Tax Lawyer vs. Accountant: Who Should You Hire?

Taxes are a nightmare for most people. Nearly everyone, whether they are employees, business owners, or private contractors, has had a tax issue they couldn’t resolve with income tax software and the internet. In some cases, the IRS sends you a polite but ominous notice requesting more information after your last tax return. There are accountants, CPAs, and tax attorneys everywhere advertising their services. Which tax professional will best meet your needs?

Income tax law changes annually, and complex tax issues arise whenever a new rule on deductions or inheritance passes a state legislature. Both accountants and lawyers know these rules, and both can do your income taxes. The attorney often charges substantially more, but may have legal knowledge the accountant lacks. Before you decide which one meets your tax needs, consider other issues that may arise during your tax filing, and why you might pick a tax lawyer over an accountant.

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

The main differences between a tax attorney and an accountant are price, expertise, and the services they can offer. An accountant typically charges a flat fee to prepare your taxes and file your return. Attorney fees are generally tied to the amount of time they spend working on your case. More experienced attorneys often charge higher rates for their services.

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

Tax Lawyer

A tax lawyer is both a legal professional and a tax professional. This means they have a law degree from an accredited law school and have passed their state bar exam.

Tax attorneys are well-versed in the federal tax code, 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.

If the situation escalates to criminal charges, a tax attorney is not the legal representation you’ll require. A defense attorney experienced in federal and white-collar crime will likely be the better choice.

Accountant

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

Certified public accountants (CPAs) have passed the CPA exam in their state and offer accounting services beyond tax preparation. For example, they can assist with tax planning 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, your first move should be speaking with an estate planning attorney. Some types of trusts are “invisible” for tax purposes. The revenue generated is subject to income tax for the grantor, but 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.

Attorney-Client Privilege

In most cases, either a tax attorney or an accountant can resolve your financial matters. However, if you have any potential legal matters that could be criminal, you’ll need the protection of the attorney-client privilege. When you consult an attorney for any matter, your communications with the lawyer are privileged. This means that in any future legal proceedings, your attorney cannot be compelled to testify against you.

The attorney-client privilege protects your conversations with your legal counsel, and any other form of communication, including:

• Phone calls and voicemail
• Emails
• Text messages
• Faxes may or may not be protected, depending on how the attorney’s office handles the receipt and the status of the person (i.e., a paralegal) who retrieves it

The privilege does not include helping clients commit or cover up criminal activity. If you consult a lawyer because you believe you have done something illegal, an attorney can advise you if you have done so and how to minimize the harm. The attorney will not help you conceal the activity or make it go away.

Hire a Tax Lawyer When:

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:

• The IRS has sent you a notice of tax lien or tax levy against your property
• The IRS has sent a notice of wage garnishment to you or your employer
• You have received a notice of a tax audit
• You receive a notice of investigation for tax fraud, tax evasion, or other tax crime

The IRS will always notify you if you are under investigation for any reason. They will send you a notice if they need to review any financial records or require additional information. If you receive any notice from the IRS regarding your taxes or other financial statements, you should contact an attorney immediately.

You should also consider an attorney if:

• You must file tax returns with unreported income, such as under-the-table payments
• You have a complicated or complex financial situation
• You need to communicate with the IRS regarding an ongoing payment plan or back taxes

The attorney can give you legal representation if you must appear in court for any reason, although the IRS seldom resorts to tax litigation. You may need an attorney for hearings or negotiations regarding the payment of back taxes or the reduction of penalties.

Hire an Accountant When:

If you have no legal issues and are filing basic federal and state taxes, an accountant or CPA can handle your tax returns. Individual, joint, and business tax returns should not require the services of a tax attorney. See an accountant when:

• The IRS owes you a refund, or you have minimal tax liability
• You have no additional income
• You have no additional deductions
• Your tax situation is not complex

An accountant cannot practice law, but can give you tax advice about the current status of tax law. If you own a small business or are self-employed, an accountant can usually resolve your tax returns unless you have other legal matters related to your finances.

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, in some cases, stopping levies.