Doing Taxes for Your Small Business: Tax Attorney vs. CPA

Taxes - March 1, 2022
IRS Tax Forms 1064, 1120 and 1040

When it comes to getting help with your taxes, there are a variety of options available depending on your needs and budget. A quick Google search uncovers that the two most common options are CPAs (Certified Public Accountants) and tax lawyers. But when should you consult a tax lawyer vs. CPA? Selecting the wrong tax support is one of the more costly mistakes made by small businesses. Before you decide, it helps to learn the differences between a CPA and a tax lawyer.

What is a CPA?

CPAs are professionals trained in various accounting-related areas, one of which is tax. They’re authorized to represent clients in front of the IRS. State requirements for becoming a CPA can vary but include completing 150 hours of college or graduate-level work and passing a qualifying exam. A CPA is a solid choice to help you do your taxes—and keep good records throughout the year, helping with small business tax deductions.

What is a tax lawyer?

A tax lawyer has completed law school, passed the bar exam, and specializes in tax-related work. They can be very helpful in small business legal services.

While both a CPA and tax lawyer can represent you before the IRS, this is where the big difference between a tax attorney vs. a CPA becomes clear. A tax lawyer’s training is particularly helpful if you’re facing penalties. CPAs can help in disputes as well, but they’re not as well versed in the minutia of the law, nor are they trained to make an argument the same way lawyers are. Another area that may convince you to work with a tax lawyer vs. CPA? Tax lawyers can be beneficial in tax planning, advising you on how to structure your assets in a way that minimizes your tax liability.

However, tax lawyers aren’t trained in bookkeeping or tax filings. If those offerings better suit your needs, you may be better off going with a CPA.

Cost consideration

A CPA and tax lawyer can also differ in cost, which is an important factor to consider.

Tax lawyers are almost always more expensive than CPAs, although it’s possible to find attorneys with competitive rates. If you’re on a budget and just need help doing your taxes, consider working with an Enrolled Agent, or EA. EAs have passed a three-part, comprehensive IRS exam covering individual and business returns.

They must adhere to ethical standards and complete 72 hours of continuing education courses every three years. Similar to CPAs, EAs are authorized to represent you before the IRS, but unlike CPAs, they focus specifically on tax work rather than the broader portfolio of expertise that a CPA can bring to the table.

Tax preparers are another option

While they’re required to register with the IRS, tax preparers are not subject to any type of credentialing in most states. The upside is that tax preparers are usually the most inexpensive category of tax professional, but the downside is that there’s a wide range of quality among tax preparers. If you hire one, be sure to do your homework first.

Regardless of whether you choose a tax attorney vs. a CPA, make sure you do your research. Before you go into a consultation, know what questions to ask a tax attorney. Look at their credentials, investigate how much experience they have, and try to get references.

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