CPA vs. Tax Attorney: What's the Difference?
If you’re seeking help with your tax situation, you may have realized that there are many types of tax professionals within the industry with varying areas of expertise. Then the question arises: should I hire a CPA or a tax attorney?
CPAs and tax attorneys are both tax professionals with experience in navigating a variety of tax matters. Still, the slight differences in these professions can impact what would be more beneficial to hire for tax help depending on your needs.
In short, CPAs are experts in dealing with the financial and accounting side of taxes, while tax attorneys specialize in the legal aspects of taxation.
TABLE OF CONTENTS
Key Takeaways:
- The main difference between CPAs and tax attorneys is that CPAs are licensed and experienced at providing financial services related to tax matters, whereas tax attorneys specialize in the legal side of tax matters.
- Certified public accountants are tax professionals who have earned a bachelor’s degree in accounting, passed the CPA exam, and worked under a licensed CPA to gain experience in providing a variety of tax services, such as tax preparation, tax break optimization, back taxes, and finding solutions to tax problems.
- Tax attorneys are tax professionals who have earned a bachelor’s degree, a J.D. degree, and sometimes a graduate degree, qualifying them to use their thorough knowledge of the tax code to help clients resolve tax disputes, remove levies, negotiate with the IRS, and offer court representation.
What Is A CPA?
A certified public accountant (CPA) is a tax professional who has earned a bachelor’s degree in accounting and met the training, experience, and licensing requirements in the state they live and work in. CPAs sometimes also earn a master’s degree in accounting to further their expertise.
Qualifications Of A CPA
In order to become qualified as a licensed CPA, individuals must meet the related education, experience, and examination requirements, as well as complete 120 hours of continuing education every three years.
CPA Education
CPAs are required to complete a university accounting program of 150 credit hours to begin the qualification process. Usually, this extensive course load exceeds the duration of a typical bachelor’s degree program, so accounting students often complete up to 30 credit hours at the graduate level or complete the requirements by obtaining their master’s degree.
CPA Experience
Depending on the state, CPAs are usually required to work under the supervision of a licensed CPA for 1,800 hours to gain experience in the field and develop their knowledge and skills.
CPA Examinations
After completing their education at the college level, CPAs in the United States must pass the national CPA exam issued by the AICPA (American Institute for Certified Public Accountants), which is a comprehensive assessment of the subject matter learned in accounting school that will be necessary to perform their duties as a working CPA.
There are four parts to this test that must be passed before earning their certification, including audit and attestation, financial accounting and reporting, regulation, and business environment and concepts.
Services Offered By A CPA
CPAs are licensed and qualified to provide assistance through a variety of tax situations involving accounting for businesses and individual taxpayers.
- Tax return preparation and filing
- Identifying eligible tax credits and tax deductions
- Managing bookkeeping tasks
- Handling financial documentation and business expenses information
- Offering budgeting advice
- Advising on business tax structure
- Small business loan acquisition
- Financial risk management strategizing
- Offering IRS audit assistance
- Business ownership, sales, or merging
- Cash vs. accrual accounting decisions
- Tax liability reduction
- Tax fraud prevention
- Annual or regular accounting services, such as tax preparation
- Life changes tax advice
While CPAs offer a variety of tax services that can help taxpayers navigate their tax needs, there are situations in which it would be beneficial to instead seek advice from a tax attorney.
What Is A Tax Attorney?
A tax attorney or tax lawyer is a tax professional who has passed the state bar exam and has specialized in taxation law. Tax lawyers are experts on the topic of tax law and the U.S. tax code, so any time taxpayers are dealing with legal circumstances related to taxes, tax attorneys are the best option for dealing with the situation.
Qualifications Of A Tax Attorney
Tax Attorney Education
Tax attorneys begin their qualification process by earning a bachelor’s degree, but there is no set requirement on which type of degree is required to apply to law school. Even so, most candidates elect to major in English, math, business, or another subject that will prepare them for the analytical and critical thinking aspects of the job.
In order to apply to law school, individuals must pass the Law School Admission Test (LSAT), an examination testing skills such as reading comprehension, analysis, and reasoning.
Aspiring tax attorneys must then earn a Juris Doctor degree (J.D) from a credible law school. Additionally, tax attorneys often further their education by earning a Master of Laws in Taxation degree (LLM).
Tax Attorney Examinations
Upon earning their J.D., attorneys must pass the state bar exam, a two-day assessment consisting of essay questions, multiple choice questions, and “performance tests” that resemble the legal writing that future lawyers will be required to analyze.
Services Offered By A Tax Attorney
Tax attorneys offer a variety of services for taxpayers needing legal assistance.
- Settling legal disputes and lawsuits related to taxes
- Resolving tax issues relating to wage garnishment
- Negotiating with the IRS on behalf of the taxpayer
- Advising during situations involving a foreign tax system, such as when taxpayers conduct business overseas
- Tax relief advising that upholds attorney-client confidentiality
- Tax levy and tax levy removal, including property liens
While tax attorneys are the most appropriate type of tax professional to hire when needing assistance in legal tax matters, such as negotiations with a tax authority, tax lawyers are not always the best option. For example, tax attorneys do not participate in aspects involving money and finances, nor do they offer assistance in filling out or filing federal income tax returns. Instead, those tax matters are better suited for a CPA.
Bottom Line: Differences Between CPAs and Tax Attorneys
Areas of Expertise
CPAs are certified and experienced in a variety of tax-related matters, including auditing, financial planning, tax planning, bookkeeping, financial accounting, and more.
Tax attorneys, on the other hand, are not experts in finance the way accountants are. Rather, they are well-versed in resolving legal disputes and navigating tax laws.
Court Representation
The certifications for CPAs restrict their ability to work with clients within their state, so they are not certified to represent taxpayers in the Tax Court.
Tax attorneys are certified to practice law and therefore can represent taxpayers in the Tax Court, often negotiating on behalf of the taxpayer to help them achieve their financial goals, mitigate tax problems, and optimize the outcome of the tax dispute. If taxpayers are facing serious legal trouble related to taxes, such as a case involving tax evasion, hiring a lawyer for court representation is essential.
Investment
As the scope and roles of CPAs and tax attorneys differ, so does the cost of hiring them. The cost of hiring tax professionals varies depending on the individual’s experience, the type of tax case, and the steps required to resolve the tax burden. Tax attorneys typically charge a higher hourly rate than CPAs to perform their tax relief services.
Confidentiality
Tax attorneys are bound to a client-attorney confidentiality agreement that legally requires them to keep matters between them and their clients. This factor usually plays a significant role in cases where clients are dealing with tax situations that are breaching the limits of tax law compliance, as CPAs are not required to keep all matters confidential at the legal level.
Which To Hire
Some circumstances in which it would benefit the taxpayer to hire a CPA include that they need a tax preparer, to correct a tax return, to understand their tax bracket and tax rate, or other day-to-day accounting issues.
Tax attorneys would be a more appropriate hire if taxpayers are facing an IRS dispute, or tax-related criminal charges, such as due to an unclaimed tax shelter or tax haven, or are under investigation by the IRS.
In general, deciding whether to invest in the help of a CPA or tax attorney depends on which type of tax problem you need help with. If you are seeking assistance related to tax preparation or the numbers, a CPA is the best person to hire. On the other hand, if you are facing a legal matter related to taxes, a tax attorney is the appropriate tax expert. Otherwise, if your tax situation requires the help of both a certified public accountant and a tax attorney, working with a company consisting of both tax experts may be the best option.
No matter which type of tax professional you need to guide you through your tax matter, the team at Ideal Tax is ready to guide you through the complexities of the tax law and offer counsel on the best tax plan for your situation. Schedule a free consultation today to learn more about our process and the benefits of working with tax relief professionals.
Luis serves as the Director of Operations for Ideal Tax, overseeing a multifaceted team including case management, tax professionals, document specialists, customer support, training, and development.
