Tax specialists come in different shapes and kinds - which is the best for you?

Tax specialists come in different shapes and kinds - which is the best for you?
Ines Zemelman, EA
14 May 2018

If you came to this page you’ve probably already decided that you need to work with a tax professional. So we won’t make the case why you should. Rather you are probably wondering what kind of tax professional should handle your case.

Should it be an accountant, such as an Enrolled Agent (EA) or Certified Public Accountant (CPA) -- or should you work with a tax lawyer to handle your tax affairs? Despite the word tax being central to both - accountants and tax lawyers are two fairly different professions.

The term lawyer (or attorney) means that you are not just working out the optimal numbers - you are engaging in a legal battle with the government.

When Should You Work With a Tax Accountant?

Individual or business tax preparation or tax planning - these are tasks that you should engage an accountant to complete.

Tax accountants work to structure your tax position in a way where you pay as little tax as possible while remaining fully compliant with the IRS. Tax accountants help you avoid problems with the IRS rather than fighting the consequences of mistakes made in the past.

When Should You Work With a Tax Attorney?

Tax attorneys are first and foremost lawyers who specialize in the technical field of tax law.

Attorneys are legal professionals that must have a Juris Doctor degree, commonly referred to as a J.D. and they must be admitted to the state bar. Some tax attorneys also have backgrounds in accounting, although they don't involve themselves with actually preparing tax returns.

Their expertise is rather focused on the legal ramifications of tax situations -- not saving you as many tax dollars as possible. As a general rule, tax lawyers engage accountants (CPA or EA) for preparation of tax returns for their clients. Tax return preparation is a time consuming process - especially when tax situation is complex and may require multiple drafts to achieve the optimal result. Tax lawyers’ hourly rates are too high to justify that. Likewise, attorneys do not perform legal research and administrative tasks. Attorneys delegate this part of the case to paralegals and legal secretaries.

You might need the help of a tax attorney when handling the following types of situations:
 

  Attorney needed if:  
  • You anticipate having a taxable estate when you die. As of 2018, this means that you expect the total value of your estate will exceed $5.6 million (or 11.2 million for a married couple). Your heirs would have to pay an estate tax of up to 40 percent of the balance over these amounts as of 2018. A tax lawyer can help you devise estate-planning strategies to help you stay below the exemption threshold and avoid a large portion of your estate going to taxes.
  • You are under criminal investigation by the IRS, or you want to seek independent review of your case before the U.S. Tax Court. In these cases, you'll want someone who can defend you in court. This is especially true if you are suspected of committing tax fraud. Your relationship with your attorney and anything you say or confide in them is privileged. This means that he or she is under no legal obligation or duty to divulge it to the court.

 

International Tax Issues

Although an opthamologist and a podiatrist are both doctors, you likely wouldn’t visit your podiatrist for an eye exam, nor would you consult with a cardiologist about your tennis elbow. Tax accountants who specialize in international tax are professionals with day to day experience in the opaque field of international taxation. They provide income tax preparation, advisory, and planning services to US citizens living abroad or involved in international business. In addition to assisting US citizens and Green Card holders abroad, international tax accountants help foreigners involved in US businesses stay compliant with the IRS while avoiding double taxation. At the cutting edge of the most recent developments in the field of financial reporting and intergovernmental agreements on financial information exchange - tax accountants specializing in international taxation possess a thorough knowledge of international Tax Treaties. If delinquent on prior tax returns, international tax specialists should help their clients select the right amnesty program among multiple venues developed by the IRS.

Considering OVDP or the Streamlined Procedure?

If you find yourself in a situation where you do not qualify for any of the “mild” programs and the OVDP program is your last resort - then you may need the help of a tax lawyer to guide you through the program. But guess what - the lawyer will delegate preparation of 8 years of tax returns required for OVDP to tax accountants anyway. Once the returns are prepared the tax lawyer will take over and will handle your OVDP case to protect you from criminal prosecution.

  OVDP Ending in September 2018  

On Tuesday, March 13th, the IRS announced the OVDP program will close on Sep 28, 2018. "By that the IRS intends that any U.S. taxpayers with undisclosed foreign financial assets have time to use the OVDP before its closure." The streamlined program will remain untouched for now, but this news can be taken as the canary in the coal mine that these programs are not going to be around forever, and it is in the best interest of the non-compliant taxpayer to take advantage of them while they are around and offer amnesty.

Ines Zemelman, EA
founder of Taxes for Expats