Tax Attorney vs. CPA vs. Enrolled Agent

Tax Attorney, CPA, and an Enrolled Agent

There are endless numbers of tax problems, and since nearly everyone is required to file a tax return, you’re fairly likely to face a complicated tax situation at least once in your life. If you own a business or have a lot of investments, you’re even more likely to have problems. When that time comes, you need to know what type of tax professional to hire.

The three types of tax professionals who can represent you in front of the IRS are tax attorneys, certified public accountants (CPA), and enrolled agents (EA). The differences between these experts are subtle, but hiring the right professional can make a huge difference when it comes to settling your tax matters effectively.

Find out more about each of these different tax experts, their qualifications, and what types of tax matters they can help you with below.

What is a Tax Attorney?

A tax attorney is a tax expert with extensive knowledge about tax laws, codes, and regulations. The services offered by a tax attorney versus a tax accountant tend to be very different.

An accountant helps with filing tax returns. They can also maximize your tax situation with budgets and tax planning. Tax lawyers focus on helping people resolve complex tax problems or legal issues. They represent people facing unfair collection actions, undergoing audits, tax court litigation, or dealing with criminal tax fraud charges.

Tax attorneys can also litigate your case in the United States Tax Court (Tax Court) and Federal District Court or Federal Court of Claims. Attorneys also have state and federally-protected attorney-client privilege, meaning your privileged communications with your lawyer will remain confidential. This privilege is crucial to keeping you protected.

Tax Lawyer Training and Education

To become a tax lawyer, you need both a bachelor’s degree and a Juris Doctor (JD). That means tax attorneys have to obtain a 4-year bachelor’s degree followed by an additional three years of graduate school (law school). From there, they must pass the bar in the state they plan to practice in.

The bar exam is an extensive two-day exam. After passing the bar exam, attorneys are required to maintain 12 hours of continuing education each year and are subject to very stringent ethical requirements by the state bar they are licensed in. Tax Attorneys are also subject to IRS regulations in addition to the state bar.

When to Hire a Tax Attorney

When wondering if you need a tax attorney or CPA, you’ll need to first consider the problem you’re experiencing. A tax lawyer would be the ideal type of tax professional to hire if you’re experiencing any of the following issues:

  • You’re facing IRS collection actions
  • You have been notified that your tax return(s) is/are under examination
  • You need to go to Tax Court or Federal district court to defend your case
  • You are setting up a new business
  • You’re in a dispute with the IRS over a debt
  • You’ve been served a criminal warrant for your tax situation
  • You have a complex tax situation
  • You’re undergoing end-of-life planning and want tax advice
  • You would like/need attorney-client privilege to ensure you can receive the best advice and strategies to resolve your case

Lawyers Have a Wide Variety of Focus

Like CPAs, tax lawyers can have a wide variety of focus. You’ll want to search for an attorney or law firm that specifically focuses on the tax problem you’re experiencing. Tax resolution attorneys, for example, provide assistance with any disputes with the IRS (collections cases, IRS exams, civil penalties, litigation, etc.), whereas tax planning attorneys can assist with entity structure, mergers and acquisitions, and estate planning.

What is Attorney-Client Privilege?

One exclusive benefit that a tax attorney can offer is attorney-client privilege. Attorney-client privilege is a legal doctrine that protects private communications between clients and attorneys when it comes to civil, criminal, and tax matters. This means that the government cannot force your attorney to testify against you regarding any communications you have had with them.

Under Federal law, there is a minimal CPA-client privilege or accountant-client privilege, which does not apply in most situations. Therefore, if there is any concern about confidentiality, you should consider hiring a tax attorney.

What are Certified Public Accountants (CPAs)?

One popular type of tax professional is a certified public accountant (CPA). These tax professionals are licensed to perform accounting duties related to tax matters, and they get their designations from the Board of Accountancy in their state.

This designation doesn’t come easy, as CPAs have to undergo significant training and education. If you hire a licensed CPA, you can rest assured knowing that they’ve gone through rigorous testing to ensure they’re highly skilled at accounting matters.

CPAs can help individuals, businesses, governmental agencies, or educational entities with any number of financial tasks, such as preparing and filing tax returns, bookkeeping services, and providing solid financial and tax advice.

CPAs are also subject to a code of ethics, which helps ensure that CPAs remain independent from big businesses or individuals when performing auditing or accounting tasks.

CPA Training and Education

To become a CPA, students must complete at least 150 hours of education. This usually includes a bachelor’s degree in finance or accounting, followed by a master’s degree in accounting or at least 30 credits of master’s level courses. Then, in most states, they must complete a year of hands-on accounting work under a CPA.

Finally, they must pass the Uniform CPA Exam, which they can do before or during their work experience.

Once the CPA passes the exam, they’ll still need to maintain a specific number of continuing education hours every year to maintain their license.

When to Hire a CPA

When weighing out whether to hire a CPA versus a tax attorney or Enrolled Agent, one of the biggest things you’ll need to factor in is what services you require. The main things you’d want to hire a CPA for would include:

  • Financial planning
  • Tax preparation
  • Tax filing
  • Help with filing delinquent taxes
  • Help with filing employment taxes
  • Management of a business’s finances
  • Auditing and reviewing financial documents

Overall, you’ll want to enlist the help of a CPA if you need long-term assistance with your financial matters. Whether you’re an individual or a business owner, a CPA can help you thrive financially and stay on budget.

Depending on your situation, you’ll need to determine which type of CPA best fits your needs. If you have a very complicated matter, then it might be worth your time and effort to scope out a highly specialized CPA that focuses on that issue.

What is an Enrolled Agent?

An enrolled agent (EA) is an individual who is qualified to perform tax representation services to consumers. Enrolled agents can represent their clients in front of the IRS, prepare tax returns on behalf of taxpayers, and provide ongoing representation for individuals in disputes with the IRS.

The duties of an EA versus a CPA vary extensively. A CPA is more focused on the financial picture of the person or business, whereas an EA generally doesn’t handle complex accounting or financial matters.

Enrolled Agent Training and Education

If you’re weighing the differences between a Tax Attorney, a CPA, and an EA, then one area of interest is the different training and education requirements. Generally, a Tax Attorney and CPA undergo years of education, hands-on experience, and training. Enrolled agents, on the other hand, do not have the same level of expertise.

The IRS enrolled agent designation does not require any specific education or training. Applicants only need to complete a background check and pass a three-part exam to become an enrolled agent. You can also become an enrolled agent by working for the IRS for a certain number of years.

How to Choose What Type of Tax Professional to Hire

In 2023, over 63,960 Americans were employed as tax professionals. Having so many options can feel overwhelming, especially if you’re still unsure of the expertise required to resolve your situation.

When it comes to choosing who to trust with your tax situation, the decision can be difficult, but understanding the strengths of each can make the process easier. The most important aspect is choosing a professional or firm with the expertise for your unique situation. Many times, a tax attorney, CPA, and EA will overlap in being able to help with the same type of problem. At Wiggam Law, we pride ourselves on having diverse experience in various tax representation matters.

Identifying Your Tax Requirements

First, start by gaining clarity on your specific tax problem. Having this understanding will help determine the best professional to assist you.

While attorneys can indeed assist with setting up a payment plan or applying for an offer in compromise, it’s important to know that they also bring to the table a unique set of skills in handling legal consequences, which make them especially beneficial for situations involving many years of unfiled returns or potential criminal charges. A CPA could be your go-to for intricate accounting issues, while an enrolled agent can be a cost-effective choice for a more straightforward task. Your primary criteria should be ensuring that the professional you select has experience handling issues similar to yours.

Know Your Budget

Understanding your budget is essential. Hiring an expert to help is an investment in your peace of mind and financial future, but ensuring you’re getting value for your money is also crucial. Typically, but not always, CPAs and attorneys might have a higher fee structure compared to enrolled agents.

When comparing similar types of work that overlap, their fees can vary. However, the depth of their service and knowledge could justify a higher cost, whether it is an attorney, EA, or CPA. Choosing the right professional to help your situation is all about finding the right balance between expertise, budget, and the quality of advice and service.

Do Your Research

Finally, be sure to do your research before hiring your tax expert. Doing a quick Google search and checking on past reviews can help you eliminate any firms or businesses that haven’t offered quality services to clients in the past.

Are You Ready to Talk to a Tax Attorney?

Now that you know more about the different types of tax professionals, you can make an informed decision on how to move forward with your tax matters. At Wiggam Law, we are dedicated to getting you out of your tax mess so you can move on. We have the expertise to resolve IRS and state tax issues for individuals and businesses and are happy to help you determine what type of help you need for your tax issue.

To get help now, schedule a consultation with us to see how we can help alleviate your tax issues.