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Tax Lawyers

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When Do I Need a Tax Lawyer?

The process of filing a tax return is straightforward for most Americans. They will simply fill in the blanks on their return online, file it, and then wait for a refund or outstanding tax bill. 

For others, the process might be a bit more complicated and require some outside assistance. Each year, millions of Americans will seek the advice of certified accountants to help them prepare their tax returns, identify potential deductions, and reduce their overall tax liability. 

While accountants can help you with most of your financial issues, some problems will require the help of a tax lawyer instead. Some high-quality tax consultant firms will often employ several types of each profession to help you with your specific problem. Still, it’s important to know when you specifically need a tax lawyer. 

What Is A Tax Lawyer?

The easiest way to think of a tax lawyer is that they are accountants who have received education and training in legal proceedings. Alternatively, you could view them as lawyers that have a background in accounting. 

For an individual to receive their license to practice tax law, they will first need to receive a Juris Doctor (JD) degree from a law school that the American Bar Association has accredited. After receiving these credentials, they will become eligible for admission to their state bar and will be allowed to take the state bar exam. They will obtain their license to practice law after they have passed the state exam. 

Tax lawyers are most commonly hired whenever a person is in legal trouble due to tax audits or outstanding balances with the IRS. Tax attorneys are more suited to the potential consequences and legal proceedings involved with tax disputes with the IRS and may be of more service than a regular accountant. 

Another important bit of information about tax lawyers is that they can offer attorney-client privilege. An accountant can be deposed to provide testimony that could potentially hurt your case against the IRS. A tax lawyer is your legal representative and generally cannot testify against you. 

When Should You Hire A Tax Lawyer?

Tax lawyers have more than just one function, and their services are commonly required by people with a large variety of tax-related issues. They might be regularly employed as a legal defense attorney, but that’s far from the only service they can provide. 

These are a few reasons why you might need to talk with a tax attorney:

You Are Being Audited

Tax audits are not necessarily a formal charge of any wrongdoing and might not necessarily lead to a potential legal problem. They are merely a formal review and thorough examination of your tax records due to inconsistency or irregularity discovered by the IRS.

A regular accountant can usually help resolve most potential issues that might pop up due to an audit. However, you might want to hire a lawyer if you are planning to appeal the auditor’s conclusions as the process can sometimes be drawn out and require legal proceedings. 

Although rare, if during an audit the IRS discovers anything that might constitute a crime, the IRS might pursue criminal charges against you. A tax lawyer might be able to help negotiate a potential settlement with the IRS while keeping you out of prison. 

You Owe A Lot Of Money In Back Taxes

It’s not uncommon for average taxpayers to owe the IRS a lot of money in back taxes. In most cases, these issues are relatively small sums of money that can be resolved by the individual or with the help of an accountant. 

However, repaying a substantial tax obligation to the IRS can be much more complex and might require the help of a tax lawyer. There are a few different methods that a qualified tax lawyer might employ to help you reduce your overall tax obligation and resolve the balance. 

These are a few of the options that a tax lawyer might suggest to help to resolve your case:

  • An installment agreement. Although you might be able to negotiate with the IRS on your own and establish your own favorable installment agreement, the chances for this get slimmer the more you owe. A tax lawyer could possibly better persuade the IRS to accept an installment agreement with more favorable terms for you in situations when your overall tax balance is so high that the IRS is interested in pursuing legal collection methods against you.

    Once accepted by the IRS, an installment agreement establishes minimum monthly payments that typically last 72 months or less. Each month you will be required to pay the amount agreed upon, and failure to timely pay could result in financial penalties or the implantation of other collection methods by the IRS.
  • A penalty abatement. When you owe the IRS money, the IRS will start to apply certain penalties to your account in the form of interest and fees. A penalty abatement request will simply ask the IRS to remove these penalties and offer up an explanation of your circumstances. A tax lawyer might be able to offer justified reasoning for your delinquency and request that these penalties be removed.
  • A currently not collectible status. Individuals who do not have the ability to make any payment toward their tax balance and who would experience financial hardship if they were forced to repay their tax obligation can request this status. It can be difficult to prove that you actually do not have the ability to pay any amount on your tax balance without the assistance of a tax lawyer, and the IRS does not often grant this status. However, if the IRS grants this status, it will temporarily pause all collection attempts. The IRS will review your case after a specified amount of time and determine whether or not your situation has changed.

    It’s important to note that this status won’t reduce the overall amount due in any way. Still, it will allow you to make adjustments to your financial situation that might help you repay without facing wage garnishments or assist forfeiture.
  • An offer in compromise. An Offer in Compromise is difficult to have approved by the IRS on your own.  You can equate an Offer in Compromise to a sort of “light bankruptcy.” You will need to establish that you can not reasonably repay the taxes you have accrued based on your current financial situation prior to the ten-year statute of limitations that the IRS has to try to collect the tax expiring (the CSED Date).

    Instead of paying nothing, you will make this offer that will act as a tax settlement. It will be a sum that is less than you owe, but more than the amount that the IRS could seize from you. Since the IRS has various methods at its disposal to try to collect the full amount of the tax owed, they are less inclined to accept an offer of compromise. A tax lawyer might be able to negotiate a proposal that is more likely to be accepted by the IRS than you could on your own.  

You Are Starting a Business

There are a ton of tax obligations that arise when starting your own business. Ignorance of the law is no excuse to the IRS, and you might face several severe penalties if you make a mistake or two on your business’s taxes. 

One of the most important ways a tax lawyer can help you is by determining which type of business structure best suits your specific situation. A tax lawyer might recommend a limited liability company, sole proprietorship, partnership, or one of several different versions of a corporation. Each of these different business types will come with different tax obligations that will require a different amount of taxes to be paid at different times. 

When you have established your business structure, your tax lawyer might also help create a general tax planning strategy that will follow all necessary guidelines. They may even help identify potential credits or deductions that can lower your business’s overall tax obligation.   

You Are Selling a Business

Selling a business will require the help of a tax lawyer because there are almost as many tax obligations when selling a business as there are for starting one. Your overall tax bill will depend on the specific business structure you have been operating under and whether or not you are selling the business’s assets or the entity. 

A tax lawyer will also be necessary to help you to draw up the proper legal documents for the sale of the business. These documents will need to be air-tight and legally binding, or else you could find yourself in an actionable position by the government, IRS, or the buyer.

You Are Leaving an Estate to a Loved One

You will need the services of a tax lawyer in order to establish or bequeath an estate. Any estate that meets the IRS minimum value threshold will be required to pay a substantial tax obligation before it can change ownership.

A tax lawyer might be able to suggest ways to protect your assets and reduce the tax obligation as much as possible. These methods are 100% legal and will help you to pass on as much money to your loved ones as possible and prevent loved ones from losing a substantial amount of money in the event of your death. 

The Takeaway

It requires a lot of education in accounting and legal proceedings to become a tax lawyer. Most people may never need to employ their services, but they are extremely useful in specific circumstances. 

A tax lawyer is most commonly employed to assist a taxpayer during an IRS audit or when someone owes the IRS a lot in back taxes. Consulting with a highly qualified tax lawyer like those at Coast One Tax Group can help you resolve your tax issues quickly.  


How to Become a Tax Lawyer | Lawyeredu.org

IRS Audits | Internal Revenue Service

Installment Agreements | Taxpayer Advocate Service

Penalty Relief Due to First Time Penalty Abatement or Other Administrative Waiver | Internal Revenue Service

Currently Not Collectible | Taxpayer Advocate Service

Topic No. 204 Offers in Compromise | Internal Revenue Service

Types of Organizational Structure in Business | Small Business Chron

Estate Tax | Internal Revenue Service