What do tax lawyers do?
Many people consider being a tax lawyer, but they aren’t sure what they do. When someone is considering being a lawyer they often think of going up in front of court and arguing a case. They think law and order or even nowadays it can be shows like suits.
They also think of huge corporate lawyers that just settle huge cases like the lawyer in billions. They want to join a huge law firm in new York city and make a huge a salary, but they aren’t really sure what they’ll be doing.
Another possibility for lawyers is to be a tax lawyer. It’s often overlooked because people do not like taxes, but tax lawyers do really well for themselves. At the outset, many tax lawyers can make up to $100,000 as an associate at a big 4 accounting firm. Many tax lawyers end up making $400,000 or more as tax directors. If a tax lawyer wants to be a principal at a big 4 accounting firm they can make in excess of $1 million.
Why do tax lawyers make so much money? This is because many CFO’s, and CEO’s don’t want anything other than a tax lawyer running their tax department. They feel that tax lawyers know the tax law and know how to support tax positions. They know that tax accountants might know the financial numbers but they feel that tax lawyers will actually understand the tax positions. They feel comfortable that if a tax position is challenged that a tax lawyer will be able to defend it better than a tax accountant. Now is that actually true? I don’t think so. I think tax accountants make for better professionals than tax lawyers. Tax lawyers often normally only want to get into the legal side of tax and don’t focus on the accounting side at all. Being that most CFO’s and CEO’s only care about the financial numbers, I think tax accountants are more valuable.
What does a tax lawyer do?
Tax lawyers can do just about anything that any tax professional does. They can be a tax accountant and work on the tax side of a financial statement audit.
They can work in mergers and acquisitions and perform due diligence. This includes sorting through the returns of the target. Another major responsibility of a tax lawyer during due diligence is to read through any major tax position that the target might have and tell whether it is a strong position. This depends on if the tax position reaches the more likely than not threshold.
Tax lawyers are also responsible for tax research whether they are in an accounting firm or not. They went to school to learn how to research law. Therefore, they make for excellent tax researchers. Their research abilities are used primarily in writing opinions. This includes writing opinions for tax positions that their clients or their company takes on a tax year. Sometimes tax opinions cover 100’s of millions or billions of dollars of tax benefits, so people want to make sure that someone very familiar with the law is doing the research and writing the opinion.
Much of today’s tax advantages come from international structuring to avoid taxes. In order to take advantage of this structuring you not only have to be versed in U.S. tax law, but you must also be versed in international tax laws and treaties. Lawyers are more familiar with legal structures and treaties than people that went to school to become accountants and CPAs.
What makes corporate tax lawyers so coveted
What makes tax lawyers so coveted in the accounting world? Tax lawyers are seen as very smart people just like any other lawyer. They went to school for much longer and have knowledge about the law. Tax is all about law since the tax code is a law. Tax law is some of the most complex and convoluted law there is, so the skills of a tax lawyer are respected heavily in accounting. In addition, tax lawyers are needed to support important tax positions as stated before. Extensive research and vetting needs to be performed when millions or billions of dollars are on the line. Lawyers are specialized in research and writing necessary to support those positions. If a position is challenged by the IRS, legal action might be required to support the position. Lawyers are required to defend a position, so it is once again important to have a tax lawyer if you need to defend a tax position.
In conclusion, tax lawyers can do almost anything within the tax accounting profession. This is what makes them so valued in the tax industry. If you are thinking of pursuing a career in tax law, you are a wise person and are likely to have a great deal of career success.