Seeking the help of an accountant or tax preparer is one of the best ways to identify deductions, reduce tax liability and ensure your return is in tip-top shape before filing with the IRS.
But every now and then, something happens that forces a big change in your tax situation. And when a new life event or multi-layered business dealing rears its head and shakes things up, the tax consequences can be significant, posing a challenge that is often best addressed by the expertise, guidance and support of a professional tax attorney.
Below, we aim to provide a closer look into what tax attorneys do and how to know when it’s time to hire a tax lawyer to manage your unique situation.
What do tax attorneys do?
As specialists in tax law, tax attorneys focus on handling the many complex legal and technical problems associated with your unique tax situation. Typically, a tax law attorney has extensive, advanced training in the many facets of the IRS tax code and utilizes this knowledge to help minimize any tax consequences you face when it’s time to file.
A tax attorney can step in and provide expert guidance during any number of tax-specific situations. In some cases, tax attorneys are brought in to manage an existing tax issue and see you through to the best result possible, such as during an IRS audit. In others, a tax lawyer may help steer you in the right direction during a major life change, providing guidance on tax planning and the actions needed to limit your tax burden and avoid tax issues in the future.
Whatever the reason, tax attorneys are often a crucial if not necessary resource of help during complex tax matters, providing a level of expertise hard to find anywhere else.
When do you need a tax attorney?
There are certain situations in which hiring a tax attorney is not only recommended, but more-or-less essential to achieving a satisfactory outcome.
You may need the help of a tax lawyer if:
You’re starting or selling a business
Setting up or selling a business almost always comes with significant tax consequences, no matter the type or size of the enterprise. A tax attorney can advise you on the best way to structure your new firm or minimize your tax exposure during the sale, helping you identify every option available and weigh the tax benefits vs. the drawbacks before moving forward.
The different types of business entities a tax lawyer may walk you through before starting your new venture include:
If you’re running an international business, a business tax attorney can be indispensable in terms of:
- Tracking and reporting income
- Contract negotiations
- Any other tax matter you face along the way
You’re leaving money to loved ones
Million-dollar estates meeting the IRS minimum value threshold face a significant tax burden once the owner has passed on, meaning a healthy chunk of your wealth could become federal government property before it’s handed over to your heirs. While most people don’t need to worry about this estate tax, those that do often need the help of a tax attorney to ensure this burden is minimized and their loved ones take the smallest tax hit possible.
Many tax lawyers specialize in mapping out estate-planning strategies to protect your assets and keep you below the current value threshold, allowing you to avoid giving a sizable amount of your assets to the IRS.
You owe a lot of money to the IRS
Many owe back taxes to the state or federal government. And in many cases, that problem can be handled and paid back on your own, such as through one of several long-term monthly installment payment options available through the IRS.
But when you owe a lot of money, things can become a bit more complicated. And often the best way to solve such a significant tax debt is to hire an experienced tax attorney—someone who knows how to deal with the IRS and help you hammer out an agreement that makes the payment process a little easier.
Tax attorneys can work with the IRS to set up a more manageable installment plan, or even to negotiate a compromise that helps reduce the full amount of taxes, interest and penalties you may now owe. A tax attorney’s knowledge of how the IRS operates and where the wiggle room is can be invaluable in this scenario.
You’re facing an audit
An IRS audit can be a painful, time-consuming process, putting undue strain on your family and providing plenty of room to make mistakes that result in greater IRS penalties.
Having a tax attorney throughout the audit process can help you avoid further errors and ensure the IRS is getting everything it needs to complete its review—as well as to negotiate a compromise and reasonable payment plan should you face additional tax debt.
And if you want to contest the results once it’s finished, tax attorneys are in the perfect position to protect your interests and rights throughout the audit appeals process.
You have tax-related legal issues
A qualified tax attorney can provide a much-needed resource of representation and guidance during tax-related litigation, helping resolve any issues you may have with the IRS if and when they land you in the courtroom.
For example, if the IRS is investigating you for a crime as serious as tax evasion or fraud, having a seasoned tax lawyer is not only recommended but essential to guarantee you’re getting a fair shake throughout the process.
Any number of behaviors may be considered tax fraud by the IRS, including:
- Filing a return using another person’s name,
- Intentionally underreporting your income, or
- Claiming deductions you weren’t eligible for
Without a seasoned tax attorney at your side, you could be facing the almost endless resources and investigatory power of the IRS by yourself. In turn, this may significantly reduce your odds for avoiding large IRS penalties and achieving an acceptable outcome.
Tax attorney vs. tax preparer: which is best for me?
Whether it’s hiring a tax attorney or going over your return with your local Liberty tax® pro, choosing the right professional is key to managing your tax situation and maximizing your 2020 refund.
Learn more by visiting your local Liberty Tax® office today.