Many Americans will face the IRS at some point in their lives. Over the years and as many people’s taxes become more and more complicated, facing a tax audit is likely. While many of these audits are “routine,” and can be handled by any qualified tax professionals—including an attorney, CPA, accountant, or enrolled agent—there are some instances where only a tax attorney will suffice.
The purpose of this article is to assist you in determining when you may need a tax attorney, and offer some specific advice on how best to seek the services of an experienced tax attorney who can protect your rights and keep your hard-earned money away from the IRS.
This is your tax case and the final results will impact your pocketbook. For this reason, you have the obligation to make sure that your tax/legal team has the necessary experience to make sure your rights are fully protected. While the attorney assigned to handle your case may not be fully seasoned, it is imperative that the partners or other attorneys at the firm have such experience. It is important to ask questions concerning his/her IRS or Tax Court experience before hiring any tax attorney.
Has the attorney ever worked for the IRS? Has the attorney ever litigated a case in U.S. Tax Court (and what were the results)? How many Tax Court cases has the attorney personally handled in the past? How many audits and IRS collection matters has the attorney handled in the past?
By asking these questions, you will be able to gauge the experience levels of the attorney who will be handling your case, along with the law firm that will be representing you.
Most US cities possess a few (or more) qualified and competent tax attorneys. Ask for a referral from other professionals that you trust, such as a CPA, real estate agent, insurance agent, mortgage broker, financial planner, etc. Ask for referrals from other friends in your geographic area who have had tax issues with the IRS in the past.
It may also pay to explore an out-of-state option, especially if you are referred to a tax attorney whom you believe would be the best fit for your particular case or issue. Many IRS cases can be transferred or otherwise assigned to any city the taxpayer requests. The location of the attorney is not nearly as important today as it was in the past.
Many IRS matters do not require the hiring of a tax attorney. These matters would include a relatively simple IRS letter requesting additional tax information concerning your tax return or account balance. You may also owe the IRS a relatively small amount of money in which hiring a tax attorney may not be cost effective (or you may not see any positive results from the hiring of one).
However, in many situations, it makes a lot of sense to consider hiring a tax attorney. These would include any situation in which the IRS is alleging tax fraud, an audit that simply won’t end, an audit with a poor result that needs to be appealed, an audit that ends up in US Tax Court, an audit with complex or disputed legal issues, frozen assets, tax levies, tax liens, collection alternatives, and many other tax matters which involve legal complexities.
Once you know the approximate costs of hiring legal representation, it is important to weigh this number with the potential risks associated with not hiring the attorney. For example, if the attorney’s retainer is $5,000 and the IRS is asserting that you owe $3,000, it would not be worth hiring an attorney to sort out the matter. Instead, you could fight the IRS alone, knowing that the worst financial outcome (paying the IRS $3,000) is still better than having to pay a $5,000 legal bill.
However, that same $5,000 retainer could be worth every penny if the amount allegedly owed is $100,000. A similar analysis can be done with respect to criminal tax matters in that the cost associated with the representation must be weighed heavily with the freedom associated with staying out of prison. The advice is simple: hire the best attorney you can afford.
In many instances, an attorney is needed to resolve a case that has dragged on for too long. In addition, there are many instances in which the attorney-client privilege of confidentiality comes into play with the IRS. There may be many different scenarios in which you wish any information you share with your tax professional remains confidential (i.e. cannot be shared with the IRS or anyone else). But only an attorney can provide this type of confidentiality in all tax matters. You may also wish to avoid any further communications directly with the IRS and hiring an attorney will require the IRS agent to deal with your attorney and not you, sparing yourself any additional telephone calls, in-person meetings or other stressful communications with the government.
Quite simply, it is impossible to guarantee any results when dealing with the IRS. A prediction as to the likelihood of an outcome with a tax case is acceptable, but not a guarantee as to the outcome. If a tax attorney makes any promises or assurances about a specific outcome, you need to seek counsel elsewhere.
While prior experience is always preferred, with a criminal tax matter—it is essential. You do not want an attorney handling your criminal case (tax fraud, tax evasion, criminal failure to file tax returns, etc.) as his/her first criminal tax case. The stakes are too high with your freedom to take this risk. While it is fine if an inexperienced attorney assists with your case, it is imperative that an attorney experienced in criminal tax cases (either from representing the IRS/US Government and/or Individuals) handles your case and is the primary/lead attorney.
Your tax attorney will be fighting for your rights and to protect your interests. Following your interview with him/her, how comfortable were you with the attorney? How well do you think the attorney would fight for your interests? Do you believe this attorney is the best choice, based upon your overall instincts (and along with cost considerations, of course)? It is your choice here and you need to be satisfied with your choice before hiring anyone. If you are not satisfied, keep looking!
In many tax cases, the IRS position is often the “correct” position—at least as far as the law is concerned. As such, there are some cases in which the IRS cannot be beat. It is important to work with an experienced tax counsel so that you can be prepared for all phases of the case: good, bad and indifferent. With the right counsel, hard work, and a bit of luck, the cases sometimes come out better than they perhaps should. But keep all expectations realistic, as the IRS is nearly always a very tough adversary and miracles are few and far between.
All attorneys use some form of written retainer agreement prior to engaging in any legal work for their clients. This retainer agreement should set out the entire fee structure for anyone working on your case (senior attorney, attorney, paralegal, etc.), along with any fees expected (research, experts, travel, etc.). You should have a basic idea as to your overall legal costs, depending upon how far the case must go before it gets resolved (i.e litigating a case in US Tax Court would certainly cost much more money than settling a case in the IRS Appeals Division).
If you are in need of a tax attorney, it is important that you seek the services of one who is the best fit for your case. Work with an attorney who is experienced, has a good understanding of your case/facts and can work with you, has handled your type of case before and you believe will fight for your rights.
Make sure you keep your expectations realistic, as many IRS cases are very complex and difficult to win. By not expecting any miracles and following the other advice here, you will likely be able to fight the IRS on its turf and obtain the best results possible. Best of luck!
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