Managing Money

When Do You Need a Tax Attorney?

When do you need a tax attorney? The lawyer explained to the client to plan the case.
Written by Wade Schlosser

Circumstances where you might need a tax attorney.

Interacting with the Internal Revenue Service (IRS) is a fact of life, and no matter how much you prepare, these interactions can be complicated and stressful. While there are some tax issues you can certainly handle on your own, there are many situations when you should strongly consider hiring a tax attorney. Besides, there are plenty of tax updates you need to be up on this season.

Professional tax attorneys know the correct way to deal with the IRS, especially when it comes to lowering your tax burden or clearing tax debt. Here are some circumstances where individuals and businesses might need a tax attorney to ensure their dealings with the IRS are quick, easy, and effective.

Starting, buying, or selling a business

Hiring a tax attorney is almost always a good decision if you’re thinking about starting a business, are interested in purchasing a business, or want to sell your current business. For example, during the sale of a company, balancing the needs of both the buyer and the seller can be difficult without guidance from an experienced tax lawyer.

When you’re starting a new business, a tax attorney can help you decide how to structure your it to keep your taxes as low as possible. If you want to choose a formal structure for your business instead of operating as a sole proprietorship, you have several options available to you:

  • Limited liability company (LLC)
  • C corporation
  • S corporation

Your attorney can help you weigh the tax benefits and drawbacks of each of these structures. For example, if you choose to establish an S corporation, your business will not be taxed directly. Profits earned by your company are passed to shareholders and then taxed on their returns. Forming an LLC is beneficial because it provides the owners of the business with liability protection, meaning parties cannot sue them for business debts. If you aren’t familiar with tax law, an attorney is essential to get it and give more than legal advice.

If you’re operating a business internationally, hiring a tax attorney is of the utmost importance. Your attorney can help your international company with a variety of essential tasks:

  • Negotiating contracts
  • Correctly reporting income and other assets
  • Additional legal matters

Leaving money to heirs

Estate planning is another situation where you may want to consult with a tax attorney. If you have assets that you wish to leave to your family members, make sure they receive as much of those assets as possible, and this is where a tax attorney can help.

If you’re single and leaving someone more than $5.49 million, or are married and are leaving behind an estate worth $10.98 million or more, the people in your will may pay a 40% tax rate on this money. A tax attorney can help you plan your estate to lower the taxes your heirs will need to spend on their inheritance.

Tax-related court cases

You can only resolve some problems with the IRS in the courtroom. If your tax matters are likely to make it into court, hire a qualified tax attorney.

If you’re planning to file litigation against the IRS, or you want the United States Tax Court to review your case, you need an attorney who has courtroom experience. Tax court proceedings are complex, and without legal representation, you may find yourself facing an unfavorable judgment.

Having an attorney is especially important if the IRS is investigating you for a crime such as tax fraud. The possibility of tax fraud can occur in several ways:

  • The appearance of taking deductions to which you were not entitled
  • Suspicion of intentionally underreporting your income
  • Filing a return in someone else’s name

The IRS is often successful in tax fraud cases. If you want to avoid expensive penalties or other consequences, you need a knowledgeable attorney on your side.

IRS negotiations and audits

Working with a tax attorney is the best idea if you are facing an audit or are trying to deal with outstanding tax debt. During an audit, a tax attorney can help guide you through the process to avoid more mistakes leading to additional debt. Once the review is complete and your debt determined, your attorney may be able to help lower your debt by:

  • Making the IRS an offer in compromise
  • Requesting a penalty abatement
  • Negotiating a payment plan
  • Without help from an attorney, you may need to pay your entire debt.

Finding the best tax attorney

Now that you know some reasons to hire a tax attorney, learn how to find the best attorney possible. All tax attorneys must meet some basic requirements before they can offer their services. First, they must possess a Juris Doctor (JD) degree. Second, they need to be a member of the state bar. If you want the most effective representation possible, however, there are several other qualifications you should consider.

To begin with, make sure your attorney has specialized training in taxation. Look for an attorney who has earned a Master of Laws degree in taxation. Having this degree means your attorney knows how to handle a wide range of tax issues.

Next, if you’re dealing with an audit, you may want to look for an attorney who has an accounting background. Most tax attorneys don’t handle any tasks that a certified public accountant does. However, these tax professionals can help you with your audit to get the most favorable outcome possible.

About the author

Wade Schlosser