Beyond the IRS and Tax Court: Why a Tax Attorney Offers Broader Representation Than a Tax Preparer CPA or Enrolled Agent

When taxpayers choose a professional to prepare their tax returns, they frequently focus on one immediate question: Who is qualified to prepare my taxes?

When an IRS controversy arises, however, the better question may be much broader:

Who is qualified not only to understand my tax return, but also to represent me wherever the dispute may ultimately go?

That distinction can become extremely important.

A tax controversy may begin with a seemingly routine IRS examination. It may then progress through administrative negotiations, the IRS Independent Office of Appeals, the United States Tax Court, and, in appropriate cases, other federal courts.

A professional who is well qualified for one stage of that process is not necessarily authorized or professionally equipped to handle every subsequent stage.

Understanding the differences among a tax preparer Enrolled Agent, a tax preparer Certified Public Accountant, and a tax attorney can therefore be important when choosing representation for a serious IRS controversy.

Three Different Professional Credentials

Enrolled Agents, Certified Public Accountants, and attorneys may all represent taxpayers before the IRS.

That similarity sometimes creates the impression that the three credentials are essentially interchangeable.

They are not.

Each credential comes from a different professional system and reflects different education, licensing, training, and professional responsibilities.

Enrolled Agent

An Enrolled Agent, commonly referred to as an EA, is a tax professional authorized by the federal government to practice before the IRS.

EAs generally qualify by passing the IRS Special Enrollment Examination or through qualifying prior experience with the IRS. Their professional focus is federal taxation and representation before the Internal Revenue Service.

An experienced EA can be extremely knowledgeable about tax return preparation, IRS examinations, collection matters, and IRS administrative procedures.

For taxpayers whose matters remain entirely within the IRS administrative system, an experienced EA may provide valuable representation.

Certified Public Accountant

A Certified Public Accountant, or CPA, is a state-licensed accounting professional.

The CPA credential represents a substantially broader professional accounting designation. CPAs are trained and regulated within the accounting profession and may work in areas including taxation, accounting, financial reporting, auditing, business transactions, and financial analysis.

For a tax controversy involving businesses, real estate, investments, depreciation, basis calculations, financial statements, accounting records, or complex transactions, that broader accounting background can become particularly valuable.

A CPA who actively prepares tax returns also has an important practical advantage: understanding how the underlying return was constructed and how the accounting and financial information ultimately produced the tax positions being examined by the IRS.

For that reason, when comparing a tax preparer CPA with a tax preparer EA, I generally view the CPA designation as the broader professional credential from an accounting and financial perspective.

That does not mean that a CPA possesses greater representation rights before the IRS. Attorneys, CPAs, and Enrolled Agents generally have unlimited representation rights before the IRS.

The distinction instead concerns the breadth of the underlying professional training and licensure.

Then There Is the Tax Attorney

A tax attorney brings another professional discipline into the controversy: law.

This distinction becomes increasingly important as a disagreement with the IRS evolves from determining numbers on a tax return into determining the taxpayer’s legal rights.

A serious tax controversy may eventually require analysis of:

• The Internal Revenue Code
• Treasury Regulations
• Judicial precedent
• Statutory interpretation
• IRS procedural requirements
• Evidentiary rules
• Burdens of proof
• Statutes of limitation
• Penalty defenses
• Jurisdictional requirements
• Litigation strategy
• Appellate issues

Those are legal questions.

A tax attorney is trained not merely to determine how a transaction should be reported on a tax return, but also to analyze and advocate a client’s legal position when the government challenges that treatment.

The Professional Progression

One useful way to understand the distinction is to consider how a tax matter can progress.

A taxpayer may begin with:

Tax Return Preparation

Then encounter:

IRS Examination or Audit

If the matter remains unresolved:

IRS Independent Office of Appeals

And if administrative resolution still cannot be achieved:

United States Tax Court

Depending upon the type of controversy and procedural posture, federal tax litigation can also involve:

United States District Court

United States Court of Federal Claims

and appellate proceedings before a:

United States Court of Appeals

The farther the controversy travels through that progression, the more significant legal training and litigation authority can become.

CPAs and Enrolled Agents Can Represent Taxpayers Before the IRS

It is important to be precise about this point.

Both CPAs and Enrolled Agents can have broad authority to represent taxpayers before the IRS.

They may represent taxpayers in matters involving examinations, collections, and administrative appeals, subject to applicable professional and procedural rules.

Therefore, taxpayers should not assume that hiring an attorney is required merely because an IRS audit has begun.

The more important question is:

Where could this case eventually go?

What About the United States Tax Court?

There is an important exception that taxpayers may not know about.

A person does not necessarily have to be an attorney to become admitted to practice before the United States Tax Court.

The Tax Court has a procedure through which qualified nonattorneys may seek Tax Court admission. Nonattorney applicants must satisfy the Court’s requirements, including passing its written examination and completing the required character-and-fitness process.

Therefore, a CPA or Enrolled Agent who separately becomes admitted to practice before the United States Tax Court may represent taxpayers there.

But that is an additional qualification.

Being a CPA or an Enrolled Agent, standing alone, does not automatically confer admission to practice before the United States Tax Court.

That distinction is important.

Tax Court Is Not Necessarily the End of the Road

This is where the broader advantage of attorney representation becomes particularly significant.

The United States Tax Court is an extremely important forum for resolving federal tax controversies, but it is not the entire federal judicial system.

Tax Court decisions generally may be reviewed by the appropriate United States Court of Appeals.

Other types of federal tax controversies—particularly qualifying refund litigation after the required administrative procedures and payment requirements have been satisfied—may be litigated in a United States District Court or the United States Court of Federal Claims.

Each court has its own jurisdictional and procedural requirements.

An attorney admitted to the applicable court can continue representing the taxpayer as the dispute moves through the federal judicial system.

That broader litigation capability represents an important distinction between being authorized to practice before the IRS and being licensed to practice law.

IRS Representation and Federal Litigation Are Different Things

This distinction is sometimes overlooked.

Being authorized to represent taxpayers before the IRS is not the same thing as being licensed to practice law before federal courts.

The IRS administrative system and the federal judiciary are separate systems.

An EA may be highly experienced before the IRS.

A CPA may combine IRS representation with substantial accounting and financial expertise.

A nonattorney who satisfies the Tax Court’s separate admission requirements may even practice before the United States Tax Court.

But a tax attorney possesses the underlying professional legal license that allows the attorney, subject to the admission requirements of the particular court, to practice within the broader judicial system.

For a taxpayer facing a potentially significant controversy, that distinction can matter.

Why CPA Plus Tax Attorney Is a Particularly Powerful Combination

There is another possibility: the taxpayer does not necessarily have to choose between accounting expertise and legal expertise.

A professional who is both a tax preparer CPA and a tax attorney can bring both disciplines to the same controversy.

The CPA side of the practice can analyze:

• Tax returns
• Accounting records
• Financial statements
• Basis calculations
• Depreciation
• Business deductions
• Real estate transactions
• Entity taxation
• Income and expense recognition
• Financial documentation

The attorney side can analyze:

• Statutes
• Regulations
• Case law
• Procedural rights
• Evidentiary questions
• Litigation risk
• Settlement strategy
• Court jurisdiction
• Pleadings and motions
• Trial and appellate considerations

That combination can be especially valuable because IRS controversies frequently involve both disciplines simultaneously.

One Professional Can Understand How the Return Was Prepared and How the Position Will Be Defended

Tax litigation does not begin when a petition is filed with a court.

The foundation of a tax case frequently begins much earlier.

The original tax return, supporting accounting records, documents produced during the examination, explanations given to the revenue agent, protest submitted to Appeals, and legal positions developed during the administrative process can all influence what happens later.

That is why continuity matters.

A representative who understands both tax preparation and litigation can evaluate an issue from the beginning with an important question in mind:

If the IRS rejects this position, how will we defend it at the next level?

That perspective can affect how documentation is organized, how arguments are presented, and how the overall controversy is approached.

Choosing a Representative Based on Where the Case Could Go

For a routine tax preparation engagement, litigation capability may have little relevance.

For a minor IRS notice that can readily be corrected administratively, it may also have little relevance.

But the calculation changes when the taxpayer faces:

• A substantial proposed deficiency
• A complex business examination
• Significant penalties
• International tax issues
• Foreign reporting disputes
• Large basis adjustments
• Real estate tax controversies
• Multi-year examinations
• Significant questions of statutory interpretation
• IRS Appeals
• Potential Tax Court litigation
• Refund litigation
• Potential appellate proceedings

In those situations, taxpayers may want to consider not only who can handle the controversy today, but also who can continue handling it tomorrow.

The Important Distinction

Enrolled Agents are federal tax professionals with significant authority to represent taxpayers before the IRS.

Certified Public Accountants bring that ability together with the broader accounting and financial expertise associated with the CPA profession.

Tax attorneys add another dimension: legal training and the ability, subject to applicable court admission requirements, to carry appropriate tax controversies into the broader federal judicial system.

And a professional who is both a tax preparer CPA and tax attorney combines the accounting and tax-return knowledge of the CPA profession with the legal analysis and litigation capabilities of an attorney.

That combination can provide an important advantage when an IRS controversy begins with numbers on a tax return but ultimately becomes a dispute about the law.

Strategic Takeaway

When choosing someone to handle a serious IRS controversy, taxpayers should consider more than whether a professional is authorized to speak with the IRS.

They should consider the entire potential life cycle of the dispute.

Who understands the tax return?

Who understands the accounting?

Who can represent me during the IRS examination?

Who can take the case through IRS Appeals?

Who can evaluate the case as potential litigation?

Who can represent me in the United States Tax Court?

And if the controversy moves beyond Tax Court or requires litigation in another federal forum:

Who can continue representing me there?

As both a Certified Public Accountant (CPA) and Attorney (JD), I represent taxpayers with that entire progression in mind—from tax return preparation and IRS examinations through administrative Appeals and, when appropriate, litigation before the United States Tax Court and other federal courts in which the particular tax controversy may properly be heard.

The objective is not simply to respond to the IRS’s next letter.

The objective is to understand the tax controversy from beginning to end and develop a strategy capable of following the case wherever it legitimately needs to go.

Stay Connected

For additional tax tips, IRS updates, tax controversy discussions, practice news, and newly published articles, follow Leon Nazarian, CPA, JD on Facebook.

I regularly share educational information concerning tax preparation, IRS audits, IRS Appeals, federal tax controversies, United States Tax Court litigation, business taxation, real estate taxation, international tax compliance, and other federal and California tax developments.