they work together for a single client.
Get Legal Tax Help From Damiens Law
If you’re still wondering if you need to hire a tax attorney or CPA, that’s okay. It’s not always easy deciding who to hire, given how much overlap there is between the financial and legal aspects of taxes. In many cases, you can’t go wrong hiring a CPA or a tax lawyer, and the decision will rely on who you’re most comfortable working with and who you can afford to hire. But there are certain situations where hiring one over the other makes more sense. Contact Damiens Law for a free consultation, and we’ll help point you in the right direction.
Tax Lawyer vs. CPA FAQs
What’s the difference between a tax lawyer and a CPA?
A tax attorney is a legal professional who works on the legal aspects of the tax code. In contrast, a CPA works on the financial aspects of the tax code.
Can a CPA help with dealing with the IRS?
A CPA who handles tax disputes should be able to represent you before the IRS, especially during negotiations. However, not all CPAs handle unpaid tax collection cases.
Can a tax lawyer help with filing taxes?
Most likely, although it depends on the kind of help you need. If it’s just basic tax preparation, a tax attorney can help, although it might be cheaper to hire another tax professional, such as a tax preparer. But if your tax return is particularly complex or you have questions about what to claim or include on your return that involve an interpretation of the law, then getting a tax lawyer to help you file is a good idea.
When should I hire a tax lawyer instead of a CPA?
If you want to find the best tax avoidance strategies, a CPA is likely the best option, as long as a legal interpretation isn’t required. But if you need representation in court or need to know if a particular tax strategy is legal, then hiring a tax lawyer is a must. If you need legal advice, whether it’s to get out of legal trouble (or prevent legal trouble in the first place), then only a tax attorney can help.
Is it cheaper to hire a CPA instead of a tax lawyer?
It can be, but it depends on what you need them to do. If you want your CPA to conduct a detailed analysis of your company’s financial statements and then recommend ways to reduce your business’s tax obligations, then you might have to pay more than if you hired a tax attorney to help set up a basic trust for estate planning purposes.
Assuming you need help with a tax issue that both CPAs and tax lawyers are equally qualified to help you with, the cost differences will often depend on factors or characteristics of the tax professional that are unrelated to their CPA or attorney status.
Should I hire an enrolled agent instead of a CPA or tax attorney?
Enrolled agents are ideal for tax disputes, like unpaid tax settlement negotiations with the IRS (although many tax attorneys can help in these situations). However, if your tax collection case needs legal advice or representation in court, then you have to go with an attorney instead.
Sources
– https://www.bls.gov/ooh/legal/lawyers.htm
– https://www.bls.gov/ooh/business-and-financial/accountants-and-auditors.htm
– https://www.ncbex.org/exams
