Tax Lawyer vs. CPA: Which One Does Your Small Business Need?

Tax Lawyer vs. CPA: Which One Does Your Small Business Need?

Whether you are seeking a professional to assist with your personal or business-related tax issues, it can be quite difficult to establish exactly which expert best fits your needs. This is because there are many financial experts with innumerable credentials, and it can be confusing to understand how each one can help you.

But when it comes to business taxes, two of the most common experts are tax lawyers and CPAs (Certified Public Accountants). Both are trained to help with a wide range of tax needs, yet there are also distinct limitations to their specific roles.

So, which one does your small business need? Let’s take a closer look.

Understanding the Role of a Tax Attorney

Tax attorneys are qualified lawyers who have gone through an accredited law school, passed their bar examination, and emphasize personal and business tax issues in their practice.

They advise clients on how to stay compliant with state and federal tax laws, represent them in court during audits and tax-related litigation cases, and help with other complex tax issues.

At their core, tax attorneys are counselors who provide comprehensive legal advice surrounding taxes. This means they can provide a level of detail and analysis that CPAs typically cannot match.

While most tax attorneys work for large law firms, some solo practitioners and smaller law firms also provide high-quality services.

What Can a Tax Attorney Do for Your Business?

The main advantage of working with a tax attorney is that they can provide in-depth legal analysis and advice on a variety of tax-related issues, including:
  1. Advising on the tax implications of business decisions
  2. Structuring business deals and transactions to minimize taxes
  3. Representing businesses and individuals during audits
  4. Litigating tax disputes in court
  5. Assisting with international tax compliance issues
  6. Preparing and filing complex tax returns

The main disadvantage of working with a tax lawyer is their services can be quite expensive. This is because they typically charge by the hour, and their rates can range from $150 to $350 per hour.

Additionally, while tax attorneys usually have a deep understanding of taxation law, they may not have the same level of experience and expertise in other business law areas, such as contracts or employment law.

Understanding the Role of a CPA

A CPA is a certified public accountant who has completed an accredited accounting program, passed a national Uniform Certified Public Accountant Examination, and met all other requirements set forth by their state's board of accountancy.

CPAs provide a wide range of services, including tax preparation, auditing, financial planning, and consulting. While most CPAs work for accounting firms, some work as solo practitioners or in-house accountants for businesses.

What Can a CPA Do for Your Business?

The main advantage of working with a CPA is that they can provide a broad range of services, including:
  1. Preparing and filing tax returns
  2. Advising on the tax implications of business decisions
  3. Auditing financial statements
  4. Providing financial consulting services

The main disadvantage of working with a CPA is that they typically do not have the same level of legal training as tax attorneys. This means they cannot provide the same level of detail and analysis when it comes to complex tax issues.

Additionally, while CPAs typically charge less than tax attorneys, their rates can still be quite expensive, ranging from $100 to $300 per hour.

So, Which One Should You Hire for Your Small Business?

The answer to this question depends on your specific needs. If you have a complex tax issue requiring legal analysis and advice, you'll need to hire a tax attorney.

On the other hand, if you need help with more general tax issues, such as tax preparation or financial consulting, then a CPA may be a better option.

Ultimately, the decision of whether to hire a tax attorney or CPA should be based on your specific needs and budget.

If you can afford to hire a tax attorney, then they're likely the best option. However, a CPA may be a more affordable option if you're on a tight budget.

Can One Professional Serve Both Roles?

Yes, some professionals can serve both roles. These professionals are typically called "tax attorneys-CPAs" or "tax lawyers-CPAs."

In this case, a person first studies to become a CPA and then completes a law degree. This allows them to provide a broad range of services, including tax preparation, legal advice, financial consulting, and auditing.

While tax attorneys-CPAs are relatively rare, they can be extremely helpful for businesses that have complex tax needs. However, you must remember that they can also be quite expensive, since they're essentially charging for two professional services.

If you're not sure whether you need a tax attorney or a CPA, the best thing to do is consult with a professional who can assess your specific needs and provide advice on which type of professional would be best suited for your situation.

The Bottom Line

Generally speaking, most small businesses will need a CPA more than a tax attorney. However, there may be some instances where it makes sense to have both professionals on board. 

Can one professional serve both roles? Sometimes, but not always. If you’re unsure whether or not your business would benefit from hiring a tax lawyer and/or a CPA, reach out to an accountant or attorney for advice.

They can help you determine which professional is best suited to meet your company's needs.
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