Tax attorney vs accountant

[Guest]

I hear a lot of radio ads from tax attorneys year round, and especially around tax time. I've always used an accountant, but wonder if I should be using a tax attorney instead. I have income from foreign sources, and this year I'm inheriting part of my mother's IRA, which has required minimum distributions. Do any of you have tax attorneys? Are they better at finding ways to minimize tax burdens than accountants?

[KeepItReal]

I have always relied upon my CPA and have no complaints. My tax return is not vanilla so she works for her money. If you are happy with your accountant, stick to 'em. My CPA told me that she frequently consults with experts in the field if need be, usually to a partner at one of the big 4 accounting firms, some of them are CPAs and JDs - twice I have paid for that consultation as she did so on my behalf. She has a professional obligation and as far as I can tell she is doing a fine job.

 

Have you tried to ask your accountant if there are steps you can take to reduce your tax burden? Sometimes just asking the question will start a conversation that may be helpful to you...

[JayCeeKy]

I've only worked with a CPA who is a great tax preparer and tax specialist - knows all the ins-and-outs of taxes. I would think that a tax lawyer would only be needed if you have some legal troubles with the tax man - e.g. owing back taxes, garnishments, etc. My CPA is not only good at filing taxes, he also is a good financial advisor for questions regarding RMD's (required Required Minimal Distributions), long-term tax planning, etc. I would think that a tax lawyer is going to cost you more as they usually are reimbursed through "billable hours" which can add up quickly.

[Epigonos]

A CPA is as the initials clearly indicate is a Certified Public Accountant. They frequently don't know a thing about tax forms and tax preparations. Tax Attorneys are definitely not accountants and usually know very little about tax forms although some are very knowledgeable regarding tax law. Ones best choice for tax preparation is an Enrolled Agent. Enrolled Agents must take three day of testing (given by the IRS) on tax forms, tax law and other matters regarding tax preparation. The number passing is usually lower than the number passing the bar exams. Once an individual becomes an Enrolled Agent they must, in in order to maintain their status, take frequent updating classes. Enrolled Agents may represent their clients at IRS audits. They may also represent their clients in Tax Count, however, they usually want a Tax Attorney actively participating.

 

P.S. Wikipedia has an excellent article explaining exactly what an Enrolled Agent is and what they are able to do.

Edited June 23, 2019 by Epigonos

[rvwnsd]

A CPA is as the initials clearly indicate is a Certified Public Accountant. They frequently don't know a thing about tax forms and tax preparations. Tax Attorneys are definitely not accountants and usually know very little about tax forms although some are very knowledgeable regarding tax law. Ones best choice for tax preparation is an Enrolled Agent. Enrolled Agents must take three day of testing (given by the IRS) on tax forms, tax law and other matters regarding tax preparation. The number passing is usually lower than the number passing the bar exams. Once an individual becomes an Enrolled Agent they must, in in order to maintain their status, take frequent updating classes. Enrolled Agents may represent their clients at IRS audits. They may also represent their clients in Tax Count, however, they usually want a Tax Attorney actively participating.

 

P.S. Wikipedia has an excellent article explaining exactly what an Enrolled Agent is and what they are able to do.

Having studied public accounting and having several CPA friends I can tell you that many CPAs in private practice are either enrolled agents or have studied taxation.It is not unusual for a CPA with an undergraduate in Accountancy to get a Masters in taxation or go for a combined bachelor's/master's program in Public Accounting and Tax.

[rvwnsd]

I hear a lot of radio ads from tax attorneys year round, and especially around tax time. I've always used an accountant, but wonder if I should be using a tax attorney instead....

I forgot to answer your question when replying to @Epigonos's post. Tax Attorneys do not typically prepare tax returns on behalf of clients. The tax attorneys who advertise on the radio do so to represent taxpayers during an audit and/or in tax court. As @Epigonos stated, an Enrolled Agent can represent a client during an audit, as can a CPA.

 

It is wise to look beyond the credential and look at the training and experience of the individual you hire to prepare your taxes. As I mentioned in the other post, a CPA in private practice will typically have studied taxation before attempting to prepare tax returns on behalf of their clients. They would be foolish not to and will not have much of a practice if they don't. That said, a CPA working for a Big 4 firm who specializes in examining financial statements, forensic accounting, or conducting/supervising internal control exams will likely not have the training to prepare tax returns for someone with a complex financial situation. Likewise, a CPA who specializes in taxation would not be the best source of advice on how to set up the accounting structure for a complex business.

[Epigonos]

Rvwnsd I would readily agree with you that "MANY" CPA's have studied tax preparation and some may even be Enrolled Agents. The key here is that "ALL" Enrolled Agents have studied tax forms and tax preparation as their sole area of interest - they know tax preparation better than any other professionals -- that's their only job.

[instudiocity]

Tax Attorney's practice tax law in tax courts.

Enrolled Agents (with the IRS) represent taxpayers in the IRS' administrative courts.

CPA's are highly trained bookkeepers. The issue with CPAs is their certification is a testimony to their certification of the books of the corporations, and taxpayers. Part of the CPA certification qualifies the CPA to all the powers of an Enrolled Agent. Enrolled Agents may not be CPAs but CPAs can practice in the IRS's administrative courts.

 

Most Enrolled Agents I've met are former IRS employees who never received formal accounting or tax law educations. But most of the EA's I've are the Tax Problem Resolution folks on the radio ad nauseam during filing season.

 

It is quite possible one person has all three designations. That person may specialize in only certain parts of the tax code. Specialties could range from Fortune 100 companies with compliance issues before the Securities & Exchange Commission to Joe Blow taxpayer who fucked up his personal returns. There are non-profit specialists, even down to church, educational institutions, Planned Parenthood and even AIDSRide LA.

 

These are huge fields where no one is a jack of all trades. My Estate Attorney was a practicing CPA who tired of having lawyers tell him he could do some the way he proposed it, returned to law school to prove he knew the law better than the attorneys.

[rvwnsd]

The key here is that "ALL" Enrolled Agents have studied tax forms and tax preparation as their sole area of interest - they know tax preparation better than any other professionals -- that's their only job.

Actually, that is not true. You or I could become an enrolled agent, despite not having a lick of experience or education in taxation. Upon passing a test, albeit not an easy one, an applicant becomes an Enrolled Agent. Check out this page from the Internal Revenue Service for details.

[+ Charlie]

And whoever you use, try to determine that they are knowledgeable about the tax laws in individual states that are relevant as well as in federal tax laws. One year I had earned income from three different states, but my tax preparer was well versed in the laws of only two of them, and screwed up the filing for the third, which ended up being an expensive nuisance.

[amused1]

As a tax professional here's my opinion... If you are comfortable with your current provider, stick with him/her. This person is familiar with your tax history and how your change in income will effect your tax liability. Knowing this, you can properly plan a payment schedule (either through withholding or estimated payments). I recommend setting up a meeting with your provider to discuss your situation and do some tax planning.

 

Topics I might suggest... The effect receiving the IRA income will have on the taxability of Social Security (if you are receiving it) and the overall impact it will have on your general income. Will it push long term cap gains into a higher rate? How will the IRA be taxed in your state?

 

If you are the beneficiary of an estate or trust, speak to the trustee/representative of the estate/trust to find out if you will be receiving a form K-1. This is, basically, the income reporting form from the distribution of the assets of the estate/trust and is reported on the recipients 1040. (Think of it as an estate/trusts W-2.) K-1s are often the last tax form a taxpayer receives. To spare yourself the annoyance and expense of amending your return find out if one will be issued before you file.

 

Cheers

[+ Charlie]

BTW, for many years I did my own taxes, because I thought the process was simple enough that it was a waste of money to pay a professional to do them. I lived in a city that had its own wage tax, but I mistakenly believed that it was only on wages earned in the city. Since it was automatically deducted from my paychecks for my job in the city, I pretty much ignored it. After also having a second job for several years in another state, I received notice from the city that I was supposed to have reported that income, and I owed the city back taxes plus interest. Now I pay someone who knows what he is doing.

[instudiocity]

I doubt you need a tax attorney for what you’ve described. I suggest you deal with an accounting firm big enough so that, if you need one, they have one internally to refer you too.

 

And by the way, CPA means:

Cut

Paste and

Assemble

It's a CPA's duty to save the client money - especially depriving government any taxes. Therefore, CPA means: CERTIFIED PUBLIC ANARCHIST

[johnjohn]

for information,at least in South Carolina Did you know if you have money in the bank , checking, savings, CDs, a power of attorney is no good once the person passes away , you need to have all those accounts setup as PAD or POD , power at death, and it can be split as many ways as you want. And it skips the Will and Probate , and greedy family the money goes straight to whoever had Power at death. tax free. Our New banker lady told us about it last year, We did it, when my dad passed everything went str8 to her . So say you have a partner/husband set it up like that and you will not have fight other greedy family members

[KeepItReal]

It's a CPA's duty to save the client money - especially depriving government any taxes. Therefore, CPA means: CERTIFIED PUBLIC ANARCHIST

[johnjohn]

for information,at least in South Carolina Did you know if you have money in the bank , checking, savings, CDs, a power of attorney is no good once the person passes away , you need to have all those accounts setup as PAD or POD , power at death, and it can be split as many ways as you want. And it skips the Will and Probate , and greedy family the money goes straight to whoever had Power at death. tax free. Our New banker lady told us about it last year, We did it, when my dad passed everything went str8 to her . So say you have a partner/husband set it up like that and you will not have fight other greedy family members

Straight my Mom i meant

[+ FrankR]

Rvwnsd I would readily agree with you that "MANY" CPA's have studied tax preparation and some may even be Enrolled Agents. The key here is that "ALL" Enrolled Agents have studied tax forms and tax preparation as their sole area of interest - they know tax preparation better than any other professionals -- that's their only job.

For context, the CPA exam has 4 parts, there is one part called “Regulations” which includes more than you ever want to know about tax laws and the practical steps of calculating taxes and completing the tax forms. When I took the exam I was asked to complete the tax return for a farmer with visual impairment! Had to do all the farming calcs and include the deduction for the blind. Tax related topics make up more than 50% of the marks awarded for the Regulations section of the CPA exam. You cant pass the test if you are not very well verses in tax law. I would say that all CPAs have studies tax law. Not all CPAs practice in the area of taxation, but they have all studied it.

[+ quoththeraven]

Accounting 201: Tax minimization is legal and expected. Tax evasion is illegal.

 

Of course, on this forum, many believe legal tax minimization is immoral and should be punished by firing squad

We want the tax burden shifted to those who can best pay. That's not the same as being opposed to individual taxpayers following the tax law as is, including provisions that may benefit them.

 

Tax lawyers are for structuring transactions and tax defense and litigation. In most circumstances use of an accountant who is experienced in tax preparation is all that's necessary and consulting an attorney would be overkill.

[studchaser]

I hear a lot of radio ads from tax attorneys year round, and especially around tax time. I've always used an accountant, but wonder if I should be using a tax attorney instead. I have income from foreign sources, and this year I'm inheriting part of my mother's IRA, which has required minimum distributions. Do any of you have tax attorneys? Are they better at finding ways to minimize tax burdens than accountants?

 

A tax attorney is gonna kill your pocket but will likely be the sharoest. However if you go the accountant route make sure they are an enrolled agent or certified public accountant. A certified financial planner may be a good option as well. Get reviews and recommendations.

[+ WilliamM]

Many on this forum do not seem to share the same sentiment...so I’m guessing you’re using “we” in the same manner that Her Majesty uses it...

 

@BnaC, the forum is usually more liberal than conservative. "We" may be a bit too strong, but not enough to be so critical.

[ElisPisis]

I am only using the services of an accountant, and everything seems to be okay with my taxes. However, considering that you have some foreign income sources and all the other factors you mentioned, I think you should contact a tax attorney and see what he can help you with. There are a lot of new federal laws that change a lot of things in the tax system. That's why using the services of a lawyer is a great idea. I have had some issues with my taxes for 2020. I am working in the constructions industry, and there was a particular issue that I didn't even know about. Thankfully, I am using the services of the best construction lawyers. They helped me correct the tax forms and solve these issues.

Edited October 8, 2021 by ElisPisis

[Wolpe]

Buddy, the most important thing is to find a consultant who knows his job well. And what is even more important, that he has nothing to do with scammers! Now there are a lot of scammers operating in the field of lending and mortgages. When I wanted to take out a mortgage, I fell into the hands of scammers. I gave them a large sum and was in despair. I'm glad I won the case and got my money back. I did not give up the idea of taking a mortgage. Then trusted people suggested the site http://moneyunder30.com to me. With it, you can find not only proven mortgage offers, but also quite profitable ones.

Edited January 24, 2022 by Wolpe

[+ FrankR]

2 hours ago, Wolpe said:

Buddy, the most important thing is to find a consultant who knows his job well. And what is even more important, that he has nothing to do with scammers!

Wait…Consultants? Buddy, a consultant is someone who knows 99 ways to make love but doesnt have any lovers.  Best avoid them! 
 

[Rudynate]

On 6/23/2019 at 3:13 PM, johnjohn said:

for information,at least in South Carolina Did you know if you have money in the bank , checking, savings, CDs, a power of attorney is no good once the person passes away , you need to have all those accounts setup as PAD or POD , power at death, and it can be split as many ways as you want. And it skips the Will and Probate , and greedy family the money goes straight to whoever had Power at death. tax free. Our New banker lady told us about it last year, We did it, when my dad passed everything went str8 to her . So say you have a partner/husband set it up like that and you will not have fight other greedy family members

I have as many assets as I can set up that way. My husband just needs to present a copy of my death certificate to the financial institution and the account belongs to him.

[+ BenjaminNicholas]

A solid accountant can usually take care you in the general sense.

A solid tax attorney can usually take care of you when the shit hits the fan.