When To Hire a Tax Attorney

A possible reason why scientists insist the human brain is the most complex thing in the universe is that they haven’t closely studied the U.S. tax code.

In the 40 years since a frustrated U.S. Treasury Secretary William Simon said the federal government “should have a tax code that looks like it was designed on purpose,” tax laws have increased in number and complexity.

The U.S. Tax Code, complete with regulations and official IRS guidelines, numbers approximately 75,000 pages. Because Congress routinely uses the tax system in pursuit of economic, political, and social goals, the U.S.  ode is one of the most complicated in the world.

Aside from basic filings of taxes every April, individuals facing more elaborate tax issues often turn to attorneys who can navigate every tax law from start-up business advice to IRS disputes to long-term estate planning to evaluating the future effects of legislative changes on investments.

That reliance is not likely to change. After all, the most inevitable aspect of life’s two biggest inevitabilities – death and taxes – is that our tax code won’t get any simpler anytime soon.

As an old truism goes, the difference between death and taxes is that Congress doesn’t meet every year to make death worse.

What Is a Tax Attorney?

Tax attorneys utilize their expertise in finance, accounting, and taxation laws to help people and corporations handle legal matters related to all types of taxes (of which there is no shortage.)

That help broadly covers proffering advice in meeting tax obligations, maximizing possible credits or deductions by making sense of dense tax codes, and representing clients in disputes with the IRS.

“Tax disputes are where tax attorneys shine,” Logan Allec, a CPA and owner of tax relief company Choice Tax Relief, said. “No one’s better at tax controversy than tax attorneys. Tax relief is (also) where a tax attorney can be a real help if a taxpayer’s matter needs to go to Tax Court.”

Allec says 99% of his clients’ tax relief issues are managed by his team of EAs (enrolled agents) and CPAs, but his company keeps a tax attorney on retainer to manage matters such as Tax Court petitions and other issues related to international tax compliance.

For many individuals, the decision to hire an attorney is made with careful consideration given to the specific tax issues they’re dealing with, whether those issues can be handled by a CPA, and the costs involved with each option.

“CPAs will generally charge less than a tax attorney and EAs will generally charge less than a CPA,” Allec said. “That said, the best of the best among

all three professionals who can represent taxpayers before the IRS – attorneys, CPAs and EAs – will likely charge roughly the same amount.”

Reasons for Needing a Tax Attorney

Whether your best option is a tax attorney, CPA or EA not only depends on your specific issue – estate planning versus a scary IRS audit that may end up in court – but also on the intricacy of that issue.

One advantage to working with a tax attorney is the opportunity to hire a tax expert with specific expertise in a particular area, be that estate planning, starting a business, tax disputes, tax relief, protecting your rights and financial decisions involving large investments.

“Depending on a client’s particular situation, a tax attorney has the experience to achieve a tax settlement (with the IRS) which is not something that every individual has the knowledge or expertise to handle,” said Matthew Rheingold, Co-Chair, Wills, Trusts & Estates and Taxation practice groups at Einhorn Barbarito in New Jersey.

“Only a knowledgeable tax lawyer understands all of the programs which his/her client may qualify for and can assist the client in determining which program is suitable for them.”

1. Estate Planning

One of the important roles of a tax attorney in estate planning is helping minimize estate taxes and ensuring that an individual’s assets are

distributed according to their wishes through wills, trusts, and other estate planning strategies.

Those assets don’t have to add up to a small fortune to make seeking legal advice a smart option. An attorney can advise you on how best to distribute assets in order to save on taxes after you die or after the death of a relative.

2. Starting a Business

A general business attorney is probably sufficient to help draft an operating agreement for an LLC, but start-ups are often more complicated and involve more than one member.

In those cases a tax attorney can offer important advice on the most tax-efficient structure for a small business, including obligations at different levels of taxation – federal, state, and local.

3. Tax Disputes

If there’s anything scarier than getting notice of an IRS audit, it’s not knowing your options in settling a tax dispute. It’s an example of the old adage about the disadvantage of playing checkers against someone who’s playing chess.

Settling tax debt is the wheelhouse of tax attorneys who can not only represent you during audits but can identify mistakes concerning unfiled taxes or errors in other past filings. Depending on the seriousness of the case, a tax attorney can help you avoid wage garnishments, liens, and the freezing of assets.

4. Tax Relief

The IRS has several payment plans for individuals and businesses dealing with significant tax debt. A good attorney who is familiar with all the available options, can be critical to your financial well being if you’re in need of tax debt relief.

Tax attorneys can negotiate payment plans, settle tax debt sometimes for less than you owe the IRS via an offer in compromise and are adept at translating paperwork and maneuvering the appeals process.

 5. Protecting Your Rights

The Taxpayer Bill of Rights includes everything from the right to privacy to the right to “challenge the IRS position and be heard.”

But just because taxpayer rights are spelled out by the IRS doesn’t mean it’s a simple matter to protect those rights against aggressive collection attempts or abuses. The importance of legal representation, especially in complex disputes and in ensuring due process in a collections matter, can’t be overstated.

6. Large Investments

An experienced attorney can provide advice on the tax implications of major financial decisions and investments, with large investments falling under the same umbrella as business startups involving multiple investors.

The need to optimize tax positions and ensure compliance with relevant laws is critical; for example, real estate investments involving multiple owners and properties.

Benefits of Hiring a Tax Attorney

Peace of mind is difficult to define but you know it when you experience it. And there’s no putting a price on it when you do.

The benefit of hiring a tax attorney is crystal clear in cases involving charges of tax fraud or tax evasion. But a tax attorney can be just as helpful if you’re creating a business partnership, dealing with mergers and acquisitions or an intricate estate plan.

The more complex the tax planning the greater the need for a specialist in tax law. And dispute resolution need not risk jail time to warrant the expertise of an experienced tax attorney. That expertise doesn’t come cheap but depending on the situation, it can save you money along with providing legal protection.

How to Choose the Right Tax Attorney

Finding a tax attorney with expertise in your area of concern is crucial to ensuring a successful outcome.

“I would advise that clients stay away from one-attorney-shop generalists,” Allec said. “If you are on a one-person law firm’s website and notice that they take on “all kinds of tax matters – from criminal tax defense to international tax to standard collections cases – run. Either find a larger firm that has specialized tax attorneys in each of these areas or find a solo attorney who specializes in representing taxpayers with your specific tax issue.”

Rheingold agrees.

“Specifically, clients should select an attorney who has significant tax experience handling IRS disputes, including audits, litigation and appeals and who specializes in tax law, rather than a general practitioner,” he said.

It’s easy enough to check credentials in your state by searching the bar association’s website. Look for signs of advanced education or specialization – Rheingold recommends an “LL.M in tax law.” – and years of experience.

Depending on your issue, and especially if your issue requires a tax attorney to represent you with the IRS or a tax court, make sure the

attorney you choose can communicate complex tax issues clearly. Again, part of the cost of a tax attorney should cover your peace of mind.

Read the testimonials of clients who’ve employed the tax attorney you’re researching and pay special attention to their particular tax issue. If you wouldn’t go to a restaurant without reading reviews, don’t consider hiring a tax attorney without doing your research.

“In my experience, it’s not so much about the letters after the person’s name but about their experience in dealing with your specific tax matter,” Allec said.

How Much Do Tax Attorneys Cost?

Tax attorneys typically work either hourly ($200-$400 per depending on your location, and type of case and the experience of the attorney) or on a fixed or flat fee.

A flat fee for legal help with an audit might be $2,500 but perhaps twice as much to navigate a settlement with the IRS through an offer in compromise (OIC.)

If possible, ask for a free consultation to check compatibility and get a ballpark estimate before you decide to hire a tax attorney.

Keep in mind that when you request an estimate, it might not be as iron-clad as a roofing estimate or an estimate from a house painter.

The more complex the issue, the more fluid the estimate from a tax attorney might be, especially if your case involves litigation. Evolving circumstances, such as the need to bring in expert witnesses for instance, and resolving specific complexities can easily add hours (and costs) in a tax case.

Remember that peace of mind consideration previously mentioned? Well, it’s hard to have peace of mind if you’re imagining the meter running with every twist and turn of a tax case.

So whatever your issue, make it a point to talk with your attorney once every few weeks or once a month to keep up to date on costs.

The Impact of Professional Tax Legal Advice

Professional tax advice can come from different sources.

A CPA or EA can satisfy your tax concerns in many of the same ways a tax attorney can.

But attorneys can be especially adept in tax law, ensuring compliance with the IRS and strategically managing tax-related matters like assisting with nonprofit organizations and mergers and acquisitions.

Investments might well be managed by a trusted financial advisor working alongside a CPA. But if that investment is high risk, one with tax

implications that might be challenged by the IRS, consulting with a tax attorney is smart business.

While not all tax questions require an advanced degree and years of experience, even something like income tax can take on layers of complexity depending on the context.

After all, someone once called income tax “the hardest thing in the world to understand.”

That someone was Albert Einstein.