Which Tax Professional Is Right for Your Tax Issue?
Tax attorneys, Certified Public Accountants (CPAs), and enrolled agents (EAs) can all represent you in front of the Internal Revenue Service (IRS). But there are differences between these tax pros. Need help with a tax problem? Wondering which tax professional is the right choice?
The answer depends on your situation. To help you out, this guide looks at the differences between tax attorneys, CPAs, and EAs. It breaks down their education and training as well as the services they provide. Then, it explains what to keep in mind when hiring a tax attorney, a CPA, or an enrolled agent.
At The W Tax Group, we have tax lawyers, a team of accountants, and enrolled agents on our staff, and we all work diligently to help you get the best resolution for your tax problem. Need help? Then, contact us today.
Education and Training: Lawyer Vs. CPAs. Vs. Enrolled Agents
Lawyers, CPAs, and enrolled agents all must pass extensive tests before they can use these titles. But the tests are slightly different. The educational paths to these professions also vary. Here’s an overview.
Tax Lawyer Education and Training
To become a tax lawyer, students must complete a bachelor’s degree. Then, they must go to law school and earn a Juris Doctor (J.D.) law degree. After earning their legal degree, they have to pass the Multistate Professional Responsibility Examination (MPRE), a 60-question test on ethics.
Finally, they must pass the bar exam so that they can practice law in their state. Some tax lawyers also go on to complete a Master of Law (LLM). You can only earn an LLM if you have already earned a J.D. Only tax lawyers can have this degree.
CPA Training and Education
In most states, students must earn at least 150 college credits to become a CPA. This equates to a bachelor’s degree in accounting plus 30 additional credits. Many CPAs earn a master’s degree while obtaining the 30 extra credits, but it’s not required.
To qualify for licensure, they must complete at least a year of work experience under another CPA, and they also must pass the CPA exam. This four-part test covers auditing and attestation, business environment and concepts, financial accounting and reporting, and regulation.
Enrolled Agent Education and Training
To become an enrolled agent, you need to pass the Special Enrollment Exam (SEE). This test has three parts focused on individual taxation, business taxation, and representation practice, and procedures. Each section has 100 questions, and the enrolled agent must pass all three sections in three years or fewer.
People who work for the IRS for at least five years may be able to become enrolled agents without taking the SEE. There are no education requirements to become an enrolled agent, but the test is extremely in-depth.
To keep their licenses active, tax attorneys, CPAs, and enrolled agents all have to complete continuing education. The requirements vary, but in most states, these professionals must complete between 10 and 40 hours of continuing education every year. They also must remain in good standing with their respective licensing boards.
Tax Resolution Services: Lawyers vs. CPAs vs. EAs
Tax attorneys, CPAs, and EAs all have unlimited practice rights in front of the IRS. That means that they can help you with any tax matter, and they can represent you in front of any IRS office.
In most cases, only an attorney can represent you in Tax Court. Non-attorneys can only represent you in Tax Court if they have passed the Tax Court Exam For Non-Attorneys. Note that this is rare. Only a handful of people pass this test every year.
If you anticipate going to Tax Court, a tax lawyer is the best option. With all other tax problems, you have to consider the tax pro’s education, training, and experience as you make a selection.
When to Hire an Enrolled Agent for Tax Problems
Because of their relatively limited education requirements, EAs are often the most cost-effective option. They can be a great choice if you want help with bookkeeping, tax prep, and IRS collection actions. They may not be the ideal option if you are dealing with an extensive audit, revenue officer, high-value collection actions, or tax crimes.
When to Hire a CPA for Tax Problems
CPAs can help with many different tax issues, but again, you need to consider their experience. If a CPA primarily files tax returns, they may not have a lot of experience filing appeals or negotiating Offers in Compromise. Similarly, if someone primarily focuses on accounting or audits for a public firm, they may not be familiar with the ins and outs of tax laws.
In terms of tax resolution, a CPA can be an affordable route to take if you need help with basics such as setting up an installment plan or requesting first-time penalty abatement. They can also help you through an audit, especially if they prepared your return. However, they cannot represent you in U.S. Tax Court, and they aren’t the right choice if you’re being investigated for tax crimes.
Note that an accountant is not the same thing as a CPA. Accountants can file tax returns or do bookkeeping, but they have not passed the CPA exam and cannot represent you in front of the IRS.
When to Hire a Tax Lawyer for Tax Problems
Tax attorneys can focus on tax controversy or tax planning including wills, trusts, and estate planning. If you have a tax problem, you may need the expertise of a tax lawyer who focuses on tax controversy. These tax attorneys deal with the IRS every day, and they understand how to help their clients through the collections, audits, and appeals process.
When you hire a tax attorney with a law firm, you enjoy the attorney-client privilege. This allows you to speak freely with your attorney, even if you have done something wrong. In contrast, CPAs and EAs do not have privilege with their clients — they can be compelled to testify against you.
An experienced tax attorney is the best option if you owe a lot of money or are dealing with a complex tax resolution case. It’s critical to contact a tax lawyer if you’re dealing with tax crimes such as tax fraud or evasion.
Can a Tax Attorney from Another State Represent Me?
Generally, lawyers can only practice in the state where they passed the bar exam. However, IRS tax problems are a federal issue. That means that a lawyer from any state can help you deal with the IRS.
If you need help dealing with a state tax agency, you should make sure the tax attorney can represent you in your state. Attorneys can typically handle arbitration, mediation, advising, and other legal activities that do not require a court appearance in any state, but if you anticipate being in the courtroom, you may need an attorney licensed in your state.
When choosing a tax resolution firm, look for one staffed with tax lawyers that have experience providing nationwide representation.
Attorney-Client Privilege: An Advantage of Tax Lawyers
One of the main advantages of hiring a practicing tax lawyer over a CPA or EA is attorney-client privilege. Attorney-client privilege means that the information you share with your tax lawyer is private. The attorney cannot be compelled to testify against you in court.
But again, choosing a tax pro with experience is critical. If you want the information you share to be privileged, you need to ensure that you hire a tax lawyer who understands when attorney-client privilege applies in relation to tax issues. Attorney-client privilege is a complicated issue, especially in relation to tax law. There’s even a lot of disagreement around this issue in the courts.
For instance, in 2020, in Lohmeyer Vs. The United States of America, the Fifth Court of Appeals voted to uphold a lower court’s ruling that the Justice Department’s summons for information about a law firm’s clients didn’t break attorney-client privilege. The vote was close which underscores how legally murky this issue can be.
To ensure the tax information you share is privileged, you need to work with a tax law firm that understands the nuances of attorney-client privilege during every stage from pre-controversy to court litigation. For example, if an attorney gives you advice that could be classified as business advice, rather than legal advice, it may not be privileged. That’s the type of distinction that usually comes up in these cases. And you need a tax lawyer who understands this issue.
A lawyer can also extend the attorney-client privilege to accountants or EAs. In particular, this can happen if the tax lawyer hires the accountant or EA to provide information related to a legal case. However, a CPA and an EA do not have attorney-client privilege when they’re working on their own. That’s why in some instances, it’s almost always better to hire a law firm over a tax resolution firm.
Tax Resolution Firms Vs. Law Firms
Only lawyers can form law firms. When you contact a law firm to help with your tax problems, you know that you are working with lawyers. You can rest assured that you’re working with well-educated professionals who can offer you attorney-client privilege. As long as the tax lawyers have experience with your issue, they can help you.
In contrast, tax resolution firms don’t have to be owned by a lawyer. Tax resolution firms employ a variety of professionals with a range of different experiences which can include lawyers, CPAs and enrolled agents. You often don’t have attorney-client privilege when you hire a tax resolution firm, which generally is not needed with tax collection cases.
Circular 230 Tax Professionals
Tax lawyers, CPAs, and EAs are called Circular 230 Tax Professionals. This means that they are professionally bound by the guidelines of IRS Circular 230. This publication outlines rules about competence, integrity, and conduct. If licensed tax pros don’t follow these ethical guidelines, they cannot practice. When you contact a law firm to help with your tax issues, you know that you’re working with Circular 230 tax professionals.
Who’s Right for You? Tax Lawyer, CPA, or EA
Again, the right tax professional varies based on your situation and what you are looking for in a company or professional. These three types of tax professionals overlap in terms of services they offer related to tax problems and the structure of their firm or company.
The most important thing is to find a professional with experience. Just because someone is a tax lawyer, a CPA, or an EA doesn’t mean they have the right experience to help you. If you’re worried about tax crimes, you also need to ensure that you work with an attorney who can provide you with attorney-client privilege.
Get Tax Help from The W Tax Group
At The W Tax Group, we are staffed by experienced tax attorneys along with accountants and EAs.. We provide individualized attention to all of our clients, and we work diligently to ensure you get the best outcome possible for your tax issues.
When you contact us, we start with a no-cost conversation about your tax situation. Then, we outline the ways we can help you, and if desired, we move forward with your case. We can help you with IRS tax problems, and we also provide nationwide representation for state tax issues.