When you encounter an unexpected tax problem, one of your first thoughts might be figuring out how to get help. Then you might wonder what kind of help you need and where to get it. Is this a tax matter you can handle yourself with the help of the Internet, a friend, or a family member? Or is this an issue that requires a tax professional, such as a certified public accountant (CPA), enrolled agent (EA), or a tax lawyer?
The goal of this post is to focus on the tax attorney professional and answer these questions by discussing three primary scenarios that come up when deciding if it’s worth it to hire one. We’ll examine tax problems where it’s usually worth hiring a tax attorney, more basic situations that you can probably handle without a tax lawyer, and squishy situations where deciding whether it’s worth hiring a tax attorney depends on your personal preferences and unique circumstances.
Situations Where It’s Probably Worth Hiring a Tax Attorney
For the majority of taxpayers, the one situation where you almost always want to hire a tax lawyer is if you’re facing potential criminal liability. For example, suppose the IRS accuses you of lying on your tax return and brings up the possibility of criminal charges for tax fraud or evasion. In that case, it’s probably worth hiring a tax attorney to help. In addition to steep monetary penalties, you also face the possibility of going to jail or prison. Even if you don’t face criminal prosecution for this alleged misconduct, you could still have to deal with significant civil monetary penalties.
Another common scenario where you want to hire a tax lawyer is when you have a tax problem that involves (or could involve) a large amount of money. And by large amounts of money, we’re usually looking at more than $25,000. The “large amount of money” condition often necessitates an attorney because only then does it make financial sense to utilize a tax process or program that’s complex and hard to handle on your own.
Two examples of such programs are the Offer in Compromise (OIC) and Currently Not Collectible (CNC) status. If your unpaid tax bill is small, it probably isn’t worth the money to hire a tax attorney to help with either. But hiring a tax lawyer is far more likely to be worth the financial investment if there are tens or hundreds of thousands of dollars at stake.
Next, there’s a situation where a mistake in a tax matter may not cost you a lot of money in taxes or penalties but could create major headaches. For instance, if you’re dealing with a business or complex individual tax audit. Not responding correctly or sending the wrong documents could cause the IRS to expand its investigation into your finances. Or maybe you’re trying to conduct business overseas and want to ensure you comply with all tax reporting laws and regulations.
Lastly, you have a tax issue where you must act quickly. Perhaps you just learned that the IRS has placed a jeopardy levy on your property. In this situation, the normal due process procedures and a 30-day window to contest the levy may not apply. Therefore, you must act as quickly as possible to protect your property (or get it back). If you had a few weeks or months to do your own research, you might be able to resolve this tax matter yourself. Unfortunately, taking too long to respond could mean never getting your property back or waiting much longer for its return.
Why a Tax Lawyer Isn’t Worth It for Some Tax Problems
You usually don’t need to hire a tax lawyer when dealing with a simple tax issue and/or a small amount of money. You can usually resolve your simple tax issues yourself with some basic research or by calling the telephone number listed on the IRS letter or notice you received. A good example of this is asking for a first-time penalty abatement, which you can usually request over the phone.
In other cases, you might have a disagreement with the IRS about an unpaid tax bill. Yet the amount is so small that it’s not financially worth the cost of hiring an attorney. For example, you might be eligible for innocent spouse relief, but you need to hire a tax attorney to help you get it. If the cost of the attorney’s fees exceeds your unpaid tax bill, it might be easier and cheaper to just pay the IRS and be done with it despite the unfairness of this situation.
When the Value of Hiring a Tax Lawyer Depends on the Situation
This is where things get more interesting and personal. There could be tax matters that most people would be willing to handle themselves, but it could still be worth it to you to hire a tax lawyer. A perfect example of this could be when you’ve done your research and are pretty sure you know what to do, such as setting up an installment agreement or payment plan to pay your tax balance over time. However, you want a tax lawyer to “double-check” your work and confirm you’re not missing a better option for settling your tax debt with the IRS. In this case, you’re not necessarily paying a tax professional for a solution or answer but peace of mind.
Then, there could be differences in the level of tax knowledge and resources available to you. If you have a close friend or family member with extensive tax experience, they might be able to help you instead of you having to hire a tax lawyer.
Next, you might want to hire a tax attorney for convenience reasons. You might already be an accountant and have no problem resolving your tax problem by yourself. But you’d rather do other things, like spend time with your family or enjoy one of your hobbies.
Finally, you’re in a unique set of financial circumstances where you have a lot to lose if you “get it wrong” with the IRS. Being very wealthy, having overseas assets, and/or seeking tax help with your business are a few examples of how you could face more significant problems than the average taxpayer if you make the wrong tax decision.
Getting Tax Help Without Hiring a Tax Attorney
Before deciding whether it’s worth hiring a tax lawyer, you should also think about other sources of tax assistance. One in particular is scheduling a consultation with a tax attorney. A consultation can provide a great opportunity to understand better your case and what you could be dealing with. There’s also no obligation for you to hire the tax attorney after a consultation.
The consultation won’t necessarily result in you resolving your tax concern, but it can answer some basic questions about what your options are and how to proceed. For instance, you might be wondering if you were truly eligible for the Employee Retention Tax Credit you received a few years ago. Assuming you weren’t, the tax consultation could confirm that for you and make it easier for you to determine that you’ll need to hire a tax lawyer to mitigate the consequences of this mistake.
Even if the consultation isn’t free, getting a more definite answer about what you need to do next is often worth the small price. Also, tax attorneys who charge for their consultations may allow you to apply the consultation fee toward a future invoice should you choose to hire them to represent you.
Another option to consider is hiring a CPA or EA instead of a tax lawyer. While a tax attorney can handle most tax issues, a CPA or EA could be a fit for you. Even if the EA or CPA charges the same amount as the tax lawyer, you might feel more comfortable hiring the EA or CPA because someone referred them to you, they are closer to you, or you’re already familiar with their work.
You could even have a tax problem where a tax attorney, EA, or CPA isn’t necessary. Instead, going to your local tax preparer is all you need. This might be a consideration if you’re looking to file a simple amended income tax return.
Not Sure If You Should Hire a Tax Attorney?
By now, you’re either on the fence about whether it’s worth hiring a lawyer or you’re pretty sure you want to hire one. Regardless of which applies to you, Wiggam Law can help. Schedule a consultation online or call us at (404) 233-9800. Remember, in addition to helping you navigate a complex tax issue, a tax lawyer’s biggest benefit is spotting issues and potential problems you may not even know exist.