Canada: When Do You Need Canadian Tax Lawyers versus Accountants?

Last Updated: July 20 2016

When do You Need Canadian Tax Lawyers versus Accountants – A Practical Guide

Income tax involves both the law and numbers, tax returns. So it’s natural that there is overlap between what tax lawyers and accountants do and therefore resulting confusion on the part of taxpayers looking to retina the appropriate tax professional. While there are common areas where both Canadian tax lawyers and accountants practice, there are equally areas that should be the exclusive area of tax lawyers or accountants, with no overlap. This article provides a practical explanation of the differences, and advice as to when you should choose the Canadian tax lawyer and when the accountant.

Legal Matters – Exclusive to Canadian Tax Lawyers

If you are going to Tax Court you need to have a litigation tax lawyer. While accountants can represent their clients in some Tax Court of Canada cases, they should not do so. Appearing in Tax Court is a purely legal activity, one for which Canadian tax lawyers have been specially trained and accountants have not. An accountant who offers to represent a client in tax court is not properly serving the taxpayer, and may not be insured in the case of a claim by the taxpayer that the case was mishandled.

Similarly a threatened CRA tax evasion prosecution or prosecution for failure to file tax returns should only be handled by a Canadian tax lawyer. It is a tax battle that may end up in the criminal courts where accountants cannot, and should not, appear.

Implementing tax planning structures or tax reorganizations, even if planned by an accountant, is legal work that is exclusive to tax lawyers. Drafting agreements is another example of work that Vancouver tax lawyers are trained to do and for which accountants lack expertise.

Legal tax opinions can only be provided by a Canadian tax law firm. However accountants can give non-legal tax opinions. If the client requires a legally binding tax opinion, they need a Canadian tax lawyer. Otherwise they can use a tax accountant.

Tax Returns and Forms – Exclusive to Accountants

Preparing tax forms and Canadian tax returns is what accountants are trained to do and they are the only ones who should fill out tax returns or tax forms such as T1135s for their clients. Lawyers lack the expertise to prepare tax returns and should not do so and are probably not insured if they make a mistake. Tax lawyers who offer to prepare tax returns for their clients as part of a package of legal services such as a voluntary disclosure are doing their client a mis-service. Clients should insist that all tax returns be prepared by professional accountants with experience in preparing voluntary disclosure submissions.

Voluntary Disclosure Program (VDP) – Legal Work Should be done by a Canadian Tax Lawyer

Why use a Toronto tax lawyer for a voluntary disclosure? At its core, the VDP is a legal process not a tax accounting process. If problems arise, only tax lawyers have solicitor client privilege - CRA can seize files and documents and prosecute if the file is handled by an accountant. The CRA VDP or voluntary disclosure is in essence the intersection of two separate areas of law, tax law and administrative law.

Our tax law firm understands these principles and can set up a tax amnesty file from day one in anticipation of CRA challenge or push-back. Accountants don’t have this knowledge of administrative law. A Canadian tax lawyer can also go to court to seek judicial remedies for breaches of natural justice, procedural fairness etc. In fact our tax law firm was an early adopter of the VDP. Our office has completed many hundreds if not thousands of VDP voluntary disclosures since the VDP program began in the 1990’s and before it became well known. We are familiar with all stages of process from initial submissions to hearings at the Federal Court of Canada.

Furthermore if an accountant submits a no-names voluntary disclosure the client is fully exposed to a CRA Demand for Information served on the accountant under the Income Tax Act. In that case, since there is no accountant privilege, the accountant will be required to release his or her files to CRA, thereby revealing the identity of the no-names taxpayer. No such risk exists with a Toronto tax lawyer submitted no-names voluntary disclosure which is fully protected by solicitor-client privilege.

However our Canadian tax lawyers don’t prepare tax returns for clients even thought our senior tax lawyer is a CPA and fully capable of doing so. We prefer to have accountants who prepare tax returns all of the time complete the returns and we review them to ensure accuracy. We think our clients are better served than if the tax returns were prepared in house by our tax law firm.

Areas of Overlap – Canadian Tax Lawyers and Accountants

Having delineated the exclusive areas of tax practice, everything else is properly the work of both Canadian tax lawyers or accountants. However in some cases Edmonton tax lawyers are better able to serve their clients, and in others accountants are better able to act.

CRA tax audits can be handled by either Canadian tax lawyers or accountants. If the tax audit issue is one of proof of documentation to support expenses claimed, then the accountant is usually in position to provide that tax audit evidence to CRA in a cost effective way. The accountant prepared the financial statements, and perhaps did the bookkeeping. It should be a simple matter for the accountant to respond to a CRA audit enquiry. However if the issue involves legal tax interpretation or possible civil penalties then a tax lawyer should be retained to respond to CRA in conjunction with the accountant for tax audit evidence issues.

Similarly CRA collections issues can often be handled by tax lawyers or accountants. On the other hand where CRA is threatening or has taken legal action it is often a good idea to consult with a tax lawyer first.

Tax planning is another area where both Montreal tax lawyers and tax accountants (not regular accountants) do the same work, and where either can be consulted. In this case the decision is usually based on an existing relationship, or a referral.

Conclusion – Canadian Tax Lawyer or accountant

As you can see, the decision as to when to retain a Canadian tax lawyer and when an accountant is appropriate depends on the exact nature of the tax help needed. Our Canadian tax law firm always refers accounting related work to professional accountants. If you are unsure as to what is appropriate in your case contact us and we’ll provide you with tax help or refer you to an accountant.

The information is thought to be current to date of posting. Income tax law changes frequently and content may no longer reflect the current state of the law. This document is not intended to create an attorney-client relationship. You should not act or rely on any information in this document without first seeking legal advice. This material is intended for general information purposes only and does not constitute legal advice. If you have any specific questions on any legal matter, you should consult a professional legal services provider.

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Useful Resources
Forms available to download for income tax filing in Canada.
Hear David J. Rotfleisch discuss timely and highly topical tax matters during appearances and interviews with specialist publications.
Useful explanatory videos of income tax matters.
The following questions and answers are based on the proposed measures that were announced on December 7, 2015.
The official Government website of the CRA.
This guide is for any person who deals with the Canada Revenue Agency (CRA). The guide gives you information on the 16 rights set out in the Taxpayer Bill of Rights and explains what you can do if you believe that the CRA has not respected your rights.
The Office of the Taxpayers' Ombudsman (OTO) works to enhance the Canada Revenue Agency's (CRA) accountability in its service to, and treatment of, taxpayers and benefit recipients through independent and impartial reviews of service-related complaints and systemic issues.
Ontario personal income tax is an annual tax collected from individuals who are Ontario residents on the last day of the tax year or have income earned in Ontario for the tax year.
The following documents provide instructions for filing your 2015 income tax return.
If you earned income in B.C. or operated a Corporation with a permanent establishment in B.C. last year you need to file an income tax return. Find out when you need to file your income tax return, and if any tax credits or rebates apply to you.
Generally, a corporation must file an Alberta corporate income tax return (AT1) for each taxation year during which it has a permanent establishment in Alberta.
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