When to Hire a Tax Lawyer

When tax time rolls around, people find themselves facing the usual array of tax problems. Taxes never get easier, and you may have questions about how this year’s income tax law applies to your current financial situation.

Tax matters can confuse anyone. If you have complex tax issues or find yourself facing an IRS audit, you might consider going to an accountant, a CPA, or even a tax attorney. But when should you call a tax attorney, and when can an accountant do your income taxes? Is there a difference?

Before making an appointment to discuss your tax filing, review this article and learn when your taxes need the extra help a tax lawyer can provide.

Tax Lawyer vs. Accountant: What’s the Difference?

The main difference between a tax attorney and an accountant is price. An accountant typically charges a flat fee to prepare your taxes and file your return. Attorney’s fees are generally tied to the amount of time they spend working on your case. And more experienced attorneys often charge more for their services.

While tax attorneys and accountants both have specialized training in tax laws, rules, and regulations, the taxpayers who consult them are generally facing very different issues. We discuss their differences in expertise below.

Tax Lawyer

A tax lawyer is a legal professional, in addition to being a tax professional. That means they have a law degree from an accredited law school and passed their state bar exam.

Tax attorneys are well-versed in the federal tax code and other tax laws and have the legal training to resolve tax disputes with the Internal Revenue Service (IRS) and state or local tax authorities. They can help you communicate with the IRS during a tax audit and protect your rights. If your tax dispute ends up going to court, a tax lawyer can represent you.

However, if the situation escalates to criminal charges, you’ll need to consult with a defense attorney experienced in federal and white-collar crime.

Accountant

Most accountants who work for an accounting firm have a bachelor's degree from a two- or four-year college or university, and many have a master's degree. However, some accountants who work for firms specializing in tax preparation may just have on-the-job training in preparing tax forms and bookkeeping.

Certified public accountants (CPAs) have passed the CPA exam for their state and offer accounting services that extend beyond taxes. They can assist with tax planning, for example, to help you achieve your financial goals.

An accountant will often refer you to a tax lawyer when they realize you need legal help that they can't provide because they don't have the skills or are legally barred from doing so.

Estate Planning Attorney

If you want to set up a trust to protect your assets, you should speak with an estate planning attorney. Some types of trusts are “invisible” for tax purposes. That is, the revenue generated creates income taxes for the grantor. The assets within the trust will not have any estate tax, gift tax, or other taxes when the beneficiaries receive the property upon the grantor’s death.

These trusts, known as “intentionally defective grantor trusts” and other types of trusts, must be written by an experienced estate planning attorney. If you want to protect your property and heirs from future estate taxes, you should discuss this after tax season is over.

When You Need a Tax Lawyer

If you only have federal and state taxes and no other legal issues, an accountant or CPA can easily handle your tax returns.

You need an attorney if you have serious tax-related issues involving the Internal Revenue Service. If the IRS has contacted you about any of these issues, you should probably seek legal advice:

• Tax liens or tax levies against your property, business, or assets. A lien is a notice that you have failed to meet your obligations, and the IRS has the right to seize your property. A levy is the seizure itself. Wage garnishment is a type of levy where the IRS takes part of your wages to pay your back taxes
• You have filed a return with unreported income, and the IRS has contacted you with questions about that income
• You have received notice you are being investigated for possible tax fraud, tax evasion, or other tax crime
• You owe substantial back taxes and need to negotiate a payment plan with the IRS

Even if the IRS has not contacted you, consulting an attorney is a good idea if:

• You own a small business, or are self-employed
• You have a complicated or complex financial situation
• You want help communicating with the IRS

For instance, if you have a large off-the-books income and know it will raise red flags at the IRS, even though it is not criminal or fraudulent, you should ask a tax attorney the best way to report it to avoid issues.

When You Need an Accountant

Most people can take their taxes to an accountant. If you’re filing a joint or individual tax return and it doesn’t quite fit into the online tax forms, an accountant can usually find the problem.

Your accountant can prepare your individual, joint, or business tax return and fix any small errors you made trying to do your own taxes. Get tax help from an accountant when:

• You have minimal tax liability
• The IRS owes you a refund
• Your tax situation is not complex
• You don’t have any additional income
• You don’t have any legal matters

If your only concern is ensuring your taxes get prepared in a timely manner and filed with all the right documents, then an accountant is what you need.

Get Legal Help with Your Tax Questions

If you need legal help to answer questions regarding your taxes or represent you before the IRS, a local tax attorney can help. A tax lawyer will have the training and skills to ensure that your tax returns don't raise any issues with the IRS and that your rights are protected in any tax disputes you may have with the agency. They can also help resolve tax debts, including removing liens and even stopping levies in some cases.