Tax controversies have two distinct phases: administrative (dealing directly with the IRS in tax audits and appeals) and judicial (Negotiating with IRS Chief Counsel’s Office to attempt to settle the case on the court house steps before having to litigate & litigating a case in U.S. Tax Court). In IRS tax audits or appeals, licensed CPAs (and enrolled agents) may represent taxpayers under IRS Circular 230. Circular 230 (31 C.F.R. §10.3) explicitly authorizes any duly licensed CPA in good standing (not suspended or disbarred) to “practice before the IRS” – for example, to conduct audits, negotiate penalties, or appear in appeals. However, “practice before the IRS” is strictly an administrative concept for CPAs. Once the dispute moves to the U.S. Tax Court (after a statutory Notice of Deficiency has been issued), the rules change. The Tax Court is a judicial forum requiring its own bar admission. Only an admitted Tax Court practitioner may file petitions or appear at trial. A Tax Court petition must comply with formal Court rules and is considered the practice of law. In short, a CPA can freely advocate for you with the IRS but cannot independently litigate a Tax Court case unless they also qualify to practice in that court which requires an exam with a rumored 1% pass rate.
IRS Proceedings (Circular 230)
Under Treasury Department Circular 230, a CPA may file claims, appear at audits or appeals, and negotiate on behalf of taxpayers before IRS agents. CPAs routinely handle audits, penalties, and administrative appeals. To further complicate matters a CPA cannot legally file a tax court petition on behalf of their client or otherwise without engaging in the unauthorized practice of law.
Tax Court Litigation
By contrast, only a person admitted to the Tax Court bar may represent a taxpayer in Tax Court. The Court itself requires that only attorneys (or specially admitted non-attorneys) may file a petition or argue a case. The filing of a petition is also a practice of law and should not be performed by non-attorneys (i.e., CPAs and EAs), as the tax practitioner risks being prosecuted for the unauthorized practice of law. In practice, this means a CPA who is not an attorney cannot prepare or file the Tax Court petition and cannot stand up in Court on your behalf unless admitted.
Tax Court Admission Requirements and Limits on CPAs
The United States Tax Court maintains its own bar:
Tax Attorneys: To practice in Tax Court, an attorney must hold an active bar license in any U.S. jurisdiction and submit an admission application to the Tax Court (including proof of good standing). Once admitted, attorneys may file petitions, argue motions, and conduct trials.
Non-Attorneys: Other professionals (including CPAs and enrolled agents) may also be admitted, but only by a special admission process. The Tax Court requires a written “non attorney” exam covering the Internal Revenue Code, Tax Court Rules of Practice, Rules of Evidence, and ethics. Those who pass the exam must still satisfy character and fitness standards (including letters of sponsorship from two current Tax Court members). Only after this grueling process, which is nearly impossible to pass without legal training, can a CPA legitimately represent a client in Tax Court without being a lawyer. Most CPAs that pass the tax court exam went to law school and could not pass the bar exam.
Once the Tax Court petition is filed, all further representation must also come from admitted practitioners. In fact, non-attorneys must be sponsored by two persons who are admitted to practice before the Tax Court and cannot file pleadings on their own behalf. A non-attorney CPA who practices law (for example, files a petition or argues a case without admission) risks violating unauthorized practice rules. Filing a petition is a practice of law and should not be performed by non-attorneys (i.e., CPAs). In short, unless your CPA has separately met the Tax Court’s bar requirements (through the exam and admission), they cannot handle a case in Tax Court on their own. This admission rule is uniform nationwide, including California state, because it stems from the Tax Court’s own rules and the general prohibition on unauthorized practice of law.
Why Only Attorneys: Privilege and Litigation Skills
Tax Court cases are legal disputes governed by complex rules of evidence and procedure. There are several practical advantages to having a lawyer (especially one experienced in Tax Court) handle the litigation:
Attorney–Client Privilege
Perhaps the most critical benefit is confidentiality. Only communications with a licensed attorney are protected by the full attorney–client privilege. Under both federal law and judicial precedent, clients have an absolute privilege to keep discussions with their attorney confidential in both civil and criminal tax matters. In contrast, discussions with a CPA are not privileged in court; the IRS can subpoena a CPA to testify about your tax matters in litigation or criminal cases. (There is a narrow statutory “tax return preparer” privilege (IRC §7525) that protects certain communications with CPAs, but it applies only to the preparation of income tax returns in civil proceedings and explicitly excludes any criminal investigations.) In California, specifically, the attorney–client privilege is also robust, whereas the accountant-client privilege is limited. Thus, only by using an attorney-CPA does a client get both expert legal and accounting advice and real attorney–client confidentiality.
Courtroom Expertise
Trial litigation is a lawyering skill. Tax Court has strict procedural and evidentiary rules. A CPA’s training (focused on accounting, tax compliance, and bookkeeping) typically does not cover these areas. Experienced tax attorneys know how to draft a petition, frame legal issues as assignments of error, file appropriate motions, and comply with deadlines. They can conduct legal research, draft persuasive briefs, and handle oral arguments. For example, when the IRS files motions or defenses, a lawyer can interpret them and strategically respond accordingly. Attorneys also know how to prepare witnesses, examine evidence, and make objections at trial. At the tax law offices of David W. Klasing, our dual-licensed litigation tax attorneys & CPAs routinely assist clients through IRS appeals and Chief Counsel settlement negotiations long before trial, and if needed they “make the best possible case before the Tax Court” by calling witnesses and introducing evidence while rebutting the IRS’s case.) In short, lawyers bring litigation and negotiation skills to protect your rights at every stage.
Risk Management
Attorneys are trained to assess whether litigation is worth the cost and risk. Not every Audit should become a Tax Court case. Our approach is to analyze the facts and law early and advise clients on the best course of action – whether to settle at the Appeals level or litigate in Court. (In fact, over 98% of Tax Court cases settle by the end of the process.) A CPA alone may not have the legal perspective to gauge this. When litigation is warranted, an attorney ensures that your case is presented adequately; if a settlement is better, the attorney negotiates the best possible deal.
Choose the Tax Law Offices of David W. Klasing to Represent You in Tax Court
At The Tax Law Offices of David W. Klasing, our team of dual-licensed Tax Attorneys and CPAs has the unique benefit of dual-licensure: each attorney is also a CPA. This “best of both worlds” model combines audit and accounting expertise with courtroom advocacy. Our dual-credentialed lawyers and CPAs can immediately understand complex financial facts and also craft the correct legal arguments. In practice, this means our attorneys can audit a client’s books, advise on tax compliance, and if needed, seamlessly transition to negotiating with IRS auditors or filing Tax Court briefs – all while preserving full legal privileges.
Moreover, any work done by a CPA in anticipation of litigation is done under an attorney’s direction within the confines of a law firm, further extending privileges. Communications and analyses prepared by the lawyer-CPA are protected as attorney work-product and confidential. By contrast, if the IRS had to deal with separate consultants and attorneys, key insights might leak or be inconsistent. A dual-licensed attorney-CPA covers both roles, which streamlines strategy and safeguards confidences. Call the tax law offices of David W. Klasing at (800) 681-1295 or schedule a confidential, reduced-rate initial consultation today HERE.
