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For complex tax situations, depending on the targeted expertise of a specialized tax attorney can help you avoid costly fees and penalties, which in some cases could even include prison time. Hiring a lawyer who specializes in taxation is about more than just filing your return. This type of professional has in-depth knowledge of tax laws and can help you understand and qualify for all the deductions that apply to your situation, potentially saving you thousands. From helping you understand when to itemize deductions to preparing for an IRS audit, a tax attorney is the professional you need to advocate for your interests.
This type of lawyer has specialized training in federal, state, and local tax laws and policies, including but not limited to the acquisition of material and intellectual property, income tax, estate transfers, and business transactions. Tax attorneys are available for both consultation and litigation, meaning that they can assist you with tax challenges both in and out of the courtroom. These attorneys represent individuals, small businesses, corporations, and nonprofit organizations for their complicated tax matters.
Hiring a tax attorney can help you understand the tax laws you are subject to as an individual or business owner and how you can best stay in compliance with these laws to avoid stiff IRS penalties. They can assist you with setting up trusts and wills as well as oversee the distribution of your estate. They can advocate on your behalf in mediation and court for the elimination or reduction of your individual or business tax obligations, recommend and oversee structured IRS settlements, collaborate with CPAs to create and prepare tax documents, and represent you in audit hearings, IRS hearings, administrative appeals, U.S. Tax Court, and even the U.S. Supreme Court and Court of Appeals.
If you’ve received an audit notice from the IRS, it’s likely the first time you’ve had to face this stressful situation. A specialized tax attorney, on the other hand, has assisted clients with this challenge time and again and understands the pitfalls that may occur during the auditing process. They can help the IRS understand the material facts of your case and take important steps to resolve tax issues, including filing appeals of court decisions, communicating with the IRS on your behalf, making recommendations to help you save money, and explain the tax credits for which you may qualify.
Even if you haven’t been subject to audit, specific situations require the knowledge and training of a tax attorney. Common scenarios in which you should consult with this type of professional include the following.
If you are in trouble with the IRS, whether you’re under investigation or you simply owe substantial back taxes, a specialized tax attorney has comprehensive knowledge of the programs you might qualify for and their specific, often-changing requirements. Understanding the details of relief programs is an essential part of taking the steps to enroll.
Like other types of lawyers, specialized tax attorney must complete their Juris Doctor (JD) degree and be admitted to practice by the bar association in your state. In addition, however, a qualified tax lawyer will also have a Master of Law degree in taxation, which indicates advanced training in a specialized area of tax law, such as estate planning, business taxation, international taxation, or the provision of financial services. Some tax attorneys also have an accounting background and are schooled in the legal implications of a vast variety of tax situations. These attorneys can help you with complex accounting situations that also have legal implications.
To represent you with the IRS, a tax attorney must be registered with the IRS as an Enrolled Agent (EA). This requires successful completion of a three-part exam about individual and business taxation and adherence to the ethical standards of the profession. They are also required to complete at least 72 continuing education course hours every three years to maintain EA status with the IRS.
It’s important to interview potential tax attorneys so you can find the right fit for your specific situation. Questions that you should ask include:
If the attorney in question is not able to help with your tax issues, he or she may be able to refer you to a colleague with more experience in that area.
If you’re already working with a CPA, he or she is required by professional ethics as documented by the National Conference of Lawyers and CPAs to consult an attorney if you receive a notice of deficiency from the IRS or if you are under criminal investigation. That’s because although a CPA may be able to represent you in tax court if registered with the IRS as an enrolled agent, more serious issues are typically settled in district court rather than in tax court.
While it’s always advisable to consult a tax attorney if you are a business owner, even individuals may need the expertise of this professional. These are the most common scenarios in which you should seek counsel from an experienced tax lawyer.
In addition to these scenarios, hiring a tax attorney has specific benefits for small-business owners. These include:
Both business and individual taxpayers have the right to represent themselves when it comes to IRS matters. For example, if you missed a deduction you might qualify for or made a minor mistake on your return, it’s fine for you or your CPA to address these items directly with the IRS. You can also easily file for an extension on your taxes by submitting Form 4868.
If you choose to represent yourself in an audit, however, you might quickly find yourself in over your head. To successfully handle the IRS audit process, you must have a comprehensive understanding of all applicable tax laws, know what type of documentation you must provide and how to provide it correctly, and know how to navigate the complex appeals process.
Although hiring a specialized tax attorney is an additional expense for individuals and business owners alike, it’s an investment that is well worth making if you are potentially facing a heavy tax burden or substantial fines and penalties.