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 CPABeing A CPAIn the accounting profession, CPA stands for Certified Public Accountant. It is a professional accountant license certified by a state board of accountancy in the U.S. Becoming a CPA is an indicator of credibility and expertise in accounting. A CPA can hold all sorts of positions in the financial domain. Their extensive knowledge of accounting and ethics can work as reliable financial advisors, business consultants, accountants, auditors, and tax professionals. They can even hold high-level executive positions.read more 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 documentation of a company’s financial transactions. These transactions include purchases, sales, receipts, and payments.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. 

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 acquisitionsMergers And AcquisitionsMergers and acquisitions (M&A) are collaborations between two or more firms. In a merger, two or more companies functioning at the same level combine to create a new business entity. In an acquisition, a larger organization buys a smaller business entity for expansion.read more, 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. 

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 –

  • BEC CPA ExamHow to Become a CPA?CPA Application Process