If you are facing an audit or in negotiations with the Internal Revenue Service, you may wonder whether you should represent yourself or hire a tax attorney. Before you answer that question, consider the ramifications of both options so you can make an informed decision.
Hiring a tax attorney can provide you with expert guidance and years of experience in working with complex tax issues. Having a seasoned professional on your side could very well determine the outcome of an audit or negotiation.
In this article
- 1 Common Questions About Hiring a Tax Attorney
- 2 When Should You Hire a Tax Attorney?
- 3 How Does a Tax Attorney Help?
- 4 What Can You Do Yourself?
- 5 How To Negotiate With the IRS?
- 6 How To Find a Reputable Tax Attorney?
- 7 How Much Does It Cost To Hire A Tax Attorney?
Common Questions About Hiring a Tax Attorney
Determining the proper course of action when dealing with the IRS depends on a variety of factors. Here are some considerations to factor into your decision.
When Should You Hire a Tax Attorney?
There are a number of tax situations when you should consider hiring a tax attorney to represent you.
If You Are Being Audited
Legal representation helps you negotiate with the IRS during and after an audit. An effective attorney, working on your behalf during an audit, can help settle the debt for less than you owe by making an offer in compromise, seeking a penalty abatement or requesting a payment plan.
If You Are Negotiating with the IRS
Often the language used in tax situations and the complexity of IRS bureaucracies can make it difficult to know what to say to whom. Providing a tax attorney with a power of attorney allows your legal representative to speak with the IRS on your behalf.
You Received and IRS Notice or CP
The IRS sends notices, also known as CPs in IRS jargon, to inform taxpayers about hundreds of different matters, from an error on a return to tax debt reminders. Knowing how to proceed after receiving such a notice can be confusing and require the assistance of a qualified tax attorney.
Occasionally, the IRS is mandated to pursue criminal charges. In such cases, you need to hire a tax attorney. Tax evasion and tax fraud are the most common causes of criminal IRS investigations. Take an IRS criminal investigation seriously: 8 out of 10 defendants are sentenced to prison. To avoid or reduce prison sentences and hefty fines, consider hiring an attorney.
How Does a Tax Attorney Help?
A tax attorney serves as your advocate in dealings with the IRS. In addition to speaking and negotiating with the IRS on your behalf, a tax attorney is often able to dissuade the IRS from pursuing inappropriate lines of questioning. A tax attorney also is expedient, understanding the complexities of your issue and the processes necessary for resolution. An attorney saves you considerable time in closing any open matters.
Tax attorneys specialize in tax law, having spent three years in law school and years of practice understanding the intricacies of the case law and legal precedents. A tax attorney is familiar with the approaches that work best for solving your dilemmas, have advanced negotiating skills and are unlikely to be intimidated by IRS officials.
Finally, a tax attorney provides you with attorney-client privilege, ensuring that discussions with you are confidential by law. Attorneys cannot be forced to share what they know about your case in depositions, hearings or trials. You can disclose any and all details related to your case, brainstorm solutions, and be confident that conversations will remain private.
What Can You Do Yourself?
When the interactions with the IRS are routine, it is appropriate to represent yourself. If you receive a notice that there is a minor mistake on a tax return or that there are deductions you may qualify for, it is fine to address these issues yourself or with your tax preparer.
If you need to file an extension for completing your tax returns (Form 4868), just follow the form’s instructions.
Although technically you can represent yourself in an audit, avoid doing so if you owe more than $10,000 in back taxes or if there’s a chance you will be accused of tax evasion. If you choose to represent yourself in an audit, make sure you:
- Understand the applicable tax code.
- Check you can provide the required documentation.
- Confirm you know how to appeal any recommended changes to your tax return.
- Find out whether any appeals will occur via telephone, correspondence or in court
How To Negotiate With the IRS?
Negotiating with the IRS is not easy. However, the IRS may be willing to offer taxpayers a payment plan. After all, the IRS only has ten years in which to recoup owed back taxes and penalties. So it tries to recover those monies as quickly as possible.
Offer in Compromise and Installment Agreements
One option available is submitting an “offer in compromise.” This is the program those late night tax relief television ads refer to when they promise you can pay “pennies on the dollar” of your tax debt.
Through an offer in compromise, the IRS allows taxpayers to pay less money than they owe. However, the IRS grants very few requests for these reduced rates. In 2015, the IRS received 67,000 offers in compromise and only accepted 27,000. Granted, an acceptance rate of 42.5 percent is not bad. But 27,000 approvals are a drop in the ocean compared to the 3 million installment agreements the IRS approved in 2015.
Fresh Start Program
The IRS recently has created new programs and guidelines that alleviate some of the pressure on delinquent taxpayers. In 2011, the Fresh Start program launched, providing taxpayers who owe back taxes an easier path to settling their debts.
For instance, the Fresh Start program raised the threshold that triggers tax liens to $10,000. A tax lien is a legal claim of all the property of a delinquent taxpayer. Once a tax lien appears on your credit report it can damage your credit score. With the new rules, the IRS will generally not impose a tax lien until a taxpayer owes at least $10k.
The Fresh Start program made it easier for taxpayers who owe $50,000 or less to qualify for an installment agreement. Other Fresh Start provisions includes
- Revisions to future income calculations
- Factoring of student loan payments, as well as state and local tax payments, into approved budgets
- The expansion of allowable living expenses
- And additional levy exclusions, such as some bank account savings and automobile equity.
How To Find a Reputable Tax Attorney?
When you’re looking for an effective tax attorney to represent you in IRS matters, there are a number of considerations to think about, including:
Identify the Need
You want to be sure you find an attorney who specializes in the tax issue you have, whether its back taxes, estate issues or an audit. Some tax attorneys may not have the expertise in your area of need.
Contact Bar Associations
The American Bar Association, as well as local and state bar associations, are excellent resources to find reputable and appropriate attorneys.
Ask for References
Family, friends, and coworkers may have suggestions of attorneys with whom they have worked. When contacting attorneys, feel free to ask for references of other clients.
Have A Conversation
Most reputable tax attorneys will provide a free consultation. Such conversations can give you a sense as to whether there is a match between you and an attorney. You should also ask the attorney for basic information such as where he or she went to law school. Inquire about the types of tax work he or she has done, and for details on their fee schedule. Also, ask to which bar associations they are admitted. Some states also provide certifications as experts or specialists in tax law.
Check An Attorney’s Background
You should check with state and local bar associations to see if an attorney has been disciplined and to confirm he or she is licensed to practice in your state.
How Much Does It Cost To Hire A Tax Attorney?
The cost of hiring a tax attorney varies significantly, based on geography and the complexity of your case. Some attorneys will charge an hourly fee of several hundred dollars and may require a prepaid retainer. Others will charge a flat fee for basic services such as creating a payment plan, submitting an offer in compromise, or hardship paperwork. Trial cases are generally more expensive and can run in excess of $15,000, depending on the complexity.
Hiring a tax attorney is a smart move, particularly if you are under audit, have a large tax debt, or are under investigation. While you may choose to represent yourself, a trained tax attorney provides important advantages, such as:
- A knowledge of the relevant tax law and precedents
- An understanding of the knows how to work effectively within the massive IRS bureaucracy
- A confidential advocate that will protect your interests and not be intimidated by IRS agents.
Tax attorneys may seem expensive, but they are a bargain when you consider the alternative. For instance, the IRS’s criminal investigation division wins 80% of its cases and the average sentence is three years and four months.
Are you interested in hiring a tax attorney but you’re not crazy about the idea of paying upfront consultation and retainer fees? Consider hiring a tax relief company that has tax attorneys on staff. These firms provide the advantages of hiring a tax attorney without the upfront fees. You don’t pay anything until they settle an account.
Click here for a free consultation with a senior tax relief professional. You will find out what tax relief programs you are eligible for and there is no obligation to hire the tax relief firm’s services.