Sometimes you need a little help with your taxes that a preparer or CPA can’t help you with. A tax attorney, on the other hand, fits the bill nicely. Taxes, like most other legal issues, are complex bordering on absurd. It takes someone with experience and the right skills to help you hack your way through the jungle of rules, regulations, and other entanglements.
A tax attorney is a lawyer specializing in the technical aspect of tax law. More than a Juris Doctor (JD, the degree lawyers earn to practice) and admittance to the state bar, tax lawyers have advanced training in things the IRS might throw at you.
In fact, many have a master of laws degree in taxation (LL.M), and some may have a background as a CPA or Enrolled Agent. All of that gives them a depth of knowledge that can help you with your tax issues.
What Does a Tax Attorney Do?
A good tax attorney can help you save thousands of dollars when filing your taxes if you have a complicated situation. A tax lawyer can also help keep you out of prison. Both are compelling reasons to hire one.
In a little more detail, tax attorneys:
- Respond to IRS audit and collection notices
- File appeals to tax court decisions
- Communicate with IRS officials
- Help you set up your business
- Help you take advantage of tax credits and deductions
You can almost imagine a tax lawyer picking up confusing IRS documents for a little light reading. For example, tax attorneys know that you must itemize your deductions if you don't want to use the standard deduction. They also know that a lot of people get into trouble with the things they try to take off their taxes.
Listen to your lawyer before trying to take dodgy deductions.
When Do You Need a Tax Attorney?
Obviously, tax lawyers are suitable for taking care of legal issues with the IRS or the US Tax Court. But you could use one for other reasons than to keep you from being arrested.
Bringing suit against the IRS or being investigated by the IRS for criminal activity really requires a knowledgeable tax attorney. Courtrooms are scary places to be without support. Even if you just want an independent review before the US Tax Court, it is good to have a lawyer on your side.
If you are starting a business, a tax attorney can help you determine the most tax-friendly organizational entity, show you the best way to structure your financial matters and provide advice about deductions, credits, tax breaks, and other arcane items. That goes double if you do business internationally.
If you have a taxable estate. How do you know whether you have one of those?
This year, if your estate's total value at the time of your death exceeds $11.58 million, or $23.16 million if you’re married, then it’s taxable. Your heirs would pay estate tax upwards of 40% of the balance over that threshold.
The Tax Cuts and Jobs Act of 2018 doubled the estate tax exemption level from 2017 and before. Unfortunately, the act sunsets (expires) in five years, meaning the exemption may drop again and complicate your estate planning.
Still, Why Hire a Tax Lawyer?
Besides giving good advice so you can make the right decisions about your money and taxes, a tax lawyer can help you work out various tax payment strategies, such as an offer in compromise. But the best thing about hiring any kind of attorney is the attorney-client privilege that exempts your lawyer from disclosing certain information or testifying against you in court.
If you receive notice of an audit, can you keep your calm and carry on? Maybe, but a tax lawyer isn’t as emotionally invested as you are in your financial issues. Lawyers are trained to be dispassionate in their thinking, even if they don’t always sound that way in court.
In cases where you think the IRS has an invalid claim, a tax attorney advocates for you, not Uncle Sam.
Questions to Ask Prospective Tax Attorneys
Due diligence is essential in hiring someone who has your financial interests in their hands. You are hiring a professional expert on a complicated legal topic. You need to know as much as possible to begin building a trusting relationship.
Don’t be afraid to ask a bunch of questions.
- Are you admitted to the state bar? Your attorney must be allowed to represent you in the state where the matter takes place.
- What are of tax law do you specialize in? That is how complicated tax law is. You can find an attorney with a subspecialty matching your case.
- How much do you charge? Do you charge a flat fee, by the hour, or some other payment structure? Can you estimate my legal fees? (OK, that’s three questions, but they’re all related.)
- How long has your firm been in business? New lawyers aren’t bad lawyers, but they are inexperienced. Top Tax Defenders has over 27 years experience in the tax business.
- Do you practice just tax law, or do you work in other areas as well? Sometimes the jack-of-all-trades isn’t good enough in your area.
- Do you have a background in accounting?
- Is this an issue that warrants a lawyer’s help?
You need to know if the lawyer representing you is experienced in the area of your issue, whether he or she is eligible, qualified, and admitted to the state bar, and how much out of pocket you are likely to pay.
Red flags to heed when seeking a tax attorney include:
- Attorneys that want payment upfront.
- Attorneys who pitch themselves like used-car salespeople.
You have to trust your lawyer. Those asking for payment before services are rendered or who seem too expansive about their skills are unlikely to represent you as you deserve.
A Final Note
It is always worth it to consult with a tax attorney if you find yourself in any situation where the IRS looks at you through their magnifying glass. That goes double if you are being charged with a tax crime.
It’s also to your financial advantage to have someone show you how to do your taxes right the first time if they become too complicated. That same person can help you save thousands of dollars on future bills and taxes.
If you are pegged for a business audit or find yourself in financial crosshairs, find a skilled tax attorney to advise, advocate, and argue for you.