Tax stops being a "tax" issue once the IRS sends you a letter—it's a quasi-legal issue now, with the potential to escalate into a full legal battle. Choose your professional wisely.

It’s important to distinguish between civil and criminal tax matters. If there’s any hint of fraud, tax evasion, or similar issues, you need to hire a lawyer right away. You’re facing more than just penalties—you need the protection of attorney-client privilege, something a CPA can’t provide. Also, in a potential criminal case, your CPA is not equipped to build a defense.

For civil tax matters, there are three main stages: audit, appeals, and litigation (or Tax Court). Most accountants will refer you to a lawyer if the case goes to court. Why? (1) Because they can’t represent you in court, so they can't bill you, and (2) many accountants don’t have the legal skills to build a solid defense.

For audits and appeals, however, accountants often hesitate to refer taxpayers to a lawyer. They’re allowed to represent you, which means more billable work for them. The real question is, should you let an accountant advocate for you instead of a lawyer? From my experience litigating over 100 cases as a former tax prosecutor, the cases where a taxpayer was represented by an accountant were much easier to win. Why? Because accountants often made evidentiary errors that a trained attorney would have caught, and these errors were frequently fatal to the taxpayer’s case.

If you stick with an accountant during audits and appeals, and only hire a lawyer for Tax Court, you’re at a serious disadvantage. Your new lawyer is left to deal with the fact that the government already has all the documents your accountant turned over, some of which may be damaging. Winning that case becomes significantly harder.

In summary, there is a time and place for hiring an accountant over an attorney: 1) for tax return preparation, and (2) for basic tax advisory purposes. However, once you receive a notice from a taxing authority like the IRS, the IRS is challenging your position, and at this stage, you don’t need an advisor—you need an advocate. This is why we believe lawyers are better suited to handle cases whenever an IRS letter is involved.

Former tax prosecutor and counsel for the California Franchise Tax Board and "Big 4" international accounting firm, PwC. We've litigated hundreds of tax disputes for and against the IRS, state, and international taxing authorities and we've never lost.