As small businesses grow and develop, having a team of skilled and knowledgeable professional advisors is essential for continued success. Typically, the financial team includes a CPA, financial advisor, and lawyer. While each plays a distinct role, the skills and knowledge of each are most effective when working together. There is value in having multiple advisors who can inform and improve each other’s contributions.
There are times when it may be necessary to discuss matters primarily with one member of the trusted advisor team. For example, CPAs are typically the main advisors for small businesses when it comes to tax compliance and planning. They prepare tax returns, manage payroll reporting, advise on estimated payments, and help with routine correspondence from the IRS or state revenue departments.
However, because of rules of evidence, confidentiality, and other legal standards, when a tax issue escalates into controversy, a small business owner may need to work directly with a tax lawyer. Understanding the distinct but complementary roles of a CPA and a lawyer — and when each is best positioned to help — allows business owners to respond strategically rather than reactively.
Quick answer: Small businesses should involve a tax lawyer when a tax issue escalates beyond routine compliance into a dispute — such as audits with proposed penalties, notices of deficiency, or collection actions like liens or levies. In many cases, the best approach is a coordinated effort between a CPA and a tax lawyer.
When does a tax issue become a controversy?
A tax controversy arises when a matter moves beyond routine compliance and into a more formal dispute process. This can happen in several ways, including the initiation of an audit, proposed penalties, a disputed assessment, or the beginning of collection activity. At this point, the issue often shifts from accounting and documentation toward questions of legal rights, procedural strategy, and risk management.
Common signs that it’s time to involve legal counsel in coordination with a CPA include:
A great first step is to consult with your CPA to determine whether and when it makes sense to involve a tax lawyer.
What is a tax lawyer’s role in a controversy?
Tax lawyers focus on managing disputes with the IRS and state authorities, negotiating settlements, and, when necessary, litigating — typically working closely with the client’s CPA throughout the process. Discussions with a lawyer are protected by attorney-client privilege, which can be critical if sensitive issues are involved.
When a business faces penalties, challenges an assessment, or explores resolution options such as installment agreements, offers in compromise, or alternative dispute resolution programs, a tax lawyer adds legal analysis and advocacy to the financial and factual groundwork already developed by the CPA.
In more serious cases — such as those involving alleged misclassification of workers, aggressive credit claims, or complex deductions — a lawyer can help manage legal exposure and ensure the issue is addressed strategically as it progresses.
Do you need both a CPA and a tax lawyer for a tax controversy?
In many cases, the best results come from early and ongoing collaboration between CPAs and tax lawyers. CPAs provide the financial and operational context; lawyers apply legal strategy and advocacy. Small businesses benefit most when professionals work together early, before positions harden or deadlines are missed.
Waiting too long to involve legal counsel, or doing so without coordinating with a CPA, can limit available options. The key is recognizing when the conversation with the IRS shifts from informational to confrontational.
When should you involve a tax lawyer?
If the issue involves filing and compliance, a CPA is usually the right starting point. If you receive notice of an IRS audit, or if the situation involves interpretation of the law, penalties, collections, or the potential for litigation, it may be time to consider adding a tax lawyer to the team.
For small businesses in Tennessee, tax controversies are disruptive, but they don’t have to be overwhelming. Understanding when to involve the right professional can protect your business, reduce stress, and lead to more favorable resolutions.
“Many business owners wait too long to bring in legal counsel,” says Chad Roberts, a tax attorney at Harris Shelton. “Involving both your CPA and a tax lawyer early can often preserve more options and lead to better outcomes.”
If your business is facing an IRS audit, tax dispute, or other controversy, Harris Shelton’s experienced tax lawyers regularly work alongside CPAs and financial advisors to help businesses navigate audits, disputes, and resolutions efficiently and strategically.
