Do You Need a Tax Attorney or CPA?
If You Have A Tax Problem, You Might Be Wondering What’s the Difference Between The Two?
Generally speaking, whether you need a tax attorney or a CPA (certified public accountant) depends on your specific situation and what sort of tax problem you have.
While both CPAs and tax attorneys can assist with tax planning, decisions and audits, each type of professional brings some distinct qualifications and skills. And in some cases, you could benefit from having both a CPA and a tax lawyer working together on your behalf.
What Does a CPA Do and When Do You Need One?
CPAs, or Certified Public Accountants, are trained in accounting and taxation, with expertise that includes tax preparation and planning, financial reporting and auditing.
To become a CPA, an individual must complete at least one year of college-level coursework after attaining a bachelor’s degree, pass a four-part exam, and complete supervised work experience and continuing education.
Schooled in the details of federal and state tax laws, CPAs are tasked with ensuring that their clients comply with tax regulations — which change regularly. They can help individual and business taxpayers maximize deductions and minimize tax liabilities, all while following relevant laws and regulations.
For most businesses and individuals, you would hire a CPA for:
- Tax preparation and planning: A CPA will help you file accurate tax returns for you or your business, especially if you have a more complex tax profile that includes multiple sources of income or investments. They can also help you plan tax filings and advise on decisions that could reduce the amount of taxes you owe.
- Financial audits: For businesses and nonprofit organizations that are required to conduct financial audits on a regular basis, a CPA is trained to review your financial statements, internal controls, and accounting procedures. After review, they will deliver an objective evaluation of your organization’s financial status.
- Financial reporting and compliance: CPAs help businesses and organizations meet financial reporting requirements that apply to them, such as preparing financial statements in accordance with Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). They also help with regulatory filings and adherence to accounting standards.
- Estate and retirement planning: CPAs have the skills to support clients with estate and retirement planning by looking at the tax implications of various options to maximize your savings and what you pass on to your heirs.
- Strategic financial advising: CPAs can assist with budgeting, forecasting, cash flow management, financial analysis, and strategic financial planning.
- Forensic accounting and investigations: In cases of fraud, embezzlement, or financial disputes, a CPA with expertise in forensic accounting can help uncover financial irregularities, analyze financial records, and provide expert testimony in any related legal proceedings.
What Does A Tax Attorney Do and When Do You Need One?
Tax attorneys, such as Fairfax, Virginia Attorney Sammy Kim, are experts in tax law.
They represent clients during tax audits, handle tax disputes on their clients’ behalf, and give legal guidance on complex tax issues. An experienced tax lawyer will negotiate your tax problem with the IRS or state taxing authority and take your case to Tax Court if it comes to that.
Following college, a tax lawyer attends law school and must pass at least one state bar exam in order to practice tax law.
While a tax attorney can help you with tax returns and accounting tasks much like a CPA, their primary expertise lies in the IRS Tax Code and state tax laws.
In short, if you are dealing with a tax dispute or tax audit and need someone to represent you and protect your legal rights, contact a tax attorney now.
Here are some instances when you might need a tax attorney:
- Complex tax issues, tax disputes and tax audits: If you are dealing with complex tax matters, such as an IRS audit, a state tax audit, or foreign gift reporting rules, you need an experienced tax attorney. A great tax audit lawyer understands the nuances involved in working with the IRS to solve your tax problem and has the skills to build your case to reach the best resolution. They’ll make sure you meet required deadlines and protect your right to an appeal when you have one.
- Getting your tax debt reduced or even removed: You might be relieved to hear that you might not need to pay the entire amount of your tax debt. A tax lawyer can help you negotiate an Offer In Compromise (OIC) with the IRS to reduce your back taxes. An IRS tax attorney can also help you apply for a partial pay installment agreement or negotiate another type of installment agreement, allowing you to spread your payment to the IRS over a number of months. In some cases, a skilled IRS tax lawyer might be able to seek Currently Not Collectible (CNC) Status on your behalf, by building a case that you can’t afford to pay both your taxes and your basic living expenses,
- Business-related tax challenges: You need a tax lawyer if you failed to pay your employees’ payroll tax deposits, if you’re facing a business bank account levy, or if you’re dealing with any other complex business tax problem. There are many issues with business taxes such as worker misclassification, payroll tax liabilities with trust fund recovery penalty issues, unfiled quarterly tax returns, fringe benefits, and officer salary justification, just to name a few.
- Criminal tax allegations: If you are accused of tax evasion or tax fraud, it is crucial to seek legal representation from a tax attorney who can navigate complex legal processes, protect your rights, and help you build a strong defense. It is important that you understand the attorney-client privilege. If you have been working solely with a CPA, certain information may be summoned without the privilege. A tax attorney can use the Kovel letter to include and protect certain information under the privilege.
- Minimizing penalties: If you have failed to file tax returns or pay taxes for an extended period, leading to penalties, a tax attorney can assist in resolving the situation, negotiating with IRS and state tax authorities, and reducing or possibly eliminating the penalties you owe. Knowing the Internal Revenue Manual, kinds of penalties and the basis for abating them, and understanding the various administrative processes that the IRS representatives must abide by is crucial for the success of penalty abatement.
Could You Need Both a Tax Lawyer and a CPA?
In some circumstances, CPAs and tax attorneys work collaboratively to give taxpayers comprehensive tax and legal services.
For example, if you have a complex financial situation, such as owning a business, multiple investments, or international tax considerations, a CPA can help you optimize your financial decisions and implement a comprehensive tax strategy, while a tax attorney can ensure that you comply with tax laws while maximizing those tax benefits.
If you or your business faces a tax audit or a tax dispute with the IRS or state tax authorities, a CPA can assist with gathering and organizing financial records, while a tax attorney can help you navigate the relevant tax laws, negotiate settlements and represent you in Tax Court if the matter escalates.
You would likely need both a CPA and a tax attorney if you’re dealing with a complex business transaction, such as a merger or acquisition, or if you have a large estate or complicated inheritance plans.
If you have a tax problem and need a tax lawyer to represent or advise you, book a consultation with attorney Sammy Kim now.
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