A taxonomy of tax professionals

CALGARIA – This time of year, many tax professionals are inundated with tax questions and assumptions about how busy they may (or may not) be. The answer can be surprising. While tax professionals of all types tend to be busier during the tax season, tax returns are not necessarily required. For example, most tax attorneys do not prepare tax returns.

For many, including other lawyers, the tax attorney is the lawyer's nerdy wallflower, nosedive in code books, citing obscure personal tax deductions and "loopholes". Because of these prejudices, unfortunately, you will never see a TV show based on the tax attorneys' daily struggles (although the classic John Grisham legal thriller "The Firm" featured Tom Cruise as a tax attorney in the movie version). These views ignore the complexities of tax law and the variety of practices as a tax attorney.

Tax attorneys are part of a dynamic group of professionals who practice a notoriously complex and interesting area of ​​law. Taxation as a field of activity has a significant direct impact on every single person and company in our country and around the world on a daily basis. Tax attorneys and other tax professionals don't just serve the rich. Tax professionals support clients of all income levels and business complexities.

Granted, most people spend little to no time thinking about tax professionals and would probably prefer to think about their next visit to the dentist. Even so, as a public service in support of those who might otherwise fall victim to malicious stereotypes or ignorance, I have created a brief taxonomy of tax lawyers and tax professionals in general to show the differences in the different types of work that tax professionals do in order not to Working -tax tax lawyers introductions and small talk at dinner parties more enjoyable .

Tax professionals This includes tax attorneys, Certified Public Accountants (CPAs) and Enrolled Agents (EAs) in the US, Chartered Professional Accountants (again CPAs) in Canada, or auditors in general, to use a colloquial language. The main division among tax professionals is between accountants and lawyers. In the United States, any tax professional who "practices" before the Internal Revenue Service is subject to the standards of professional conduct set forth in Circular 230. Canada doesn't have a comparable standard, although the Canada Revenue Agency had a number of standards that tried to introduce a tax accountant registration system years ago, but the idea abandoned shortly after it was introduced.

Tax planning is perhaps closest to what most laypeople believe a tax attorney generally does. Tax planning lawyers and tax consultants primarily support their clients in determining tax-privileged positions, credits, deductions, the time of such positions prior to filing the taxpayer's tax returns and structuring transactions. For many CPAs, EAs, and some tax attorneys, this work also includes preparing tax returns. Tax controversy In contrast, it addresses anything that goes wrong after submitting a return. Tax disputes focus on audits, tax disputes, and collections. Tax controversies aim to justify the positions on the original tax return, to mitigate the tax consequences of adjustments, and to identify reasons why taxpayers should not be penalized for inaccuracies in reported amounts or arrears in filing and payment.

There is no minimum requirement for someone to qualify as an Atax attorney in the United States or Canada. In principle, every lawyer can apply this label himself. As with other types of attorneys, tax attorneys hold a Juris Doctor (JD) degree and have successfully passed a state / provincial bar exam and passed various experience requirements. A reputable tax attorney should at least receive additional courses or training focused on federal and state / provincial tax laws and procedures. In many cases, especially in the US, a tax attorney has an LL.M. (Master of Laws) in Taxes. An LL.M. is an advanced law degree that focuses on individual, corporate, partnership and trust taxation issues. In some US jurisdictions, the bar will certify qualified attorneys as "specialists" in tax law. All lawyers are required to adhere to the professional rules of their respective jurisdiction. All U.S. tax attorneys must also follow the requirements of Circular 230 and sometimes the American Bar Association's model rules for practice in the U.S. tax court and other federal courts.

Tax lawyers can then be broken down into different areas of activity, often with considerable overlap. For U.S. tax attorneys, the following are most important, but by no means limited to my description:

• State and Local Tax (SALT) attorneys are experts in multi-state taxes and state and local income taxes, as well as sales and use taxes, primarily for businesses. SALT attorneys, for the most part, do not deal with US federal income tax issues. SALT attorneys do both planning and controversy related to their area of ​​practice.
• Mergers and Acquisitions (M&A) and business tax deal with the tax consequences of founding, merging and selling companies, as well as transactions between individuals and companies. Many of these topics pertain to US and state tax law, as well as state corporate and partnership law.
• Estate planning attorneys must be familiar with US estate and gift taxation, as well as trust and estate taxation.
• International tax attorneys deal with the tax consequences of doing business across borders or, more generally, of the application of US tax law outside of the US
• Tax dispute attorneys typically have a variety of backgrounds and may be familiar with a wide variety of tax issues. In addition to representing taxpayers during exams or in front of the U.S. Treasury or other federal or state courts and for one, many tax dispute attorneys also assist in deciding on private letter decisions and other potentially controversial positions with the IRS, but generally do not advise Planning or advising transactions.
• ERISA stands for "Employee Retirement Income Security Act". Attorneys whose practice includes ERISA may call themselves ERISA attorneys, or tax attorneys, or something else entirely. ERISA attorneys are familiar with both the Labor Code and parts of the Internal Revenue Code regarding pension and health insurance plans.
• Internal tax lawyers at auditing companies. Many tax attorneys work in accounting firms doing planning, compliance, and controversy work. Compliance work is an accounting function, tax return and reporting, generally not a legal function. However, the controversial work that accounting firms do will never go beyond the audit phase, as accounting firms in general cannot get directly involved in litigation or legal practice.
• Crime defense lawyers are also most likely engaged in white-collar crime defenses, and don't bother with tax planning or possibly even civil law controversy.
• Lawyers in other tax practice areas also deal with important tax issues in their practice, such as bankruptcy and real estate. However, these attorneys do not typically refer to themselves as tax attorneys.

Accountants include CPAs and by and large EAs (in the US). Each is licensed by the state / province and often has a background in finance and accounting. In the United States, in order to practice before the IRS, a CPA must be qualified as a US CPA and not be suspended or banned. Canadian and U.S. CPAs are also subject to the professional rules set forth in the laws of the jurisdiction in which they are licensed and, more broadly, the national and international standards set by various organizations. An EA is a person who, through written examination by the IRS, demonstrates a special competence in US tax matters that enables the EA to represent taxpayers before the IRS.

While accountants can theoretically do much of the same job as a tax attorney, accountants are not lawyers. And vice versa – lawyers are not accountants. Auditors and tax attorneys usually deal with the same tax problem very differently, but often in a complementary manner. This is a major reason our firm intentionally employs tax attorneys and tax advisors from Canada and the United States.

The distinction between an accountant and a tax attorney is also important when discussing potentially sensitive matters that may have an intentional or criminal component. Under US law, non-lawyers have limited "tax returns" that do not apply to criminal matters. Conversely, non-lawyers do not have such limited privileges as tax advisors. Accordingly, taxpayers should be careful when it comes to discussing potentially criminal or general matters that the taxpayer has for willful misconduct (e.g., willful failure to report foreign bank accounts) with non-attorneys or attorneys performing accounting functions because of some US courts doing so can adversely affect ruling that attorney and client law does not apply in such situations.

Whether or not a tax advisor is a tax attorney or an accountant, any reputable tax professional can help with most tax issues or indicate what type of tax advisor is appropriate in the particular situation.

Jason Galek, JD, LLM (US Tax) is a US tax attorney and head of the US tax practice at Moody's Tax Law LLP.