A frequent question we get from clients and colleagues is if a tax attorney or certified public accountant (CPA) — or both — are needed.
The CPA and tax attorney roles overlap in many areas, but each professional brings unique skillsets and areas of expertise to the table. Leveraging both types of professionals — or one who is both a CPA and an experienced tax lawyer — creates comprehensive coverage for your tax demands.
Businesses, individuals, and families with complex tax needs, such as those involved in international operations or investments, mergers, or business formations or restructuring, benefit from having both a CPA and a tax attorney. Additionally, if you’re facing IRS scrutiny or legal challenges, this dual approach can provide both the financial and legal guidance necessary for a successful resolution.
While a CPA and a tax attorney have different areas of focus, having both professionals on your side can be a smart strategy for your business. Here’s why:
- Comprehensive Coverage: CPAs focus on financial management and compliance, while tax attorneys provide legal guidance. By using both, you get a holistic approach to your tax needs that covers both the financial and legal aspects of taxation.
- Risk Management: With a CPA handling your financials and a tax attorney ensuring legal compliance, your business is better equipped to avoid costly tax mistakes or legal disputes. This two-pronged approach helps reduce risk and improve decision-making.
- Tailored Knowledge: Some tax issues require financial knowledge, while others demand legal insight. By having both a CPA and a tax attorney, you gain access to know-how in both areas, ensuring no aspect of your tax strategy is overlooked.
- Proactive Planning: A CPA and a tax attorney working together can help your business plan, providing advice that considers both financial and legal implications. This can lead to smarter decisions about business structure, tax efficiency, and growth strategies.
Seven Tips to Seamlessly Bridge the Gap Between a CPA and Tax Lawyer
Ensure smooth collaboration between a CPA and tax attorney by following these steps:
- Establish Clear Communication: Make sure both the CPA and the tax attorney understand their specific responsibilities, schedule regular check-ins, and have access to the relevant documents, such as financial statements, contracts, and correspondence with tax authorities.
- Align Financial Reporting with Legal Tax Strategy: Legal strategies, like tax settlements or restructurings, should align with financial reporting cycles to avoid mismatches. For example, a CPA should know if a tax attorney is negotiating penalty reductions. The two should work together to ensure that financial records and tax filings fully align with the legal positions taken in complex tax matters.
- Proactively Involve Both Professionals in Key Decisions: Whether it’s forming a new entity, merging, or dissolving a business, both the CPA and tax attorney should collaborate to ensure financial efficiency and legal compliance. In the case of tax audits and disputes, the CPA should manage the detailed records and financial reporting while the tax attorney develops the legal arguments and represents the client.
- Share Expertise for Complex Scenarios: In cross-border transactions, compliance with treaties, and reporting requirements (e.g., Report of Foreign Bank and Financial Accounts (FBAR) or Foreign Account Tax Compliance Act (FATCA), the combined knowledge of CPAs and tax attorneys will bring you benefits. During litigation, CPAs can provide detailed financial analyses that support a tax attorney’s arguments in court. For high-stakes transactions, such as large acquisitions, sales, or estate transfers, CPAs and attorneys should collaborate on tax-efficient strategies that stand up to legal scrutiny.
- Use Technology to Facilitate Collaboration: Use secure cloud-based systems to manage financial documents and legal updates in one place.
- Cross-Refer: CPAs should know when an issue requires legal interpretation, and tax attorneys should involve CPAs for financial precision and compliance.
- Kovel Agreement: Working with a Kovel agreement between your CPA and attorney may allow for the attorney-client privilege (confidentiality) between the attorney and client to extend to the CPA as well.
While CPAs and tax attorneys each bring distinct advantages to the table, using both can provide a balanced and thorough approach to your tax needs.
When you have a CPA and tax attorney in one, you have a powerful professional who can help your business navigate the complexities of taxation with confidence.
By fostering collaboration, maintaining clear communication, and involving both professionals strategically, you can bridge the gap between financial accuracy and legal compliance — ensuring you achieve the best outcomes for your tax matters.
[View source.]
