Hiring a knowledgeable tax attorney has many advantages, but the greatest is peace of mind and knowing you’re not taking unnecessary risks with your personal and financial freedom. Going in front of the IRS without an attorney is like defending yourself in a criminal trial: Without legal training or detailed knowledge of the legal system, you’re at a huge disadvantage.
If you become the focus of an IRS inquiry, what do you do? For many, the answer is simple: Surrender as quickly as possible—no matter how good a case you have.
Even if you’re sure you’re right and have all the records to prove it, fighting the IRS, one of the most powerful government bureaucracies on the planet, can be a nightmare. What may seem like routine struggles can drag on for months or years which can lead to endless frustration and sleepless nights. Even those who win in the end may wonder if the fight was worth the time, effort, and expense.
But if you’re ready for the challenge, there are many smart ways to fight back—and win. No one wants to face the IRS alone and that’s why having a tax attorney on your side is important. Many tax situations can be handled personally, but some cases—like those discussed below—require hiring a professional.
Complex Tax Planning
Tax attorneys know the tax code extremely well and can use that knowledge to set up an estate plan or tax structure to help you avoid paying high levels of taxes. They do this in several areas of tax planning:
- General income tax planning: A tax attorney can help you decide the best options to choose in structuring your affairs and transactions to your best advantage when filing your personal taxes.
- Estate tax planning: When designing your estate plan, your tax attorney can help you create an estate structure to prevent or minimize high taxes. That way, your money can go to your loved ones or a charity of your choice instead of the government.
- Business tax planning: Planning a tax structure for a business can be complicated and consideration can change over time. If you are just starting a business or you believe your business structure needs to be reevaluated for tax purposes, a tax attorney can help.
- Charitable tax planning: Giving to charity, especially in the context of an estate, is one way to avoid paying taxes on some assets and put as much as you can toward something of your choice.
In the case of an audit, you’ll more than likely need legal representation. The job of a tax attorney in this situation is to help you negotiate a settlement with the IRS (and, hopefully, settle your debt for less). This can be done in many ways, including an offer in compromise, penalty abatement, or installment agreement. Be aware that offers in compromise are very rarely accepted by the IRS. You must have solid proof that a hardship exists and show you have absolutely no money and very little assets.
Tax attorneys are experienced in tax dispute resolution, whether that resolution comes through negotiations or a trial. Deciding when you need a tax attorney is fairly straightforward in this context. You should contact an attorney in the following situations:
- If you’ve tried to communicate with the IRS, but they seem to be ignoring you, there’s no way for you to negotiate an acceptable solution. The IRS may not be interested in working with you because you don’t truly understand the system. A tax attorney solves this problem.
- Attorneys are expert negotiatorsand may be able to work out a deal with the IRS that will help you avoid a trial, struggling with liens and levies, or having to file an offer in compromise.
- The IRS has many tax experts that will consider your case. If you have a tax attorney on your side, you level the playing field.
When your situation involves criminal charges don’t handle things on your own. There are times when the IRS has no choice but to pursue criminal charges—usually when it comes to income tax evasion. You’re required by law to pay income tax. If you don’t, the IRS will take begin to send notices. The longer you go without responding or paying the more it appears you’re hiding.
Along with the above, you may need a tax attorney if you are accused of tax fraud.
The last thing you want is to end up in prison and/or be slapped with large fines. While you may not be able to avoid all trouble, your tax attorney may be able to greatly reduce your penalty.
Robert W. Wood, a tax lawyer for 30 years and contributor to Forbes magazine, explains it this way, “I believe that, on average, taxpayers come out better if they don’t represent themselves. That’s so even taking the cost of professional fees into account.”
“I’m not saying you need a lawyer every time a piece of paper comes from the IRS. You might receive a letter from the IRS asking about some aspect of your return. You might want to handle it yourself. Still, be cautious and reflective, especially in more serious matters,” he continues.
Wood advises you contact a tax attorney to see if they think you need their services because hiring a professional is “not a panacea, but you generally can’t represent yourself very effectively.” He also comments that you often need a representative early on in the process. Wood has seen taxpayers spend large sums with professionals precisely because they tried to handle the case themselves. “Sometimes you dig a hole that is bigger, wider, and deeper than if you had you handed it to a professional from the start.”
The attorneys at Oliver & Cheek, PLLC possess outstanding advocacy skills and a wealth of knowledge and experience in all areas of state and federal tax law. If you’re planning for future needs, facing a tax challenge, or buying or selling real estate, we will partner with you to navigate and resolve even the most strenuous tax issues. For more information, call (252) 633-1930 or visit www.olivercheek.com.
(Sources: Forbes Magazine; The Wall Street Journal; Chris Bibey; CECB; and Michael DeBlis III, Esq.)