tax attorney

When it comes to financial challenges and struggles, dealing with tax issues can be some of the most stressful. Not only are tax disputes often complex, but the consequences of making a mistake can be severe. Whether it’s the IRS taking your professional license, placing a levy on your bank account, or facing prison time, making the wrong decision when it comes to your taxes is nothing to take lightly.

Luckily, there are tax professionals to help prevent and/or fix these mistakes. Depending on your tax needs, you might want to hire a tax attorney, certified public accountant, or enrolled agent. But which one should you hire and why? This article focuses on the differences between these tax professionals, with a special focus on when and why you should hire a tax lawyer.

What’s the Difference Between a Tax Attorney, Certified Public Accountant, and Enrolled Agent?

On the surface, tax attorneys, certified public accounts (CPA), and enrolled agents (EA) are very different tax professionals. A tax attorney is a type of lawyer, a licensed professional that represents clients in legal matters. In contrast, a CPA is a licensed accountant and an EA is a professional that represents taxpayers in matters before the IRS. In the majority of cases, any of these professionals may represent you in a tax matter before the IRS.

The differences between these tax professionals mean each one will usually be better suited to handle different tax matters, whether from a knowledge or cost-benefit perspective. For example, a tax attorney, CPA, and EA might be able to handle the same tax dispute, but the enrolled agent may cost less to hire. But if you need representation in a court case, a CPA and EA probably lack the familiarity of courtroom procedures and neither is legally allowed to represent you in court.

To better understand the differences between these tax professionals, let’s take a closer look at each one. 

Tax Attorney

A tax attorney is a type of lawyer who focuses their practice on tax law. Due to their legal training, tax lawyers are best suited to helping you with legal tax issues that involve litigating in court or providing advice concerning the interpretation of case law, regulations, and statutes.

One of the benefits of hiring a tax attorney is that your communications with them will be protected by attorney-client privilege. There are exceptions to this privilege, but for the most part, as long as your communications with your attorney relate to you seeking legal advice (and don’t involve asking for their help to break the law), your attorney is not allowed to divulge what you said to them or what they said to you unless you explicitly permit them to do so.

In some cases, your communications with your EA or CPA could also be confidential. Yet these protections will be far less robust and protective than attorney-client privilege. This is especially true if you face tax-related criminal charges. Your EA or CPA could be forced to testify against you in a criminal matter, but your tax attorney can’t testify against you (even if they want to) unless you allow them to do so. 

Certified Public Accountant

A CPA is a licensed professional (like an attorney) but instead of giving legal advice, they focus on providing accounting and/or business advice. Because their expertise is financially oriented, CPAs tend to be more helpful in handling questions or matters concerning:

  • Budgeting
  • Loans
  • Preparing financial statements
  • The financial benefits and drawbacks of a particular business transaction

While a bit of an oversimplification, a good way to think of a CPA is someone who can tell you what to do (or not do) from a financial perspective. On the other hand, a tax attorney is someone who can tell you what to do (or not do) from a legal perspective. In reality, there’s some overlap in the tax assistance a CPA or tax attorney can offer, such as helping prepare and file tax returns or setting up a payment plan or installment agreement with the IRS. 

Enrolled Agent 

Enrolled agents are tax professionals who may represent any type of taxpayer in any type of tax matter, as long as it’s before the IRS (and not in a courtroom). This means if you’re dealing with an audit, IRS collection action, or appealing an IRS decision, an EA can represent you. To become an EA, a person must either pass a three-part exam or have a certain amount of experience as an IRS employee.

When Do I Need to Hire a Tax Attorney?

You’ll definitely want to hire a tax lawyer in situations where you could potentially end up in court, whether it’s U.S. Tax Court or federal court facing federal tax charges. It would be illegal for a CPA or EA to represent you in court. Even if you’re not facing civil or criminal charges, there are several contexts or scenarios where you might still benefit from the services of a tax lawyer.

Generally speaking, a tax attorney will focus their practice on either litigation/adversarial work or transactional/counseling work. Many tax lawyers do both, but most will spend most of their time representing clients in one of these two areas.

Litigation or adversarial work usually refers to being in a courtroom, but it can also refer to other types of actions where you’re in opposition to the IRS or state taxing authority. This includes representing you in an audit, tax appeal, or contesting an IRS collection action. For instance, if you’re trying to remove an IRS tax levy or cite legal precedent to support your position that the statute of limitations has run on the IRS’ ability to collect a tax debt, then a tax attorney might be your best bet.

As for transactional or counseling tax work, this describes matters relating to tax planning or finding legal strategies to reduce how much money you have to pay in taxes. A great example would be asking for advice on how to complete a business transaction or create an estate plan to minimize the tax consequences.

Or, there might be a tax deduction you want to use for your business’ tax return, but you’re not sure if you’re legally allowed to do so. A tax lawyer can do the legal research and analysis to help you understand how likely it is for the IRS to accept the deduction. Or if the IRS challenges it, how likely your deduction will survive a legal challenge in court.

A tax lawyer really shines when there’s a tax question with no clear answer. A common saying among lawyers is that “gray is green.” This means lawyers earn their money by advising clients in situations where there is no black-and-white solution (if there was, the client probably wouldn’t have to hire an attorney).

This doesn’t mean tax lawyers are only useful when there’s no clear answer to your particular tax challenge. However, if you want to take a certain approach concerning your tax issue and it’s never been done before, a tax attorney will likely provide more thorough advice than an EA or CPA.

The bottom line is that tax attorneys can help you avoid tax problems (transactional/counseling), but they can also help you if you’re trying to get out of an existing tax problem (adversarial/litigation). 

Common Tax Situations a Tax Attorney Can Help You

A tax attorney’s role comes with a wide range of services. While some attorneys may have specific focuses within the tax law that they focus on, below are some of the common types of situations they can help with regard to tax problems. 

  • Handling legal issues that come up related to tax matters.
  • Resolving unpaid tax debts.
  • Engaging in discussions and negotiations with the IRS or state tax authorities.
  • Assisting in the preparation of current or delinquent tax returns
  • Providing representation in tax audits
  • Contesting IRS findings and providing representation through an appeal
  • Helping with IRS collection actions such as liens or levies.
  • Advising on tax aspects related to estate planning.
  • Assisting with amendments of tax returns.
  • Guiding in transactions related to the purchase or sale of a business
  • Challenging incorrect tax assessments by the IRS. 
  • Assisting with complex tax issues and providing strategic advice.

Tax attorneys are essential in helping individuals and businesses navigate through complex tax issues while ensuring compliance and optimizing your financial situation. They represent your best interest in dealing with the tax authorities.

Can a Tax Lawyer Negotiate on My Behalf With the IRS?

The IRS and other taxation authorities allow taxpayers to seek legal help when they request it. The average taxpayer is not very knowledgeable when it comes to tax laws, while the IRS is. A tax lawyer, CPA, or enrolled agent can represent you before the IRS and handle negotiations. 

When hiring a tax lawyer to represent you, they have your best interest in mind. Realize the goal of the IRS and state authorities is to collect as much tax as possible. A Tax lawyer will utilize their knowledge of the tax law and experience to get you the best outcome for your tax situation within their legal rights. 

How Much Does a Tax Lawyer Cost?

How much a tax attorney charges depends on several variables, such as the cost structure, the complexity of the tax issue, and the attorney’s pricing of their services. For a basic tax-related legal question, a tax attorney might charge a few hundred dollars or less. But for extensive tax litigation that results in years spent in Tax Court and appeals courts, the tax lawyer’s bill could eventually total a few hundred thousand dollars.

As scary as this second scenario sounds, understand that the vast majority of tax cases most attorneys take don’t result in spending months or years in court. If you find yourself in a situation where you need to hire a tax lawyer, a very rough ballpark estimate of what you can expect to pay is anywhere in the $500 to $10,000 range. Many times, the tax lawyer will assess your case beforehand and give you a ballpark range of what it will cost or will provide you with a flat fee to resolve your situation. 

Tax Attorney Billing Arrangements

If you hire a tax lawyer, they will probably bill you in one of three ways. First, they could bill you by the hour. Tax lawyers typically charge anywhere from $200 to $500 per hour, plus expenses, such as mailing, copying, and filing fees. The biggest drawback of this approach is the unpredictability of your legal bill.

The second common cost structure used by tax lawyers is the flat fee arrangement. The attorney will examine your specific tax issue to figure out the type and amount of legal work they’ll need to provide. They can then provide a fixed cost for their legal services. This is popular with clients because they know exactly how much their legal bill will be. It also motivates the tax attorney to work as efficiently as possible.

Third, there’s the contingency fee. Here, you pay nothing until a specific result is obtained, such as winning or settling a case. This is common in personal injury litigation but is sometimes used in the tax legal practice, especially when combined with another billing arrangement. For example, an attorney might charge a flat fee for work relating to reducing your tax bill. But then they also get paid a certain percentage of the amount the tax bill gets reduced, or they help you recover from the IRS.

Regardless of which tax billing arrangement is used, you should expect to pay for the legal advice and work you receive. At first glance, it might seem like a lot of money, although compared to the alternative (going to prison or paying the full amount of your tax bill, for instance), it’s a worthy investment and will save money in the long run. 

How to Find the Right Tax Attorney Near Me

When searching for a tax lawyer, you’ll probably start with an online search. This is a great place to begin, as most tax lawyers worth hiring will have an online presence. When conducting your search, you’ll want to pay careful attention to finding a local tax attorney near you.

Finding a tax lawyer close by is important for several reasons. First, it’s more convenient in case you need to stop by the office or meet with your attorney in person. Second, a local tax lawyer is more likely to have experience handling state and local tax issues that affect you.

Practically all tax attorneys have experience dealing with the IRS, but many won’t have the same level of skill in handling a state or local tax concern for every other state, county, or municipality. This isn’t surprising given the complexity of tax practice and the need to focus on a particular area of law.

Every state has different laws, so it’s not realistic to expect a lawyer to be an expert in all jurisdictions. If you hire an out-of-state or non-local tax attorney to represent you in a matter involving local tax issues, there’s a fair chance that they’ll end up hiring a local lawyer to assist them in your case. There’s nothing wrong with this, but understand that it will probably result in a higher tax bill for the same quality of legal work. 

Still Not Sure If You Should Hire a Tax Attorney?

Sometimes you can’t tell if you need to hire a tax lawyer until you talk to one. You don’t know what you don’t know, so it’s a good idea to consult with a tax attorney and have them provide a clearer picture of what your options are.

At Seattle Legal Services, PLLC, there’s no charge for an initial consultation, so feel free to contact us. After hearing about your tax issue, we can help you decide what to do next, including whether you should hire us (or another type of tax professional) or if you can handle things on your own. 

We also offer clear and transparent pricing. Our costs are fixed flat fees based on the facts and circumstances of each case. We don’t play the billable hour game, and our clients really appreciate that when they work with us.