CPA vs Tax Attorney

Difference Between CPA and Tax Attorney

Certified Public Accountants (CPA) and tax attorneys are both professionals who can attend to your tax needs. The primary difference between the two is that, while a CPA holds expertise in dealing with the financial implications of tax matters, a tax attorney specializes in handling the legal aspects of taxation. In the context of CPA vs tax attorney, each role has its benefits and limitations. Both professionals command a good salary and excellent career prospects.

Hiring a CPA or a tax attorney depends upon your specific needs and circumstances. Need to handle financial aspects of tax-related matters or create a long-term tax plan? Hire a CPA. Facing a legal battle with the Internal Revenue Service (IRS), or need a professional to defend yourself in the court? Hire a tax attorney.

What is a CPA?

CPAs are licensed accounting professionals who have passed the AICPA-administered CPA exam. The American Institute for Certified Public Accountants (AICPA) coordinates with the National Association of State Boards of Accountancy (NASBA) to conduct this exam and issue the license.

Being a CPA ensures that the professionals have passed their respective State Board of Accountancy’s necessary education and experience requirements. A CPA’s role majorly revolves around fulfilling the client’s needs of accounting, bookkeepingBookkeepingBookkeeping is the day to day recording of financial transactions such as purchases, sales, receipts, and payments, and it is the first step in the accounting process. It can be prepared in two ways: single-entry and double-entry; however, the double-entry approach is more widely used and recognized in most countries.read more, auditing, and taxation. 

Their license indicates their integrity and expertise in maintaining and auditing financial records and preparing tax returns. While tax attorneys can also prepare tax returns, CPAs have the upper hand due to their years of knowledge and training. 

CPAs can provide efficient tax planningTax PlanningTax planning is the process of minimizing the tax liability by making the best use of all available deductions, allowances, rebates, thresholds, and so on as permitted by income tax laws and rules imposed by a country's government. It contributes to better cash flow and liquidity management for taxpayers, as well as better retirement plans and investment opportunities.read more by minimizing an entity’s tax liability while ensuring legal compliance. With an extensive understanding of an entity through its financial records, they offer insightful financial advice and assist business decision making.

In other words, CPAs could keep your account books in order, keep track of your finances, fulfil tax obligations, file tax returns, and provide auditing services. Since they hold thorough financial expertise, they can even advise their clients on financial planning to bring more significant monetary benefit. 

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What is a Tax Attorney?

A tax attorney is a state-bar exam qualified lawyer specialized in the legal aspect of taxation. Having vast expertise in tax law, tax attorneys are your best option in dealing with any potential legal matters related to taxes. They can defend your case in tax lawsuits related to inheritance issues, charges of tax evasion, irregularities in tax payments, or withholding taxWithholding TaxWithholding tax is a part of the salary an employer withholds from an employee's compensation and pays to the legal authorities. It is treated as collateral imposed against the taxes an employee is liable to pay during a particular year.read more disputes, etc. 

With an exhaustive knowledge of federal tax laws, a tax attorney is better equipped to defend you in tax disputes with the IRS. Both CPAs and tax attorneys can rightfully represent you in IRS disputes, but what sets the latter apart is their expertise in handling legal matters. 

Unlike CPAs, since they are experts in legal proceedings, they could keep your sensitive information under the wraps. If you need professional legal help with the IRS or continuously receive debt collection notices for tax evasionTax EvasionTax Evasion is an illegal act in which the taxpayers deliberately misreport their financial affairs to reduce or evade the actual tax liability. This includes using multiple financial ledgers, hiding or representing lesser income, gains, or profits than actually earned, overstating deductions, & failing to file returns. read more, hiring a tax attorney would greatly help. They are an expert in negotiation and building arguments around the desired outcome.

Apart from taxation, tax attorneys also specialize in other areas, like estate planning, mergers and acquisitions, litigation, audits, appeals, etc.

CPA vs Tax Attorney Infographics

The following infographics illustrate the contrasting features of CPA vs tax attorney, outlining the salary, career opportunities, skills, and educational requirements.

CPA vs Tax Attorney – Comparative Table

The professional outlook, career prospects, qualifications required, and salary offered to a CPA and tax attorney differs vastly. Let us explore some major differences in the table below. 

ParticularsCPATax Attorney
DefinitionA state-board licensed accounting professional specializing in the area of business, finance, and taxation.A lawyer specializing in tax rules and regulations.
Career opportunitiesBusiness consultant
Financial advisor
Accountants
CFOsCFOsThe full form of CFO is Chief Financial Executive, and he or she is a top level executive of the firm who is responsible for the firm's overall finance functions and has the authority to make financial decisions for the organization. read more
AuditorsAuditorsAn auditor is a professional appointed by an enterprise for an independent analysis of their accounting records and financial statements. An auditor issues a report about the accuracy and reliability of financial statements based on the country's local operating laws.read more, etc.  
Sole practitioner
Corporate legal advisor
Tax attorney at a law firm
Tax Attorney (government)
Estate planning attorney
Litigation attorney
Average annual salary$75,660 per annum$93,127 per annum
Educational requirementsMay vary as per the state board of accountancy. Usually, Passing certificate of Uniform CPA ExamCPA ExamThe CPA Exam assesses accounting professionals not just on their financial knowledge, but also on their ability to review and seek out key abilities.read more + 150 (at least) college credits + Work Experience  Law Degree + Passing Certificate of State Bar Association ExamSkills RequiredMathematical and accounting skills
High ethical standards
Research, analytical, and problem-solving skills
Attention to detail
Client focus
Extensive business perspective
Factual and legal research skills
Attention to detail
Mathematical and accounting skills
Effective written and oral communication skills
Strong analytical reasoning skills
Specialization (Tax)Tax preparation and tax planningResolve legal disputes or controversies related to tax
OrientationWorks to avoid tax issuesWorks to resolve tax issues
ExpertiseFinancial accounting, auditing, bookkeeping, financial planning, taxation, etc.Tax law
IRS disputesRepresents the taxpayer before the IRS but lacks required legal expertise.Represents the taxpayer before the IRS and defends him/her well.
US Court of lawCannot represent the taxpayer in the Tax Court as the license is restricted to the issuing state in most casesCan represent the taxpayer in the Tax Court
Benefits of HiringProvides regular accounting and auditing services
Maintains accurate financial statementsFinancial StatementsFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more
Ensures reliable audits
Conducts forensic accountingForensic AccountingForensic accounting employs a mix of accounting, auditing, and investigative acumen by recording accounting documents, preparing reports, and performing financial analysis for use in legal proceedings. Thus, it provides an accounting analysis from a litigation perspective.read more services to uncover fraudulent business dealings
Offers growth-oriented consulting sessions
Follows efficient tax preparation and filing process
Provides insightful taxation and financial advice
Extends better financial planning
Ensures effective settlement to complicated tax problems
CPAs are more cost-effective as their hourly rates for tax services are less than tax attorneys.
Provides legal assistance in settling tax disputes and lawsuits
Resolves wage garnishment issues
Negotiates with the IRS
Reduces the tax burden on your heirs for the inherited estate
Understands foreign laws and assists in conducting overseas business by ensuring tax compliance
Recognizes prospective tax liability for your business entity typeBusiness Entity TypeA business entity is one that conducts business in accordance with the laws of the country. It can be a private company, a public company, a limited or unlimited partnership, a statutory corporation, a holding company, a subsidiary company, and so on.read more
Offers confidentiality to your matters

Real-life example

Businesses or individuals often face perplexing questions regarding sudden tax hikes by the government. A CPA or tax attorney could provide insightful information to cushion against the financial implications of such hikes. 

The US government recently announced a tax hike on wealthy Americans to fund a welfare plan. It raises the household’s capital tax rate to 39.6%. Family-owned businesses, farms, and estate planners are apprehensive over how it would impact their finances.  

Some experts suggest taking the help of a CPA or tax attorney in understanding the implication of the tax hike to shield against its impact.

This has been a guide to CPA vs Tax Attorney. Here we discuss the difference between CPA and Tax Attorney with infographics and why to pursue them. We also discuss the exam requirements for both. You may also have a look at the following articles –

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