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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.
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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, bookkeeping, 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 planning 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.
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 tax 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 evasion, 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.
| Particulars | CPA | Tax Attorney |
|---|---|---|
| Definition | A state-board licensed accounting professional specializing in the area of business, finance, and taxation. | A lawyer specializing in tax rules and regulations. |
| Career opportunities | Business consultant Financial advisor Accountants CFOs Auditors, 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 requirements | May vary as per the state board of accountancy. Usually, Passing certificate of Uniform CPA Exam + 150 (at least) college credits + Work Experience Law Degree + Passing Certificate of State Bar Association Exam Skills Required Mathematical 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 planning | Resolve legal disputes or controversies related to tax |
| Orientation | Works to avoid tax issues | Works to resolve tax issues |
| Expertise | Financial accounting, auditing, bookkeeping, financial planning, taxation, etc. | Tax law |
| IRS disputes | Represents the taxpayer before the IRS but lacks required legal expertise. | Represents the taxpayer before the IRS and defends him/her well. |
| US Court of law | Cannot represent the taxpayer in the Tax Court as the license is restricted to the issuing state in most cases | Can represent the taxpayer in the Tax Court |
| Benefits of Hiring | Provides regular accounting and auditing services Maintains accurate financial statements Ensures reliable audits Conducts forensic accounting 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 type 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 about how it would impact their finances.
Some experts suggest taking the help of a CPA or tax attorney to understand the implication of the tax hike to shield against its impact.
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