Using your CPA or Tax Preparer:
The advantages of using your CPA include familiarity with your return, your financial affairs and/or business. The CPA’s professional fees will likely be less compared to hiring a Tax Attorney. Lastly, you likely have a professional history and trust with your CPA.
Using a Tax Attorney:
Let’s face it, tax attorneys are not cheap dates, but there are noteworthy factors to consider in addition to costs:
Only an attorney can provide attorney-client privilege. While there is a CPA-client privilege, the extent of this very limited with Federal/State tax matters. Your CPA may have to disclose unfavorable facts to the IRS or State taxing authorities during the exam and even testify against you if your tax problems turns into a criminal matter. This is a significant risk. All taxpayers under IRS exam should be cautious discussing any potential wrongdoings to a CPA and should first consult a tax attorney.
The IRS expends significant resources selecting returns for audit, and most returns selected have issues. Part of every IRS Exam, the Revenue Agent in addition to examining the return analyzes whether or not there should be tax preparer penalties. Therefore, the CPA in essence is defending himself or herself as well as defending you in the exam. If there were issues, for example with personal expenses being deducted on a business return, it is only human nature for the CPA to protect themselves and in doing so puts you, the taxpayer, in an unfavorable light.
A tax attorney has an ethical duty to act in your best interest and your best interest alone without any inherent conflict.
It is a substantial task for a CPA to simply keep up with the current tax laws in order to complete tax returns each year. To expect a CPA to understand the policies and procedures of IRS audits, to know the local Revenue Agents, the IRS Managers, statute of limitations issues and the appeals rights is unrealistic. A tax controversy attorney will have the experience to navigate the IRS with sound judgment and specific expertise.