With the Law Society of Alberta’s recent announcement launching Locum Connect, we thought it was an important time to make sure solo practitioners and small firms understand the difference between using a tax lawyer, and using an accountant. Although accountants may be great referral sources and you may be familiar with them, there are many situations in which using a tax lawyer is a significantly better option. The tax lawyer and the accountant can work together, the accountant can do some things the tax lawyer does not do, and vice versa. The question is, in what situations should you unequivocally be using a tax lawyer?
First, privilege. Accountants do not have privilege like lawyers do. Although the relationship may be confidential in nature, the accountant can be compelled. Often, accountants would also want to have a good relationship with the CRA, to keep their business going in the right direction. Furthermore, with Voluntary Disclosures, although some accountants may submit them, they are not subject to privilege. A tax lawyer cannot be compelled to provide information, nor are they required to report any information of any sort.
If there is an audit dispute, the accountant can file a notice of objection to the Canada Revenue Agency. After this however, they cannot do anything. If the problem is information asymmetry, they may be able to help. However, if you ask your client “is there anything to be worried about”, and there is even a glimpse of hesitation, contact a tax lawyer. Tax lawyers know the Income Tax Act, the regulations, and understand what the perspective or position of the CRA is on relevant issues. Unlike accountants, who may know the Act, the lawyers are extremely aware of the legal precedents issued by the Tax Court of Canada, the Federal Court of Appeal, and the Supreme Court of Canada. Often, the CRA does not follow these legal precedents, so it is up to the tax lawyers to enforce it. Tax lawyers can also provide legal opinions on matters and structures, which accountants cannot do. In any dispute, accountants cannot act in the tax court appeal process, you will specifically need a tax lawyer.
For filing a tax return, you probably want to use an accountant. No reason to use a lawyer. However, if you are ever concerned with the legality of anything, or whether your client may be offside in any way, it is best to use a lawyer. If you find out your client has done anything wrong in the past, a tax lawyer can help you significantly.
It is important to mention that as a sole practitioner or a small practice, you may be worried about farming out tax work to another lawyer, as the last thing you want to happen is to lose a client. That is why you contact tax boutique firms, or solo tax practitioners, as they only do tax matters. They can help you, and your client, with any tax related matter in Canada.