Benjamin Franklin once stated, “Nothing is certain except death and taxes.” Therefore, you will probably need to call a CPA and/or a business tax lawyer at one time or another during your career.
Many people hire accountants because they tend to cover financial planning, general bookkeeping, preparing and filing tax returns, as well as tax planning and assisting with audits. In addition, they also do budgeting, cost and asset management, estate planning, and can help you in making in-depth business growth decisions.
CPAs or Certified Public Accountants have more specialized training and credentials. While an accountant may suit your needs for basic tax filing and business advice, for various out-of-state tax returns, as well as for financial and estate planning, asset management, and audits, hiring a CPA is well worth the additional expense.
On the other hand, while accountants and CPAs are more focused on managing your finances and filing tax returns, a tax attorney is better suited to deal with the legal aspects of financial proceedings. This includes payroll taxation issues, international business tax laws, filing a lawsuit against the IRS or representing you if the IRS files a lawsuit against you, as well as IRS criminal investigations, or tax fraud investigations.
However, there is still some overlap between these two professionals as both CPAs and tax attorneys can provide tax planning support. Additionally, they can also both provide assistance to individuals and organizations concerning financial decisions by focusing on the possible tax benefits or penalties of those decisions. The difference in these situations is that tax attorneys offer more specialization in the legal questions of tax planning, whereas CPAs tend to have more expertise on the financial implications.
In addition, both professions can help individuals and companies defend themselves when it comes to tax-related issues. Tax attorneys and business lawyers are educated to handle legal challenges and can represent clients in the court system by either going against or defending them from the IRS. However, a CPA can help to strengthen a legal case, as well. This is especially true if he or she helped to prepare the tax returns in question. One of the major advantages that a tax attorney provides is that of attorney-client privilege. A CPA can only offer attorney-client privilege if he or she is acting at the direction of a lawyer to give the client information relevant to the case.
Bear in mind that both CPAs and tax attorneys both have to have extensive education in order to practice in their fields. While all tax attorneys must earn a law degree and then pass the state bar association exam in the state where they plan to practice, some choose to extend their education even further and received either a master of laws degree in taxation or a CPA license. Therefore, you can have one person that wears both hats. Should you ever choose to move, remember that individual states enact their own requirements for taking both the CPA and state bar exams.