Should I Hire a Tax Attorney or an Accountant for a Tax Audit?
*The following article was updated in July 2022*
This is a common question that taxpayers have, and one I receive frequently if someone is facing a tax audit. Given that most people use a Certified Public Accountant (CPA) for tax preparation, you may assume that individual is the best person to defend you against a tax audit since they are familiar with your tax situation. Yet the reality is that while a CPA is the perfect choice for tax preparation (I use one myself), a tax attorney may be your best option when it comes to defending you against a costly audit such as an EDD audit. Let me explain why.
Most likely, you as a taxpayer will not need a tax attorney until you have an issue with a government agency. Tax attorneys understand the law and are able to take your legal situation as far as necessary to obtain a successful result. Lawyers also have the ability to take your tax controversy case to Tax Court if necessary.
When you hire an attorney, you have an attorney-client privilege. There is no client confidentiality between you and your accountant or tax preparer. When you hire an attorney, you are allowed to freely communicate with your attorney. If you face any criminal charges, your tax preparer or accountant cannot provide this same protection. In most cases, he or she will be compelled to testify against you. Not because they want to; but because they will not have a choice, as confidentiality does not exist.
In some cases, taxpayers may consider using their accountant or tax preparer to represent them in front of a government agency. Depending on the facts of the case, there may be a conflict of interest between the tax preparer and client.
When faced with a tax audit, many individuals think that the government agency will automatically assume they are guilty if they hire a tax attorney for help with the tax issue. This is a very common belief; but the reality is, you have the right to representation. The government agent understands you are busy with your own business and that it is more efficient for you to hire a tax attorney and focus your time and energy running your business.
In fact, my experience as a tax attorney has shown me that the government agent actually likes that an experienced person is working with them because, in most cases, we do their work for them. We know the format, the questions and the documentation that the agent will request. We review your information and provide it to the government agent in an organized manner, which saves the government agent’s time and energy.
If you find yourself in a situation where you’re facing a tax audit or dealing with a government agency, your first step should be consulting an experienced tax attorney. While a CPA or tax preparer is extremely skilled in their area of expertise, you want to make sure you are protected legally.
Allison Soares is a partner and tax attorney at Vanst Law. Before starting her own practice, Soares was a partner at a tax law firm where she honed her skills handling a wide variety of tax and employment-related cases. In addition to her legal work, she has worked in accounting and utilizes that knowledge to her advantage while handling cases involving EDD audits.