Tax Attorney vs. CPA: What’s the Difference?
If you have IRS or other tax issues, you may be wondering whether you should hire a tax attorney or a CPA to represent you in your case.
And in this article, I’m going to:
- Explain to you the similarities between tax attorneys and CPAs
- Explain to you the differences between tax attorneys and CPAs
- Give you some insight as to what kind of tax professional you may want to work with on your tax relief case
Now, in full disclosure I am a CPA who represents taxpayers who have significant tax debt before the IRS and various states — so my direct competition in business are in fact tax attorneys who do the same thing — but I’m going to try be as objective as possible in this article when comparing tax attorneys and CPAs. This means that:
- I’m not going to take cheap shots at attorneys as vicious snakes (after all, I’ve only see a handful of attorneys with a split tongue) and
- I’m not going to shy away from being transparent about the things that attorneys can do — such as go to court — that I cannot do as a CPA.
So, let’s start from the top and talk about the commonalities shared by both tax attorneys and CPAs when it comes to IRS matters.
Table of Contents
How Tax Attorneys and CPAs Are Alike
1. They can both represent taxpayers before the IRS.
Tax attorneys and CPAs can both represent taxpayers before the IRS to do things like:
- Defend a taxpayer’s tax returns in an audit
- Negotiate a settlement for a taxpayer’s tax debt through an offer in compromise
- Negotiate an installment agreement for a taxpayer
In fact, whether you work with a CPA or a tax attorney, both of them when taking your case will send you an IRS Power of Attorney (Form 2848) on which you designate the particular CPA or tax attorney you’re working with as your representative before the IRS.
And you can see on page two of the Form 2848 the three primary categories of tax professionals that can represent you before the IRS — attorneys, CPAs, and enrolled agents who are certified by the IRS.
2. They both had to pass really hard tests to earn their license.
To earn their license to practice law and accounting, respectively, both attorneys and CPAs have to pass a rigorous exam.
For attorneys, that’s their state bar exam, and for CPAs, that’s the Uniform CPA Examination, which consists of four distinct parts. Both of these exams are extremely rigorous tests of their respective subject matter.
The overall pass rate for the bar exam varies between states because each state has its own bar exam, but using the most recent bar exam results we have publicly available, the overall bar exam pass rate, depending on the state, is somewhere between 30% and 60%, while the pass rate for each of the four separate parts of the CPA Examination range from between 40% to 60% depending on the particular part, and of course applicants must pass all four parts in order to become a CPA.
3. They are both subject to strict professional guidelines.
Both attorneys and CPAs are licensed by their state — for lawyers, that’s their state’s bar and for CPAs, that’s their state’s board of accountancy.
And every state sets standards for both attorneys and CPAs who practice in that state. These standards include:
- Ongoing educational requirements
- Ethical standards
- Various other requirements
How Tax Attorneys and CPAs Are Different
1. They have different educational requirements.
So obviously attorneys have to complete law school to become an attorney except in a handful of states, which are the exception rather than the rule. And law school is typically completed after four years of undergraduate study, so in total, to become an attorney in most states, you have to go through at least seven years of post-secondary education.
CPAs obviously do not have to go to law school, and states have slightly different educational requirements for CPAs, but all states require CPA candidates to hold at least a bachelor’s degree, and most states require CPA candidates to have at least 150 semester-based (or 225 quarter-based) credit hours of higher education. Most bachelor’s degrees are 120 semester hours or 180 quarter hours, so this means that to become a CPA in most states, the candidate must have gone through at least five years of post-secondary education.
2. Attorneys can represent taxpayers in criminal tax matters, but CPAs cannot.
Unless they’re also a licensed attorney, CPAs cannot be admitted into District Court or any other court of law apart from Tax Court (if they pass the Tax Court Exam).
And the only venue in which criminal cases are tried is in court.
So if you’re a criminal, I don’t want to talk to you as a CPA; you need to talk to an attorney.
So if you’ve been charged with a tax crime, I can’t help you; you’re going to court, and you need to talk to an attorney who specializes in criminal tax defense.
And as a matter of fact, if you’ve been charged with a tax crime, I don’t want to hear about it because if you tell me about it, I might get subpoenaed.
While accountant-client privilege is a thing, it is largely theoretical and much weaker than attorney-client privilege.
3. Attorneys generally don’t have as much experience with doing tax returns as tax-focused CPAs do.
If you’re working with a CPA who holds themselves out as a tax professional, they’ve probably done lots of tax returns.
I’ve personally done thousands of personal and business tax returns in the over a decade I’ve been a CPA. When I was at very large firms ranging from Big 4 firms to a large regional firm here in the Los Angeles area, I worked on tax returns for people who are household names in the entertainment and other industries. I’ve done extremely complex consolidated corporate returns for publicly-traded companies. And of course in my own tax relief practice at Choice Tax Relief, we work on lots of returns for folks who have not filed tax returns for years and now we’re getting them caught up.
Tax attorneys, on the other hand, generally — and this is painting with a very broad stroke since I do have a few tax attorneys whom I know that do prepare tax returns themselves — do not prepare tax returns so they generally don’t know the ins and outs of tax returns as well as your typical tax-focused CPA does.
Should You Hire a Tax Attorney or a CPA?
Unfortunately, my answer to this question is a bit of a cop-out, but before I get into it, here’s a dirty little secret about both tax attorneys and CPAs: Most tax attorneys and most CPAs are wearing too many hats; they are the proverbial “jack of all trades, master of none”; they are not specialized and are likely not specialized in handling cases like yours.
If you go to a tax attorney’s website, and you see that it’s a one- or two-attorney firm and they do everything under the sun pertaining to tax law — audit defense, criminal tax audits, criminal tax defense, residency audits, international tax issues, and more — chances are they really haven’t worked many cases like yours, in which you’re looking for someone to represent you, an everyday American who has found themselves with a lot of back tax debt, before the IRS or your state, to reach a favorable resolution for said debt.
In the same vein, if you go to a small-time CPA’s website and it’s pretty apparent that he or she or their small team does individual tax returns, business tax returns, trust and estate tax returns, bookkeeping, payroll, 401(k) plan audits, R&D credit studies, tax provisions, audits, compilations, reviews, succession planning, and they sell insurance to boot — how much experience do you think they really have in representing everyday Americans with back tax debt before the IRS and/or the state?
So bottom line is you want to hire a tax attorney or a law firm or a CPA or a CPA firm that specializes in cases like yours because that means that they have systems in place to work your case efficiently; they have experience with many cases like yours; their staff is knowledgeable about cases like yours; and they won’t make mistakes on your case because they have experience.
So to be honest, it doesn’t so much matter about the professional designation the professional or the owner carries, be it attorney or CPA; what matters is the degree of experience and specialization in successfully helping clients similar to you.
I personally know excellent tax attorneys as well as excellent CPAs who handle tax resolution work; I have also personally cleaned up some big messes left by tax attorneys and CPAs who frankly didn’t know what they were doing.