The Internal Revenue Service (IRS) is one of the most important government agencies. Given how it’s tasked with collecting revenue that the federal government relies on to carry out its functions, this is no surprise. Because of how critical the agency is, trying to take on the IRS is often a losing proposition that could put you in significant legal and/or financial trouble.
If you find yourself going up against the IRS, having a tax attorney can help you navigate your tax issues and challenges. A tax attorney can act as your legal advocate, which comes in especially handy when negotiating with the IRS. Keep reading to learn more about what exactly a tax attorney does, when you should hire one, and how they can help you negotiate with the IRS.
Key takeaways
- Tax attorneys help you get the best result from the IRS.
- They provide peace of mind and guidance in dealing with complex tax laws.
- They may charge hourly or by the project.
- The process usually starts with a free consultation.
- Alternative tax professionals include EAs or CPAs.
- Tax attorneys can help with the following:
- Representation when you’re facing legal consequences
- Helping you deal with tax debt.
- Guiding you through tax planning for business, personal, estate, etc.
- Negotiating tax settlements with the IRS or helping you find other options if you don’t qualify.
- Applying for payment plans
- Stopping IRS collection actions (liens, levies, etc).
- Dealing with audits
What Is a Tax Attorney and What Do They Do?
A tax attorney is a tax professional who focuses most of their time on interpreting and applying tax laws. These types of tax professionals are highly skilled and have a solid understanding of tax policies and regulations at the federal and state levels. They understand not just the legal theories behind these laws but also how those theories can affect taxpayers.
Tax attorneys have graduated from law school, obtained a license to practice law, and passed their respective state bar exam. Equipped with these qualifications, a tax attorney is prepared to be your legal representative and serve as a middleman between you and the IRS. They can also advise you on the best course of action when encountering a tax problem or dilemma.
Types of Situations Where a Tax Attorney Can Help
So, what can a tax attorney do for you as your legal representative? Tax lawyers can assist in several ways, including situations where you need to:
- Deal with legal situations that could result in civil and/or criminal liability.
- Resolve a tax debt.
- Negotiate a tax settlement with the IRS.
- File missing tax returns.
- Amend one or more tax returns.
- Deal with an audit, including appealing the result of an audit.
- Appeal a collection action such as a lien or levy.
- Remove a lien or levy on your property.
- Challenge a tax assessment.
- Understand your tax situation and need advice on how to handle it.
Overall, these tax professionals can help you navigate complicated tax problems and put you in the best position possible before the IRS. They can also act as your representative so that you don’t have to deal directly with the IRS.
Representation When You’re Facing Criminal or Civil Legal Consequences
The number one situation that warrants using a tax attorney is when you could face legal consequences due to your current tax situation. In other words, a tax lawyer is usually the best tax professional to provide assistance when your tax issue involves an interpretation of tax law. This is especially true when you’re dealing with an IRS collection action involving a significant tax debt or the IRS believes you might be guilty of tax evasion (criminal tax fraud).
In the former situation, the IRS may garnish your wages or levy your bank account. If they believe that you have committed criminal tax fraud, they may refer your case to the Department of Justice to bring criminal charges against you. If you’re worried about any of these types of consequences, then it’s time to consult with an attorney.
Guidance When You Need Financial Relief from Tax Debt
When you owe the IRS a significant amount of money, you should contact a tax attorney to get informed about your options before the IRS starts trying to collect those taxes from you. An attorney will advise you about different options that can help you find a solution to your tax problem.
Tax Advice
A tax attorney is a great resource if you’re simply looking for tax advice. You can consult with a tax attorney at any time about any tax questions you have, and you can use their advice to make informed decisions about your future. Even when you have questions you could research yourself, having a tax attorney to “double-check” your work can provide invaluable peace of mind.
Can Attorneys Negotiate With the IRS?
Yes, as your tax attorney can communicate and negotiate with the IRS on your behalf.
The IRS is well-versed in the law, but the average taxpayer isn’t. Because of this, the IRS must allow taxpayers to seek legal counsel when they request it.
Therefore, per Internal Revenue Code Section 7421(b)(2), the IRS must stop talking to taxpayers if they say they would prefer to consult with a tax attorney, CPA, or enrolled agent regarding their tax situation. This law is intended to protect the taxpayer, who is often at a disadvantage when it comes to negotiating a tax debt or another tax matter with the IRS.
What Are Some Tax Attorney Strategies That Can Help During IRS Negotiations?
A tax attorney will provide a host of benefits during tax negotiations with the IRS, especially concerning a substantial unpaid tax balance. Some of these strategies include:
- Assessing your financial situation: A tax attorney can analyze your finances to determine your eligibility for certain programs, like an offer in compromise or Currently Not Collectible status, and help you decide if they’re viable options for your situation.
- Gathering important information: A lot of negotiating with the IRS requires you to provide information and documents to the IRS to support your claims. A tax attorney can help you with this process by identifying only the relevant information you need to send to the IRS. This avoids sending unnecessary information, which can waste your time, cause confusion, and sometimes lead to a bigger tax problem by bringing attention to an issue the IRS didn’t previously know about.
- Presenting the best offers possible to the IRS: A tax lawyer knows the best way to present settlement offers and requests for program acceptance to increase your chances of success.
- Identify legal arguments to help your case: If there’s a specific regulation or court case that supports your position that you aren’t aware of, your tax attorney will bring it to your attention. Without an attorney, you’ll never know about this argument because the IRS won’t tell you about it.
- Negotiating tactics: There are things you should and shouldn’t say when negotiating with the IRS, as well as the right time to say those things. A tax attorney will have the experience to know what to say, how to say it, and when to say it to the IRS to achieve a more favorable outcome for your tax problem.
How Does a Power of Attorney Work?
Before an attorney can represent you before the IRS, you need to let the IRS know. You can do this by filing a power of attorney form, otherwise known as IRS Form 2848, Power of Attorney, and Declaration of Representative.
Form 2848 gives the individual named in the form (your tax attorney) the legal authority to receive your tax information for the tax years on your form and to represent you in front of the IRS. Without this important document on file, your tax attorney can’t legally talk to the IRS about your tax situation.
Keep in mind that these forms do not absolve you from legal liability. You will still be fully accountable for your tax situation.
How Does Hiring an Attorney Impact IRS Decisions?
Just because you have an attorney represent you doesn’t automatically mean you’ll achieve a better outcome, but it dramatically improves your chances. Remember, it’s the job of a tax attorney to have a deep and nuanced understanding of tax law, as well as stay up-to-date with recent updates to the law, like a new tax case that changes how the IRS can collect taxes, assess a tax debt, or decide whether a taxpayer qualifies for a particular program.
A tax attorney also has plenty of experience negotiating with the IRS, they know what arguments work best and which ones are losing propositions.
Can an Attorney Lower Your Taxes Owed?
Possibly, although there’s no guarantee. An attorney will be able to help you determine if you’re likely to be eligible for an IRS tax debt forgiveness program such as:
- Offer in Compromise: This allows you to settle your tax debt for less than what you owe.
- Penalty Abatement: In some cases, the IRS is willing to waive or reduce your penalties, but only if you ask and only if certain conditions are met.
- Currently Non-Collectible Status: Acceptance into this program can pause the IRS’ collection efforts against you, but only taxpayers who meet stringent financial requirements are eligible.
- Partial Payment Installment Agreement: This is a type of pay-over-time settlement option that offers the possibility of manageable monthly payments and the possibility of paying off your tax debt for less than the full amount.
- Amended tax returns: If a prior tax return contained incorrect information that resulted in you paying more taxes (or getting a smaller benefit, like a tax credit or refund), then a tax attorney can help you determine if filing an amended return is a worthwhile endeavor and if so, the best way to go about doing it.
Your lawyer will not have any more negotiating power than you as an individual taxpayer. Still, they do have the advantage of knowing more about the various programs the IRS uses to provide relief to taxpayers. They’ll also be better positioned to leverage the law to your advantage where possible.
For example, an attorney will have a better idea of whether the IRS will accept your offer in compromise, given your finances. Given the time and effort required to submit an offer in compromise to the IRS, you only want to undertake this request if you have a reasonable likelihood of success.
If the statute of limitations on some of your debt has already passed, then your lawyer may be able to get the IRS to cease collection efforts by pointing out that they have no legal basis to seek out the funds anymore. If the IRS disagrees that the statute of limitations prevents it from trying to collect a tax debt from you, your attorney will be able to identify the facts and applicable tax law to support your position.
Can a Tax Lawyer Prevent a Tax Levy?
It depends on the situation, but a tax attorney can often help you take steps to avoid the IRS taking your property with a tax levy, such as seizing a house or garnishing your wages. For example, before the IRS levies your property, it sends out a series of notices. Having a tax attorney can help you submit a timely response to those notices, whether it’s negotiating a tax settlement (with an offer in compromise or installment agreement) or filing an appeal. They can also contact the IRS for you to request that the IRS withhold any enforcement action against you while they help you work towards resolving your tax debt.
Can a Tax Attorney Help With a Tax Audit?
Absolutely. Dealing with a tax audit is one of the most critical times to have a tax attorney represent you. This is because a tax attorney can help you understand how the audit process works and what’s required of you. For example, they can help you understand the scope of an auditor’s document request and help you avoid wasting time searching for documents you don’t need or, even more importantly, documents that might incriminate you.
How Would a Tax Lawyer Help When Requesting a Payment Plan?
A tax attorney can help you settle your tax debt with a payment plan (or installment agreement) in several ways. First, they can identify the right plan for you and use their expertise in negotiating with the IRS to ensure the IRS agrees with that plan. The amount of your tax debt and your current financial situation will determine what type of payment plan you’re eligible for.
Second, being current on all your tax returns will usually be required before the IRS agrees to enter into a payment plan with you. If you have any unfiled tax returns, your tax attorney can help you get caught up with those. Third, your tax attorney can help identify other potential tax settlement options if your financial situation changes during the payment plan negotiating process.
Can an Attorney Help During the Investigation Stage When Negotiating with the IRS?
Of course. Dealing with an IRS’ request for documents and other financial information can be the most frustrating and scary part of any interaction with the IRS. It starts when the IRS sends you a letter containing a list of documents and financial information demands.
Then you get this sick feeling in the pit of your stomach because you don’t understand half of what the IRS is asking. And the other half, you do understand, and you have no idea where you’ll get that information.
A tax attorney can really shine here because they can help you figure out where to get this information, and if you don’t have it, they can craft the appropriate response to the IRS. Then, once the information is obtained, they can use it to support your position during tax negotiations.
Determining if You Need to Hire an Attorney
Whether you need to hire an attorney depends on your tax issues, financial situation, and personal preferences. For example, you might need to set up a payment plan, which you could do yourself.
However, you’re afraid that you’ll miss something important and want the reassurance a tax attorney can provide. Or maybe you can handle your tax matter yourself, but it would be time-intensive to do so, and it’s actually more affordable for you to hire someone else to handle things for you. Then there’s the nature of the tax problem and whether a tax attorney is best suited to help you deal with it.
Tax Attorneys vs. CPAs vs. Enrolled Agents
There are several benefits associated with working with an IRS lawyer. Still, you’ll only want to hire a tax attorney when you need the legal and tax advice that they offer.
Sometimes, your tax situation might require the skills of a different type of tax professional. For instance, certified public accountants (CPAs) are ideal if you need help crunching numbers and have to make a decision based on financial information. For instance, you might be wondering what corporate form makes the most financial sense for you from a tax perspective. As their name implies, CPAs are most skilled in accounting matters. Some tax attorneys are also CPAs, given the related nature of tax law and accounting.
Enrolled agents (EA) are individuals who are authorized to represent taxpayers in front of the IRS. To become an enrolled agent, a tax professional must pass an extensive three-part IRS test or be a former IRS employee. Then, they must complete continuing education courses every few years. There are no preliminary education requirements for enrolled agents. EAs are sometimes preferable over tax attorneys or CPAs because hiring might cost less. However, this isn’t always the case, and it might be advantageous to hire an EA over a lawyer or CPA because that particular EA has more experience and skill in handling a unique type of tax matter.
How to Find a Tax Attorney
Before you hire the first lawyer that pops up when you Google “tax attorney near me,” there are a few things you need to know. While tax lawyers are some of the best tax professionals available, not all attorneys are able to provide the same level of tax representation.
You deserve top-quality legal representation from an attorney who will give your case the time it deserves. You’ll be best served by an attorney with experience handling your specific tax issue. Once you know if a prospective tax lawyer offers the services you’re looking for, dive deeper into their experience by checking up on their past case results and how long they’ve been practicing in the particular area of tax law that concerns you.
You’ll also want to see what past clients say about the lawyer or law firm by reading reviews and testimonials. If you have a friend, family member, or coworker, ask them for recommendations. From there, you’ll want to schedule a consultation to ensure the attorney is a good fit and has the time to take on your case. Sometimes, a tax lawyer could “check all the boxes,” but after meeting them, you don’t feel like you two will be able to work well together. This could be for any number of reasons, such as personality traits and working styles.
Do Tax Attorneys Offer Free Consultations?
Some tax attorneys offer free consultations, but most do not. There are advantages and disadvantages to free consultations. If they don’t offer free consultations, they’ll generally offer a short overview of your issue to see if they can help. If they determine that they can help you, they’ll charge you for a consultation, during which they’ll go into more detail about your options.
In contrast, many other types of attorneys who don’t practice tax law offer free consultations. But most of these firms also work on a contingency fee basis, meaning they don’t get paid until the case resolves. While that sounds attractive, it’s important to recognize that the lawyers who offer these arrangements usually handle personal injury cases.
Tax attorneys don’t usually work on these payment schedules because there’s no lawsuit to resolve, which results in their client receiving a significant amount of money.
So, how much is a tax attorney consultation? That depends on the specific firm you choose to work with! To learn more, contact us to ask about our fees for an initial meeting. It’s important to note that at Wiggam Law, we initially offer a free consultation with our Client Services Coordinator to ensure we can serve your needs before you pay for a consultation with one of our attorneys.
How Much Will it Cost to Hire a Tax Attorney?
The answer depends on the specific firm you work with and their payment schedule. Some attorneys charge a flat fee, while others charge by the hour. The payment schedule that will work best for you depends on the complexity of your case and the extent of your tax needs.
Hourly billing will generally result in the cost matching the complexity of the work. Simple matters take less time, so they cost less. Complex matters require much more time, energy, and effort, and the billing reflects that. Generally speaking, flat fees apply to relatively straightforward tax matters where the tax attorney can reasonably anticipate how much time and effort they’ll need to provide. An hourly billing arrangement is more likely for more complex or uncertain tax issues.
Are Tax Attorneys Worth it?
It’s often worth the investment to pay for an attorney’s assistance with tax matters. They are experienced in dealing with tax matters and can give you peace of mind about your tax problem. This is especially true if you’re dealing with many fees, trying to get a settlement on your tax bill, facing complicated audit issues, or navigating complex business, estate, or trust taxes.
The real answer comes down to your personal preference, such as the importance of peace of mind and if time is of the essence. For example, if the IRS garnishes your wages or levies your home, you need to act quickly, and paying for the services of a tax lawyer is more likely to be worth it. If time is less of an issue, you might be able to figure things out yourself because you have the time to do so without a pressing deadline hanging over your head.
Are You Looking for Tax Resolution Attorneys You Can Rely on?
Are you currently looking for a tax resolution firm to assist with your tax questions and concerns? If so, our team of tax professionals would love to hear from you to see how we can help. We know how stressful and complex tax issues can be, but you can rely on our legal expertise to help you more easily navigate your tax situation and achieve the best resolution possible. Schedule a consultation with our team or call us at (404) 233-9800 now to get started on your tax resolution journey.