Differences Between a Tax Attorney and a Tax Accountant
People are often confused over whether to hire a tax attorney or a tax accountant to handle their tax issues. In many cases, the roles these individuals play can overlap. They both know a lot about taxes, charge about the same, and have a professional license. However, these professions have distinct roles. In some cases, there may even be clear factors that dictate whether you should hire a tax attorney or an accountant. This article will explain some of the key differences between a tax attorney and a tax accountant, and why you may want one versus another to handle your taxes.
1. Attorney-Client Privilege
While both attorneys and accountants must keep your information confidential, an accountant can be ordered to give up information about you and your financial records by a court or government agency. The only confidential information about you that an accountant cannot be forced to divulge is the tax advice he or she gave you. However, even this is limited because it does not apply to tax shelters or criminal matters.
On the other hand, anything you tell or provide your attorney are “privileged communications.” This is much stronger than confidentiality or the accountant-client privilege. Your attorney may never divulge the contents of your communications with him or her to anyone without your permission. This allows you to have frank and open discussions with your attorney without fear that it will be used as evidence against you in any legal proceeding, whether you are a party, witness, or innocent bystander.
Therefore, when privileged communications are important, you should hire a tax attorney rather than an accountant to handle your tax matters.
Few people realize the difference between the ethical rules that apply to attorneys and the ones that apply to accountants. Unlike accountants, attorneys owe their clients a duty of loyalty and are bound to advocate for their clients’ best interests. They cannot violate that duty.
Accountants, on the other hand, have no ethical duty to advocate for their clients. They are bound to truthfulness, objectivity, integrity, and avoiding conflicts of interest, but they do not owe their clients a duty of loyalty like attorneys do. If the IRS audits or investigates you, your accountant is well within his rights to protect him or herself during the investigation and may put his or her interest above yours.
Therefore, if you need an advocate, you should hire a tax attorney.
- IRS Audits
Having a tax attorney instead of an accountant represent you in the event of an IRS audit is a tremendous advantage. It shows the IRS that you mean business and that you have an advocate who is ready and trained to represent you to the fullest measure, even in court if necessary. Knowing this, the IRS will often concede the case earlier and for less tax.
While accountants can represent you during an IRS audit, the IRS knows that accountants can only go so far. They cannot file a Tax Court petition. Therefore, if the accountant cannot settle your case with the IRS, he or she must recommend that you accept the IRS’s proposed tax deficiency, or hand your case over to an attorney who can take it to the next level. This two-step process increases your cost because the accountant must bring the attorney up to speed before he or she can begin to represent you.
Therefore, if your return has unusual or complex issues, you may be better off hiring a tax attorney rather than an accountant.
- Legal Advice
While an accountant can be a tremendous resource for filing tax forms and preparing spreadsheets and financial statements, an accountant cannot give you legal advice. Only an attorney can give you legal advice. Nor can an accountant prepare legal documents or advocate for you in a court of law. Only an attorney can do these things. Doing so without a law license is the “unauthorized practice of law” and can be a criminal offense.
Therefore, if you need legal advice or legal documents in addition to tax services, you should hire a tax attorney who can satisfy both your tax and other legal needs at the same time.
Tax attorneys and tax accountants charge about the same hourly rates, which will vary among them based on their expertise and experience. As with any hourly professional, the more work you ask them to do, the more it will cost you. Most attorneys and accountants are happy to quote their hourly rates and tell you what they expect the total charges to be. Accountants can usually give you a very close estimate, even a fixed fee, for preparing your tax return because they do hundreds, or thousands, of returns just like yours every year.
But if your return is more complex, has sensitive issues, or needs more individual attention, you may be better off with a tax attorney. In addition to handling your tax issues for about the same cost, the attorney can also prepare legal documents for you and keep your communications protected under the attorney-client privilege. Our trusted and experienced Houston tax attorneys are ready to help. Contact us today to schedule a consultation and discuss your case.