Accountant vs. Tax Attorney: When and Why To Use Them

When it comes to taxes, you can never be too careful or too organized. Though, if you run a small business, you’re likely going to need help along the way to ensure you’re being careful and organized enough. Businesses may turn to either a professional accountant or tax attorney for help. Despite what you may think, hiring a tax professional is not just for big business! Forming a working relationship with a tax pro can keep you out of hot water with the IRS and take some of the stress off of tax time. Adding a tax professional should be part of your business operating expense—consider it insurance you shouldn’t live without!

There are different types of tax professionals. Commonly, businesses rely on accountants and tax attorneys. How do you know which type of professional is the best fit for your needs? Let’s take a look at the differences between the two professions and how to choose the right one for your business tax needs.

Accountants

You’re probably most familiar with accountants during tax season. But the truth is a qualified accountant can help with much more than just filing your tax return. If you run a small business, it’s a good idea to form a relationship with an experienced accountant so you have someone to call on with tax or accounting questions. This is also true if for personal taxes if you have expenses, income and deductions beyond a simple return.

Accountants provide a wide range of general and advanced tax services, including:

  • Financial planning
  • General bookkeeping
  • Prepare and file tax forms
  • Tax planning
  • Audit assistance
  • Business budgeting, cost and asset management
  • Can be a key team member for making key business growth decisions

There are several educational choices for accountants:

  • Tax preparer certification: Some states allow a tax prepare certification which trains individuals to prepare basic personal taxes. You may be most familiar with tax preparers from places like H&R Block and other kiosk tax-preparation services.
  • 2-year accounting degree: Technical colleges often offer a 2-year degree in general accounting. Graduates may hold a certification or Associate degree in accounting.
  • 4-year accounting degree: Accountants may choose to receive a Bachelor’s degree from a 4-year university.
  • Certified Public Accountant: The CPA designation must be earned by passing a rigorous examination. CPAs also hold a license from their state of practice and are held to a high standard of practice and accounting knowledge.

When interviewing accountants, ask exactly what duties they are able to perform based in their degree and licensure level. If you’re looking for help preparing taxes and filing the correct forms, a general accountant may suit your needs.

However, if you need help with financial planning, asset management or audit assistance, a CPA may suit better. There may be a cost difference between the type of accountant you choose; however, don’t let cost dissuade you from getting the help that you need to adhere to tax laws.

Keep in mind that accountants are not well-trained in the legal aspects of tax law. If you’ve become involved in legal proceedings with the IRS, your accountant may be able to help prepare necessary information, but a tax accountant will help you manage the court system.

How to Choose an Accountant

  • Determine what tasks you need help with
  • Ask for referrals to an accountant from other business owners (like the Outright Community)
  • Talk to your local Chamber of Commerce for a listing of accountants in your area
  • Shop around to find an accountant who can help with your exact needs
  • Look for an accountant with history dealing with your type of business: LLC, corporation, sole proprietor, etc.
  • Ask about technology. Does the accountant use e-filing software or accounting software that can help you track and organize expenses? Do they offer instruction on using compatible software that you can share, like Outright?
  • Will the accountant help with both personal and business financial advice if you need it?

Tax Attorney

Tax attorneys are lawyers with a Juris Doctor (JD) degree and admission to the state bar, who also have subsequent education in tax law. Some are also Certified Public Accountants, which provides the ability to handle duties of an accountant, as well as those of a legal tax advisor.

Tax attorneys understand the finer details of tax law which can be helpful if you’re ever involved in an IRS action. Commonly, tax attorneys can assist with:

  • Estate planning or filing estate related tax returns
  • Business start-ups that have a complicated entity or tax requirements
  • Payroll/employee taxation issues for business with multiple employees
  • International business and tax laws
  • Filing a law suit against the IRS
  • IRS lawsuits against you
  • Criminal IRS investigations against you
  • Representation for tax fraud accusations against you

If your business has any legal issues with the IRS, you may want to consider a tax attorney for assistance. A tax attorney can help resolve many tax-related problems. They negotiate on your behalf and are trained to analyze complicated tax information and formulate a plan for resolving your case. Because tax laws change every year, tax attorneys are also invested in constant learning to stay abreast with all the changes.

If you feel your business tax situation is above what an accountant can tackle, the next step is to find a tax attorney. Tax attorneys are generally more expensive to hire; however, first meetings to discuss your situation may be free. And ultimately, if you’re in a bind with the IRS, the cost to hire a tax attorney could end up saving you a bundle of cash in the long run.

How to Choose a Tax Attorney

If you have a complicated business structure, employees on payroll or have delinquent tax returns or owe back personal or business taxes, you may want to establish a relationship with a tax attorney.

Before you decide:

  • Have a face-to-face meeting with a qualified tax attorney to discuss your needs
  • Ask for their professional references
  • Ask how much experience the attorney has with a situation like yours
  • Ask about the attorney’s continuing education practices. How up-to-date on tax laws is he/she?
  • Ask how fees are managed and collected
  • Shop around. Interview more than one tax attorney
  • Ask for referrals. Do you know other business owners? Ask them for referrals to a tax attorney.

Extra resources:

National Association of Tax Professionals (NATP): Help for finding qualified tax preparers, nationwide.

CPA Directory: Lists Certified Public Accountants nationwide

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