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5 Signs You Need a Tax Lawyer, Not a CPA

By Tanya Roth, Esq. | Last updated on

Many small businesses use Certified Public Accountants or Enrolled Agents to do their tax work for them.

Yes, it's true. A CPA or an EA can do much of the work needed when it comes to your taxes. The roles are the same in many cases, and the knowledge that a CPA has often isn't too different from that of a tax attorney.

But there are times when a small business needs a good tax lawyer, not just a good CPA. Here are five signs that you should probably consider hiring a tax lawyer:

  1. You've received a Notice of Deficiency from the Internal Revenue Service. While a CPA or EA can appear in Tax Court, and while they may have the necessary tax knowledge to win your case, they may lack one essential piece of the puzzle: the ability to present your case. A tax lawyer brings a knowledge of tax laws, coupled with the ability to frame a proper argument.
  2. You're contemplating merging or getting funding. If you're contemplating high growth, you want to form your business properly from day one. This is also important if you plan to try for venture capital funding or other forms of raising large sums of money. Also, if you plan to merge with another entity, you should definitely seek the help of a tax lawyer to help you plan out that merger, even if it's between two small businesses. Your tax structure matters from day one.
  3. You have partners or co-venturers. When more than one person is contributing capital at the get-go, you need to plan your tax structure out so that the owners are getting the maximum tax benefit. Do you go in as a partnership, an LLC, a C corporation or an S corporation? Partnership tax and corporate tax aren't the same, and a tax lawyer understands the differences.
  4. You want to plan for succession of your business. Do you want your kids to inherit the business after you die? If so, then a good tax lawyer can help you incorporate your business into your estate plan.
  5. You're a nonprofit. Here's where laws get very tricky. Many nonprofits are governed by the Tax Code and there are nit-picky details to know about structure, board member selection and prohibited transactions -- details of nonprofit tax law that a CPA likely won't be able to guide you through.

While a CPA's role often overlaps with a tax lawyer's role, there are areas where a CPA can't always replace a tax lawyer. With just three months until taxes are due for most of us, whether to hire a tax lawyer is a decision most business owners should make sooner rather than later.

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