When Do I Need a Tax Lawyer?

By Catherine Gerrits, Tax, Wills and Estates Specialist

Do I need a tax lawyer? It’s a question I hear every day, and the answer is never clear-cut. Not just for disputes with Canada Revenue Agency, a tax lawyer can help you at any and all stages of your life and career.

Understanding when a tax lawyer is needed is the real art, and hopefully this post helps you answer that question. Below are my top four tips in determining whether you should reach out to a tax lawyer for their help and advice.

1.Think about taxes sooner rather than later

A lot of people don’t like taxes and they certainly don’t like thinking about them. That being said, often by the time I get the phone call, I realize one of two things: either it’s too late for me to help and there is nothing I can do to improve the outcome; or, I can help but there is little I can to reduce the cost of the fix.

Seeking the advice of a tax lawyer at the very end of a transaction (or not at all) usually reduces the ability to help. While tax lawyers may charge higher rates for the services they perform as compared to a general practitioner or accountant, their advice comes power-packed and can often save you money, prevent costly “fixes” in the long run and they work very well with your current advisors – including your accountant and general practitioner lawyer.

So if you or your advisor is unsure as to whether it is the right time – it doesn’t hurt to ask the question and pick up the phone or write the email. If it’s too soon (it never is) or it’s not a tax matter, a good tax lawyer will tell you right away and admit that you’re better served by another expert.

2. Sometimes a lawyer is necessary

Accountants are also tax experts who help their clients and the public with the services they offer and perform. I have worked with many wonderful accountants and I can’t speak more highly of their professional services and encourage you to work with one.

Let me be clear. A tax lawyer is not a replacement for a good accountant. Your accountant should understand and appreciate your overall history and has built a relationship of trust with you. For those reasons, they are one of the first persons that I encourage you to speak with if you have a tax question. It may be a situation or question that they have dealt with before.

If it is a legal question that is outside of their expertise or practice area, often it’s an accountant (or other advisor) that gives a tax lawyer a call on their client’s behalf to see if further assistance or legal advice is required.

Some accountants are also highly specialized tax planners with the same or very similar training to tax lawyers, and can offer suggestions for dealing with your tax planning issues or questions. So what’s the difference between an accountant and a tax lawyer, and why would you ever call a tax lawyer in the first place?

What’s the difference between a tax lawyer and an accountant?

Tax lawyers need to understand, well, tax law, but they also have expertise in blending many different and complicated legal areas: tax law, wills and estates law, corporate and commercial law, family law, property law, trust law, insurance law, litigation… just to name a few, and the list goes on.

Accountants—even those that specialize in tax planning—often do not have the same legal knowledge and understanding all in these other areas. Many general practitioner lawyers have expertise in these other legal areas, but may have limited or little tax law expertise. Being able to recognize that a “specialist” is required to bridge the gap is key.

3. Tax planning is prudent

There has been a lot of news and attention on so-called aggressive tax planning. Tax laws are technical and they change often. More frequently than not, what was once sanctioned by the Canada Revenue Agency and considered non-aggressive planning has come under the microscope.

Tax lawyers are highly specialized and knowledgeable in changes in tax laws and are engaged to help clients and their advisors understand the emerging government positions and rules on what they consider to be “aggressive” or “abusive” planning, and help navigate the course to prudent, tax-efficient results.

Planning to help you save or minimize taxes in and of itself is not being aggressive. Individuals are allowed and are also encouraged by government to take full advantage of available tax deductions and credits – registered retirement savings plans and charitable donation tax credits – to name just a few.

Also, the federal and provincial governments recognize that individuals and families require flexibility in arranging their business and personal affairs. To that end, there are many allowable tax-free transfers between individuals, family members, spouses and businesses that may be used in the right circumstances, all without being considered aggressive planning.

What is far worse is absolutely no planning.

Good tax planning includes:

• having your estate documents, such as your will, enduring power of attorney and personal directives in place, viewed and updated;
• co-ordinating your financial planning, such as your personal investments and insurance, with your life goals and business planning for tax efficient life and business succession or transitions;
• reviewing your personal circumstances with your accounting advisors to see if there are any available tax deductions or credits to help minimize taxes for you and your family; and
• reviewing your personal and business circumstances and structure with your legal counsel to see whether any updates or revisions are suggested or required.

A tax lawyer can assist you with suggestions and advice in all of the above areas.

4. It’s time to bring in a litigator

Some lawyers are litigators. They help clients with litigation matters and represent their clients before many different levels of government, tribunals and courts. There is a special breed of litigator – tax litigator. They generally represent clients who are being assessed and need representation before the Canada Revenue Agency, provincial or federal courts, including the Tax Court of Canada.

Did I mention that tax law has its own special court? It does.

Tax litigators are a powerful arsenal in assisting you with your disputes with the Canada Revenue Agency and before the courts. Consider a consultation with a tax litigator, again, sooner rather than later.

While many stages of the audit, assessment and dispute resolution process with the Canada Revenue Agency or other agency or government body can be competently and capably handled by your accountant, you should strongly consider when a lawyer should be engaged in that process. An early engagement of a tax litigator may be able to save you money on expensive litigation and could keep you out of the court room.

What’s the take away?

Tax matters and planning should not be swept under the table for a later day – your issues usually don’t go away and your options may decrease over time.

Hopefully this post has helped answer some of your questions about when to approach a tax lawyer for help and advice or at least has given you some insight as to whether other advisors can assist you with your questions.

I encourage you to reach out to professionals who can help you feel confident in dealing with all your tax matters and planning, including a tax lawyer.

Tax lawyer Catherine Gerrits works with individuals, families and business owners with tax and estate planning matters. If you’re looking for practical, cost-effective solutions, contact Catherine>>