When Do I Need a Tax Attorney and When Do I Need a CPA?

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It can be complicated to know when to contact a tax attorney versus when to reach out to a CPA, especially when you need help with your taxes.

Both professionals can help you with tax-related issues, but despite their similarities, a tax attorney and a CPA are used for very different and specific purposes.The main difference between a CPA and a tax attorney is that a CPA helps prepare your tax return while a tax attorney helps you navigate the details of the tax code and tax-related legal issues.

Read below to find out some specific instances where you may need the help of a tax attorney, a CPA, or both.

When Do I Need a CPA?

CPAs are experts in helping you prepare business and personal taxes, identifying what can be expensed or deducted. Many CPAs are trained in tax preparation and to help you maximize your deductions. Unlike an accountant, CPAs do not specialize in helping file taxes — even though they are often hired to do so.

CPAs also assist when your business needs an internal audit or help determining which company structure — a C-Corp, an LLC, etc. — is right for your business. The advice offered by a CPA could help you pick the right structure for your company upfront, because changing it later on is often difficult to do.

Also, if you’re trying to choose health insurance options for your company’s employees, a CPA can determine one that fits your budget while still adhering to the proper state and federal regulations. Picking the wrong health insurance and not adhering to regulations could result in a penalty that may be costly for your business.

If you are applying for a loan, preparing financial statements, or analyzing the financial health of your company, a CPA can also lend you a hand.

When Do I Need a Tax Attorney?

While CPAs help with certain financial matters, tax attorneys are more suited to help with problems on your tax returns — especially when legal ramifications are concerned.

For example, a CPA might find an error on an old tax return and may think your best course of action is to amend the tax return immediately. Instead, a tax attorney might recommend you consider all the consequences and potential outcomes that come with submitting an amended return. While the CPA’s advice is not necessarily wrong, you may be more inclined to follow the tax attorney’s advice to help avoid or prevent any legal trouble.

Tax attorneys are also helpful when you need expert knowledge and advice on matters such as tax disputes with the IRS. A tax attorney is a legal representative skilled in understanding, communicating, and working with the IRS. If you owe a large amount of money to the IRS, a tax attorney could help you negotiate a deal with the IRS to lower your payment. Or if you need to address an error on a previously filed tax return, a tax attorney could offer advice on the safest course of action to minimize your risk and money owed.

On a more personal level, tax attorneys are also trained in help you establish a trust or understanding investments.

And if you own or are setting up a business, a tax attorney can help you understand the tax regulations that govern your business structure. They can also help you communicate with the IRS if your business is audited.   

When Would I Need Both a CPA and Tax Attorney?

In some situations, it might be advantageous to hire both a CPA and tax attorney. These situations typically involve financial or tax issues in addition to potential legal action.

For example, if your CPA is considering a tax position that the IRS may likely oppose, consulting a tax attorney can help add clarity. Obtaining the tax attorney’s opinion on the situation (and in writing) may also help your case with the IRS.

If you need a CPA or tax attorney, or have questions about whether your tax situation requires either, contact the law offices of Milikowsky Tax Law today.