Frequently Asked Questions About Tax Attorneys

The only people who like taxes are those who collect them, right? But every year most taxpayers fulfill their civic duty, knowing that their dollars support federal, state and municipal infrastructure, healthcare, social security, schools and universities, our veterans, national defense and more. 

Even so, most people still dislike paying taxes, but some of us are outright afraid of the tax agencies, both federal and state, and not without reason.

The questions that weigh heavy on the minds of those who are dealing with tax problems usually include whether to hire a tax attorney or a CPA, when to hire a tax attorney, and how to find a good one.

We hope to help answer those questions here, so you know what to do if you find yourself in a “taxing” situation.

What Is the Difference Between a Tax Attorney and a CPA?

A Certified Public Accountant (CPA) knows the ins and outs of financial documentation, planning, and the implications of various financial decisions, including those dealing with taxes. They are trained in maintaining business and financial records.

To practice, a CPA must:

• Put in substantial hours of study in accounting
• Pass a rigorous, four-part accounting exam

Not all CPA’s prepare taxes, and so many lack the experience or knowledge of the frequently changing tax codes.

You should hire a CPA for overall financial and tax strategy for:

• Your personal business
• Retirement
• Divorce
• Out-of-state tax returns
• Financial estate planning
• Asset management
• External audits to review and validate corporate financial accounting

A CPA can stand with you in front of the IRS, during an audit, and other situations with the IRS, but there is one thing a CPA cannot provide: attorney-client privilege.

A tax attorney is a lawyer specializing in the complex field of tax law. Tax lawyers learn every tiny piece of the IRS tax code, especially in areas such as:

• Trusts
• Estate planning
• Tax disputes
• Business tax law such as payroll tax issues and international business tax laws

A tax attorney must earn a JD or Juris Doctorate and pass the state bar exam for licensing. Some may continue their education and earn a Master of Laws in taxation or certification as a public accountant (CPA).

An attorney can represent clients before the IRS for audits, collections, and appeals but so can a CPA. The big difference here and one you need to keep in mind is that a tax lawyer can provide attorney-client privilege, meaning your tax lawyer is exempt from being compelled to testify against you in a court of law.

A CPA cannot offer attorney-client privilege unless acting under the direction of an attorney to provide relevant information to the client. Otherwise, a CPA can testify against you even while working for you.

Tax attorneys are more familiar with the various tax settlement programs than most CPAs and know how to select the best program for your case and how to get you qualified for that program.

How Do I Know When to Hire a Tax Attorney?

If you are having a problem with the IRS or just questions and concerns, you need to hire a tax attorney. You want to locate and hire a good tax attorney as soon as possible because if you suspect you may need one, you probably do.

Do not wait until the last minute.

One area a tax attorney can help is if the IRS is not responding to your attempts to correct a mistake. An attorney can:

• Draft letters to the IRS that are guaranteed to get their attention
• Act with direct information about necessary branches of the IRS such as where specific matters should be handled
• Negotiate over the phone to make an end to the communication issue

If you are planning to itemize your deductions instead of taking the standard deduction, it would be a good idea to use a tax lawyer.

If you own a taxable estate, need to make complex estate planning strategies, or have reason to file an estate tax return, get a tax attorney.

Starting a business means determining the structure and tax activities surrounding the business. A tax attorney can help you avoid any pitfalls and save on your taxes. You especially want a tax lawyer if you are conducting international business and need to develop contracts and take care of taxes and other legal matters.

You definitely need a good tax attorney if:

• You plan to bring a suit against the IRS
• The IRS is bringing suit against you
• You need an independent review of your case before the U.S. Tax Court
• Are under investigation for tax fraud or tax evasion
• Are under criminal investigation by the IRS

Another important time to hire a tax attorney is when you receive an audit notice from the IRS. An attorney can communicate with the IRS on your behalf, be present during audits, help negotiate settlements, and keep you from overpaying as a result of the audit. Also, having a lawyer on your side can relieve a lot of stress.

Other reasons to hire a tax lawyer include helping to:

• File an appeal of a tax court decision
• Take advantage of tax credits
• Requesting an Offer in Compromise or other tax settlement program or strategy

Anytime you feel in over your head with the IRS is a good time to hire a tax attorney. Tax law is complicated and constantly changing. Part of a tax attorney's duty is to keep up with it, so you are protected.

How Do I Choose a Good Tax Attorney?

Your best source is word of mouth. Ask around for an experienced tax attorney and check the internet for client/customer reviews. When you interview your choice, ask for additional references, particularly clients who had the same issue as yours.

Run, do not walk, if a lawyer tries the hard sell or asks you for all money up front. A retainer is fine, but you should not pay the entire amount right away.

Look for experience:

• How long has the firm been in practice?
• Has the firm handled cases similar to yours?
• Ask for an assessment with a potential plan of action.
• Look for the credentials listed under What Is the Difference Between a Tax Attorney and a CPA
• Find out if the firm is active in a professional legal association such as the Tax Law Association

Before finalizing your choice, ask how the firm bills. Is it hourly or does it charge a flat rate for cases like yours? See if you can get an estimate of your legal fees.

The tax lawyer you have in mind has all of the right credentials and testimonials. All of your questions have been answered. Should you hire this tax attorney?

If you can afford the fees, can agree to the type of potential solution offered, and have confidence in the tax attorney’s ability to help you, then yes. Yes, you should.