What You Should Know Before Hiring a Tax Attorney or a CPA
This article was originally published on UpCounsel.
I see or talk to my CPA about once a week. That may seem a little extreme, but it’s because he’s brilliant, he gives great advice, and because he’s also my dad. Many times he’ll talk about my investments, the stock market, or the upcoming changes in political policies and while I am interested, his vast knowledge and verbiage can cause my eyes to glaze over and my stomach to wonder if it’s time for mom to serve dessert yet. (For those of you who have met with your CPAs for your tax appointments with the April 15th deadline approaching, you probably know exactly what I’m talking about.)
While you are an expert in your small business industry, it can seem daunting to cover all of the demands that running a business of your own requires. Fortunately there are many experts out there, but how do you know which one to use? More specifically, I know that CPAs prepare tax returns the first four months of the year, but what else do they do? And when do I need a CPA and when should I contact a tax attorney?
Just as Benjamin Franklin said, “Nothing is certain except death and taxes,” you’ll probably need to call a CPA or tax lawyer at one time or another (and according to that statement a mortician too, but that is a different topic for another time). So below are some basic functions that each professional addresses.
Accountants generally cover financial planning, general bookkeeping, preparing and filing tax returns, tax planning, assisting with audits, budgeting, cost and asset management, estate planning, and can help in making in depth business growth decisions. CPAs (Certified Public Accountants) have more specialized training and credentials. For basic tax filing and business advice, an accountant may suit your needs. For various out-of-state tax returns, financial and estate planning, asset management, or audits, a CPA is well worth the additional expense.
While accountants and CPAs are more focused on managing your finances and filing tax returns, a tax attorney deals with the legal aspects of financial proceedings including payroll taxation issues, international business tax laws, filing a lawsuit against the IRS or representing you if the IRS files a lawsuit against you, IRS criminal investigations, or tax fraud investigations.
However, there is still some overlap between these two professionals. Both CPAs and tax attorneys are able to provide tax planning support and they can provide assistance to individuals and organizations concerning financial decisions by focusing on the possible tax benefits or penalties of those decisions. For these situations, tax attorneys offer more specialization in the legal questions of tax planning whereas CPAs have more expertise on the financial implications.
In addition, both CPAs and tax attorneys can help individuals and companies defend themselves concerning tax related issues. Tax attorneys differ in that they are educated to handle legal challenges and can represent clients in the court system while either going against or defending themselves from the IRS. A CPA can help to strengthen a legal case, especially if he or she helped to prepare the tax returns in question. Furthermore, a tax attorney provides the advantage of attorney-client privilege while a CPA only offers attorney-client privilege if acting at the direction of a lawyer to give the client information relevant to the case.
Finally, both CPAs and tax attorneys must have had extensive education to practice in their fields. Tax attorneys must earn a law degree and then pass the state bar association exam in the state where they plan to practice. Some may wish to extend their education even farther such as getting a master of laws degree in taxation or a CPA license. While individual states enact their own requirements for taking the CPA exam, most require a minimum of 150 college credits which is about five years of study. Some states also require work experience in the field, or they may allow work experience as a substitute for the education requirement. Finally, someone seeking a CPA license must pass the Uniform CPA examination.
