Do You Need a CPA or a Tax Attorney?

Have you ever wondered which would be better for you; a CPA or a Tax Attorney? I know I have had that concern, especially when the IRS contacted me and demanded I pay $60,000 of additional taxes.  I knew my taxes were correct, but how do I fight the IRS so they don’t inappropriately get their hands in my pocket. I ended up using my CPA and the IRS was shown the error of their ways so I kept my money in my pocket.

Today we have the answer to this dilemma with a guest post from Lyle Solomon, a California attorney who covers the details of both professions and shares advice as to what situations are best for each to handle. I hope this will end your concern of which to choose. 

What is a Certified Public Accountant (CPA)?

CPAs are Certified Public Accountants who have completed the certification test administered by the American Institute of Certified Public Accountants (AICPA). The American Institute for Certified Public Accountants (AICPA) collaborates with the National Association of State Boards of Accountancy (NASBA) to administer the exam and provide the license.

Being a CPA certifies that practitioners have completed the appropriate required qualifications set forth by their individual State Board of Accountancy. A CPA’s primary responsibility is to meet their clients’ accounting, bookkeeping, auditing, and taxes demands.

Their license attests to their honesty and competence in keeping and auditing financial records as well as drafting tax returns. While tax lawyers can also prepare tax returns, CPAs have an advantage because of their years of experience and training.

CPAs can help with tax planning by reducing a company’s tax burden while maintaining compliance with the law. They provide thoughtful financial advice and support corporate decision-making by acquiring a thorough understanding of a firm through its financial records.

To put it another way, CPAs can help you keep track of your money, meet tax requirements, submit tax returns, and provide auditing services. They can even counsel their consumers on financial planning to offer more considerable financial gain because they have extensive financial knowledge.

There are a variety of reasons you might use the services of a CPA, such as :

  • You’re in a complicated tax situation.
  • You want to work with a tax professional on a long-term basis.
  • You require assistance in developing a long-term tax strategy.
  • You require accounting services on a monthly and annual basis.
  • You wish to have your taxes done by someone who has had specific tax training.

When Is Hiring a CPA the Best Option?

When you don’t have any formal legal issues or extra-complicated tax matters, it’s best to hire a CPA. When creating a proper financial plan for your firm or finances, a CPA can help.

CPAs and tax lawyers can both assist you with the process of tax preparation, increasing the amount of your return, and reducing the amount you owe the IRS. A CPA, on the other hand, will cost you less than a lawyer if your situation isn’t too complicated.

What is a tax attorney?

A tax attorney is a lawyer who has passed the state bar exam and plays a central role in handling the legal technicalities of taxation. Tax attorneys are your finest means of dealing with specific significant legal issues relating to taxes because they have extensive experience in the field. They can represent you in tax lawsuits involving inheritance concerns, tax evasion claims, discrepancies in tax payments, or withholding tax disputes, among other things.

A tax attorney is better suited to defend you in tax disputes with the IRS, since they thoroughly understand federal tax rules. CPAs and tax attorneys can both legally protect you in IRS issues, but an attorney’s knowledge of legal concerns sets them apart.

Because they are professionals in legal proceedings, unlike CPAs, they may be able to keep your confidential material hidden. Hiring a tax attorney would be extremely beneficial if you need professional legal help with the IRS or are constantly receiving debt collection notifications for tax evasion. They are skilled at negotiating and formulating evidence to substantiate the desired goal.

Tax attorneys can assist with estate planning, mergers and acquisitions, lawsuits, audits, and appeals.

There are a variety of reasons you might want the services of a tax attorney, such as:

  • You’re launching a business and need legal advice to determine how your firm will be taxed and structured.
  • You’re doing business worldwide and need help with taxation, contracts, and other legal issues.
  • You want to file a lawsuit against the IRS.
  • The IRS has you under criminal investigation.
  • Because you committed a tax violation, you require the protection of attorney-client privilege.

When Is Hiring a Tax Attorney the Best Option?

If your company is dealing with legal tax concerns, you should employ a tax attorney because they are more familiar with the US taxation laws. If you get debt collection notices or receive a notice from the IRS, or the IRS places a levy on your company’s bank account, consult a tax lawyer. When preparing complex tax returns or creating complicated financial strategies, you should also consult a tax attorney.

A tax attorney can assist your company in making important decisions, like whether to convert from an LLC to an S-Corp. They can also highlight any prospective liabilities and any general structure safeguards. Their law license then allows them to complete the necessary legal documents to conclude the transaction.

The attorney-client privilege protects your business, which is one of the main benefits of employing a tax lawyer versus a CPA. If you do end up in court, this legal protection of communication between you and your lawyer means you can seek advice without worrying about anything you communicate privately in a trial being made public.

Prevention VS Intervention

CPAs and tax attorneys can both help with tax planning, financial decisions, and avoiding tax penalties. CPAs have more knowledge regarding how to deal with tax preparation issues, considering all the financial aspects. But a tax attorney can offer legal guidance in adversity or potential problems. Trust an attorney if you need help with a tax defense case. An attorney can also assist you in resolving cases involving significant tax debt and other complex issues. 

You can also file for IRS tax debt relief or negotiate for IRS debt forgiveness by opting for assistance from a reputed law firm who provides debt settlement services.

Which is best for you – a tax attorney or a Certified Public Accountant?

A Certified Public Accountant (CPA) is a professional who provides regular accounting and auditing services, accurate financial statements, reliable audit services, forensic accounting services for businesses, consulting sessions focused on growth, efficient tax preparation process and filing methods, insightful taxation, effective financial planning, and practical solutions to tax problems, etc.

Hiring a CPA can work if your tax case is short and confined to exchanging your tax documents with the IRS and assessing your returns and accounting concerns. In short, a CPA works on avoiding tax issues for you.

On the other hand, there are some situations in which a tax attorney is necessary.

A tax attorney focuses solely on fixing your tax problems. Legal assistance in resolving tax problems and litigation, resolving wage garnishment issues, negotiating with the IRS, lowering the tax burden on your heirs for an inherited estate, understanding foreign laws and help handling overseas business by ensuring tax compliance, identifying prospective tax liability for your business entity type, and offering privacy are some services that a tax attorney may provide.

A CPA cannot defend a taxpayer in Tax Court since their license is limited to the issuing state in most situations, whereas a tax attorney can.

CPAs are far more cost-effective than tax attorneys, since their hourly charges for tax services are lower.

A tax attorney or CPA can help you handle your tax difficulty, depending on your situation. Each has a particular area of expertise. You can choose the right professional to fix your problem based on what you’re dealing with.

About the Author: Lyle Solomon has considerable litigation experience as well as substantial hands-on knowledge and expertise in legal analysis and writing. Since 2003, he has been a member of the State Bar of California. In 1998, he graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, and now serves as a principal attorney for the Oak View Law Group in California.

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