• By Admin
• TAM Associates

CPA Vs Tax Lawyer - Understanding the difference

If you want your taxes managed by a top professional, you might be considering a certified public accountant (CPA) or a tax lawyer. The question is, which one do you choose? The answer depends on your tax situation and what goal you’re trying to achieve as a taxpayer. The main difference between a CPA and a tax lawyer is that a CPA helps you prevent legal trouble while a tax lawyer helps you rectify legal trouble.

A CPA is a top-tier accountant with a five-year business degree and a minimum of 150 hours of education. Only professionals who complete the CPA exam and satisfy exhaustive continuing education requirements qualify for a CPA license. While many CPAs work for accountancy firms, many others become CFOs, financial planners, and business consultants. CPAs are great for personal and business tax services because they’re far more knowledgeable than standard accountants and they’re authorized to resolve tax audits with the IRS on behalf of their clients. A standard accountant cannot do this.

A tax lawyer is a legal professional who has passed their state’s rigorous bar exam. They specialize in the legal complexities of tax preparation, including the requirements and restrictions of various deductions, the rights of taxpayers in the event of a lien or levy, and how to negotiate a compromise with the IRS. They can assist with processing unfiled returns, settling back taxes, halting wage garnishment, and similar issues.

Similarities

• Both can assist with tax filings
• Both have specialized expertise far beyond the typical tax preparer
• Both can represent their clients in the event of an audit
• Both are useful for individuals and businesses alike

Differences

• A CPA is ideal for prevention; a tax lawyer is ideal for intervention
• CPAs are financial experts; tax lawyer are legal experts
• Tax lawyers have one specialty; CPAs may have multiple specialties
• Tax lawyers tend to be a much costlier option for those in need

Should I Hire a CPA or a Tax Lawyer?

A certified public accountant is ideal for anyone with a unique tax situation. They can help you to secure the maximum tax benefit by utilizing credits, deductions, and forms that your average accountant is ill-equipped to manage. You may benefit from the help of a CPA if:

• You own a business
• You are a high-net-worth individual
• You have multiple streams of income
• You manage an investment portfolio
• You’re responsible for quarterly taxes
• You don’t work a traditional 8-to-5 job
• You are recently divorced
• You require supplementary services like bookkeeping, day-to-day accounting, or investment advice
• You want to build a lasting relationship with a tax professional complete with long-term financial planning

A tax lawyer is ideal for anyone who needs to address an important legal tax matter. The important thing, though, is to choose an lawyer who specializes in your unique issue. For instance, some tax lawyers specialize in trusts and estates while others specialize in corporate tax concerns.

You may benefit from the help of a tax lawyer if:

• You’re facing a tax audit with criminal implications
• The URA is investigating you for tax evasion or fraud
• You’re trying to stop a wage garnishment
• You’re facing a lien or a levy
• You need help with settling back taxes
• You need to account for unfiled tax returns
• You want to negotiate a compromise with the URA
• You’re leaving a lot of money to loved ones
• You require tax-related legal counsel for a new business venture
• You need assistance with international tax treatment

Should I Have Both a CPA and a Tax Lawyer?

There are certain instances in which you may require both types of tax professional. It’s especially common for high-net-worth individuals to have both a CPA and a tax lawyer—the CPA handles the day-to-day accounting and tax preparation while the tax lawyer focuses on legal compliance and settling disputes.

Most often, your CPA will be with you every year at tax time and possibly throughout the year if you rely on them for accounting or financial planning services. A tax lawyer, though, will usually serve a specific, short-term purpose—like establishing an estate plan or resolving back taxes.

Most businesses and individuals won’t need a dedicated tax lawyer or retainer unless their taxes are monumentally complex.

Why Most Taxpayers Choose a CPA Over a Tax Lawyer

It pays to have a professional manage your taxes. But while CPAs and tax lawyers are both highly educated and adept in resolving tax controversies and disputes, most taxpayers will choose a CPA.

A qualified CPA can help you with all of your essential tax needs from maximizing your deductions to beating an audit. As long as you don’t have pressing legal issues in need of resolution, a CPA is usually the way to go.

Or, to put it more simply: Tax lawyers are there to help you resolve serious tax issues; a CPA can help you to prevent those types of issues from occurring in the first place.

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