In a world of CPAs, tax preparers, enrolled agents, bookkeepers and accountants, it can be confusing to know when to hire a tax attorney. After all, you’re not hiring a tax lawyer to prepare this year’s income tax return. So when and why would you need a tax attorney’s services?
IRS Tax Disputes
First and foremost, you need a tax lawyer if you have a dispute with the Internal Revenue Service.
Most tax disputes arise in the form of an audit of one or several past tax returns. If the IRS notifies you of an audit, you should hire a tax attorney immediately.
Your tax lawyer can communicate with the IRS on your behalf, be present during your audit and help negotiate a settlement, if necessary. Having experienced legal counsel helps ensure that you don’t overpay as a result of your audit.
In some instances, taxpayers ignore letters and warnings from the IRS because they’re scared or don’t know how to respond. In those cases, the IRS may have no choice but to threaten you with criminal charges for tax evasion. If you learn that you’re the target of an IRS criminal investigation, you’ll want to hire a tax lawyer—and do it quickly.
Your tax lawyer can reassure the IRS that you’re taking its investigation seriously, work with the IRS in an effort to help you avoid criminal charges and represent you in court if you are charged with a tax crime.
Complex Legal Tax Issues
A tax lawyer’s help can also be invaluable if you’re facing a complicated legal tax situation. This might include instances where:
In addition, tax lawyers are frequently hired when a person or business is considering a transaction that could have significant tax implications. Before entering into the transaction, it’s common to hire a tax attorney to write a tax opinion letter.
“[Tax] opinion letters are typically used to assure investors that a transaction is legitimate,” says attorney John Alan Cohan of the Law Offices of John Alan Cohan. “Often tax issues associated with proposed transactions are complex, and the lack of certainty is what prompts people to obtain a tax opinion letter.
“These documents are designed to justify a tax position, avert an audit, legitimize tax minimization strategy, and avoid possible accuracy or negligence penalties….Tax opinions, especially if prepared early, can help shape the transaction or position, help with information return issues, help direct the return preparer, and help in tax controversies.”
Questions to Ask When Interviewing Tax Lawyers
Before hiring a tax lawyer, take some time to meet with and interview a few attorneys. You’ll be working closely with your lawyer, so it’s important to do comparison shopping to ensure you’ve hired the best lawyer for your particular situation.
During each meeting, you’ll want to share the specifics of your situation and then ask the lawyer about their experience handling similar matters. Know that lawyers are bound by strict confidentiality rules. Even if you end up hiring a different attorney, the lawyers you meet with cannot share the information they learned with the IRS or anyone else.
Some questions to consider asking during your initial consultation:
How long have you been practicing law?
Do you just practice tax law, or do you also work in other areas of practice?
Have you previously handled tax situations similar to mine?
What’s your assessment of my situation? What works for me and against me?
If I hired you, what course of action would you recommend?
Do you charge a flat fee or hourly rate, or do you use some other billing structure?
Can you estimate my total legal fees?