Hiring a tax attorney is worth it when you have over $25k in debt, complex audits, or IRS notices you don’t understand how to handle.
If you have a tax problem, you have two main options: hire an attorney or DIY your tax problem. As a taxpayer, you have one objective: to solve your problem and save money doing it. So, which one is the best way forward? Well, there are times you can handle a tax situation on your own, and there are times that hiring a tax attorney will save you money in the long run.
In this guide, we shall examine when a tax attorney is necessary and basic situations in which you can handle the tax problem on your own. To get help now, reach out to the Atlanta tax attorneys at Wiggam Law today.
Key Takeaways
- Tax attorneys are critical if you’re dealing with large tax debts (anything above $25,000).
- Tax attorney services can help with business tax compliance and complex audits.
- You have attorney-client privilege with your tax attorney.
- A tax attorney can help if you’re dealing with aggressive collection actions like wage garnishment, levies, or liens.
- A tax attorney isn’t necessary for medium to small tax debts or if you’re comfortable with an EA or a CPA handling your issues.
- It’s always okay to hire a tax attorney for your peace of mind, even with small debts.
Situations Where It’s Definitely Worth Hiring a Tax Attorney
One 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. Owing large sums can be difficult to resolve, as you may need to submit detailed financial information, negotiate with the IRS, or apply to a relief program.
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 a 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.
Another instance is when 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.
Lastly, if you’ve been evading taxes willingly or have a case of tax fraud and you’re afraid the IRS is catching up with you, hiring a tax attorney can help you avoid jail or hefty fines. Communications with your attorneys are also protected by the attorney-client privilege, which is imperative to have in these types of matters.
Do Tax Attorneys Really Help?
Yes, there’s plenty that tax lawyers can do to help you with tax audits, settling large tax debts, and negotiating with the IRS. But you may not need their help with small tax debts or low-risk procedures.
Here are a few benefits you get from hiring a tax attorney:
- IRS communication and representation: Communicating with the IRS, whether it’s knowing the right thing to say or actually getting the representatives on the call, can be challenging. A tax professional takes this off your plate.
- Experience: The IRS operates under strict rules, and actions can be difficult to undo. A tax professional knows what to expect from the IRS at every stage and across all programs.
- Confidentiality: There is some information you might be afraid to share with an IRS representative, but thanks to the attorney-client privilege, you can share everything with your attorney. With everything on the table, it’s easy to get the right advice.
- Higher odds of better outcomes: Some tax relief programs, like OIC, have very low approval rates. A tax attorney knows the right offer to increase your approval odds.
- Avoiding expensive mistakes: For example, if you have years of unfiled tax returns, knowing the years you need to file for compliance can save you thousands of dollars in tax debt.
That said, there are instances when you can handle tax problems on your own successfully. Read on in the next section to see when a lawyer isn’t worth it.
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 is requesting a first-time penalty abatement, which you can usually do 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.
Here’s a table showing when you need to hire a tax attorney and when it’s okay to handle tax issues yourself:
| Situation | Likely Worth Hiring a Tax Attorney? | Why |
| IRS audit of a small individual return | No, unless you want their help for peace of mind | Low complexity and easy to respond on your own |
| Business audit or multi-year audit | Yes | Risk of expanded examination and higher liability |
| $5,000 tax debt | Usually no | You can easily set up a payment plan on your own |
| $50,000+ tax debt | Often yes | Finding the best relief option and applying can be challenging |
| Wage levy or bank levy | Yes | Immediate action and procedural protection are needed |
| Simple penalty abatement | Usually no | Often resolved over the phone |
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 for 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 be able to resolve your tax problem on your own. 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.
How Much Does It Cost to Hire a Tax Attorney?
A tax attorney can charge a few hundred dollars to $10,000 or even more, depending on the nature of your case. Here’s a breakdown of different payment models to expect with tax attorneys:
- Flat fee: If you have a specific problem that’s somewhat straightforward, like basic audits, tax return reviews, or tax advice, some lawyers can charge a $1000-$3000 flat fee.
- Hourly rates: Most attorneys charge $200-$550 per hour, but in major cities like New York or Los Angeles, the hourly rate can reach $1000.
- Retainer fee: If you have complex tax disputes that require multiple follow-ups, your tax attorney may offer a retainer fee. This can be several thousand dollars against their hourly fee.
The important thing is to understand how the attorney’s fee structure works and exactly what you’re paying for. At Wiggam Law, we charge a retainer and bill clients hourly – you always know exactly what you’re paying for and how it benefits you.
What Influences Tax Attorney Fees?
The service you need, the complexity of your case, and the attorney’s experience affect their fees:
- Service type: A tax attorney can also charge depending on the specific service you need. For example, tax attorneys can charge $2,500 to $3,500 for an installment agreement, $4,000 to $7,500 for OICs, and $2,000 to $5,000 for tax audits. These are just sample numbers, as actual costs vary significantly.
- Case complexity: The cost may increase depending on the time and resources required to resolve it. For example, if you want an installment agreement that requires financial disclosure, the cost may go up.
- Attorney’s experience: Seasoned attorneys naturally charge more for their years of experience.
Cost vs. Potential Tax Liability Reduction
When hiring a tax attorney, it’s important to weigh their cost against your financial benefit. These numbers may vary for everyone. For example, if you paid an attorney to apply for an OIC, here’s roughly how much the cost would compare to what you pay, but again, remember, these numbers are just for illustrative purposes and will vary:
- Offer in Compromise
- Tax attorney fee: $ 7,500
- Tax debt reduced: $40,000
- Net benefit: $32,500
However, with tax attorney services, sometimes it’s about damage control and preventing future tax issues. For example, paying an attorney to handle your installment agreement ensures you get into a plan your finances can accommodate without defaulting. Similarly, winning a tax fraud case keeps you in jail. In some cases, clients just don’t want the hassle of learning new tax laws and would rather pay an attorney to deal with a tax issue, which makes sense, too. It all comes down to what you define as your ROI.
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 better understand 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 is to hire 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)609-1300. 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.
Frequently Asked Questions ( FAQs)
Here are answers to common questions on hiring tax attorneys:
Are tax attorneys worth it?
Yes, tax attorneys are beneficial, especially when you’re dealing with a large tax debt, complex IRS audits, or aggressive collections. Attorneys can help reduce your tax debt, apply for relief options, and deal with the IRS on your behalf. Attorneys also provide confidentiality through the attorney-client privilege.
When should you hire a tax attorney?
Hire an attorney any time you need help with a tax problem. You can hire an attorney if you’re tired of waiting on hold with the IRS, you want to dispute a tax assessment, your offer in compromise was rejected, or in countless other cases. You can also hire an attorney if you’re being audited or simply want customized tax compliance advice. You should also hire an attorney if the IRS is asserting fraud or criminal charges.
Do tax lawyers really help with IRS debt?
Yes, tax lawyers really do help with IRS tax debt. For example, they can negotiate with the IRS to allow you to pay less than you owe (OIC), temporarily pause collections if you’re going through financial hardship, negotiate a payment plan, etc.
How much does it cost to hire a tax attorney?
Hiring a tax attorney can cost a few hundred dollars to $10,000 or more. It depends on how complex your tax problem is, the tax relief program you need help with, where the attorney is located, and the experience of the tax attorney.
Is it more expensive to hire a tax attorney than a CPA?
It depends. Often, hiring a tax attorney costs more than hiring a CPA. This is because tax attorneys are highly specialized in legal training, and they can handle more complex tax issues. For example, unlike a tax attorney, a CPA can’t represent you in court. Also, CPAs can be subpoenaed to testify; there’s no client confidentiality.
