It can be easy to get confused about whether to hire a tax attorney or a CPA to handle tax needs. Both have similar professions, however, a CPS has more expertise in dealing with the financial implications of tax matters while a tax attorney is more versed in handling the legal implications of taxation.
Both professions bring unique advantages during tax season, but they also have different limitations. Knowing which one is right for you ultimately depends on your specific needs and goals, and the state of your accounts with the IRS.
What Is a CPA?
A certified public accountant typically handles financial preparations for individuals as well as businesses. They can also act as a financial advisor if you need to make decisions that may affect your tax liabilities and investment holdings.
A CPA will usually have a higher business degree and over 150 hours of education. They are also required to complete up to 120 hours of ongoing education every three years and pass the CPA exam within an 18-month period. This exam has 4 parts:
- Audit and attestation
- Financial accounting and reporting
- Business environment and concepts
Their education level is different from that of bookkeepers, accountants, and other tax professionals who do not need the same level of education to practice. A CPA is different because they must also practice for 1,800 hours under a licensed CPA.
This extensive training makes it one of the most widely trusted and recognized professions in business. A CPA must also follow the AICPA Code of Professional Conduct to ensure they do not lose their license.
What Is a Tax Attorney?
A tax attorney is often referred to as a legal professional with a law degree. However, to become a tax attorney, a candidate must have a bachelor’s degree in math, business, or accounting.
They must also pass their Law School Admission Test which measures skills such as reasoning, reading comprehension, and analysis.
Once the law student passed the Juris Degree, they must also pass the state certification or state bar exam to become a tax attorney. Some tax attorneys go on to do an advanced degree in tax law for 5 years to specialize in their field.
Of course, a licensed tax attorney must maintain an active bar membership with ongoing legal education. There are different guidelines in each state concerning how tax attorneys advertise themselves and the rules and regulations they must follow or risk losing their license.
Tax Attorney VS CPA: Who Should You Hire?
As discussed earlier, the decision to hire a tax attorney or a CPA is heavily influenced by your tax needs. If you have complex personal or business taxes to handle and need to minimize liability with the IRS, a CPA is the right choice for you.
However, if you are in trouble with the IRS, you have a tax controversy, or have received a debt collection notice, a tax attorney is the best option for your needs.
Keep in mind that if you are in trouble with the IRS, you should not hire a CPA just because it appears to be the cheaper option. It could end up causing you more losses.
When to Hire a CPA
A CPA is the best choice if you need help with:
- Filing taxes
- Finding out which tax credits and deductions you are eligible for
- Payroll management
- Bookkeeping and preparation of financial documents
- Advice on financial planning and budgeting
- Advice on acquisitions, mergers, and selling a business
- Advice on changes in tax law and tax reforms
- Choosing a business structure
- Taking a business loan
- Financial risk management policies
- Choosing between cash and accrual methods of accounting
- Fraud prevention
- IRS audit
When to Hire a Tax Attorney
You should hire a tax attorney if you need help with:
- A case involving a tax agent or revenue officer
- You owe unpaid taxes
- Tax fraud investigation
- You are investigated for tax fraud
- Assets being levied
- A revenue officer auditing your returns
- Negotiating with IRS agents
- Written legal advice
- Representation in court
A CPA can negotiate and represent you before a revenue office or the IRS, while a tax attorney is generally preferable when dealing with the legal side of tax.
However, there are some CPAs who are specially trained to handle tax controversies and litigation in the U.S. Tax Court. Always ensure that your CPA is certified to deal with the legal issue at hand.
There are also some areas where you can choose to hire a tax attorney or a CPA such as:
- You owe large amounts in back taxes
- Levies and liens as a result of unpaid taxes
- You need to stop wage garnishment
- IRS negotiations
- Trusts and estates
Go for The Right Match
Whichever professional you need, it is always best to choose one who can work best with your needs. If you are hiring a CPA, consider choosing one who is experienced in your specific case.
For instance, if you are starting a business or need to change your business structure, choose a CPA with relevant experience to give you an advantage.
When hiring a tax attorney, consider that tax law is vast, and most attorneys only specialize in one area. Ask your attorney about their experience and choose one who is best suited for specific tax needs.
Ultimately, whether you hire a CPA or a tax attorney, do not wait for the IRS to come knocking. It is always best to be proactive and hire a professional you can trust.