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When Does It Make Sense to Hire a Tax Attorney?


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You never know when you’ll face a complex tax situation that calls for outside help. If you’re lucky, it will never happen to you, and dealing with tax matters will be a seamless and straightforward process.

However, some taxpayers have trouble reporting overseas investments, IRS audits, owing back taxes, and life events that can have serious income tax consequences, such as short sales or foreclosures.

When your tax and legal issues are too complex to handle on your own — or even with the help of your accountant — hiring a tax attorney makes sense. If you’re still not sure, there are several questions you can ask to help you identify when you need a tax attorney in your court.

Questions to Ask to Determine If You Should Hire a Tax Attorney

Does your situation require the assistance of a tax lawyer? Ask yourself these questions to find out.

1. Are You Being Audited by the IRS?

Some IRS audits are routine. The IRS just sends you a letter asking you to provide more information or documentation to support the tax credits or deductions you claimed on your federal tax return.

In this case, if you feel comfortable responding to the request or can hand off the correspondence to your accountant to deal with, an attorney isn’t necessary.

However, if you’ve already gone through a tax audit but disagree with the auditor’s decision, you have the option to appeal. In that case, you need legal representation.

The job of a tax attorney in this situation may be to represent you in tax court or help you negotiate a settlement with the IRS. In other words, they can help you settle your tax debt for less. You can do that in two ways: an offer in compromise or penalty abatement.

Just be aware that the IRS rarely accepts offers in compromise. You need to have a really good hardship story and show you have absolutely no money and very few assets.

If you simply need to arrange a payment plan with the IRS, you don’t need a tax lawyer to handle that for you. You can set up an installment agreement on your own online or with the help of your CPA.

Pro tip: If you do your taxes through H&R Block Advisors, you’ll receive what they call the Peace of Mind® Extended Service Plan. If you ever get audited by the IRS, they will represent you through the entire process.

2. Is the IRS Pursuing Criminal Charges?

Criminal charges make for a dire situation — one that you don’t want to handle on your own. The IRS doesn’t pursue criminal charges for honest mistakes. They reserve these for people who willfully commit tax evasion by choosing not to file tax returns, concealing taxable income, or claiming fraudulent deductions and credits.

If you’ve ignored notices from the IRS or you stand accused of tax fraud, you need legal advice from a tax attorney. If you’ve been playing fast and loose with IRS rules, you won’t be able to avoid all trouble. However, a tax attorney can help reduce your IRS penalties and possibly keep you out of prison.

3. Do you Need Somebody to Communicate With the IRS on Your Behalf?

Getting a notice from the IRS can be scary. While the IRS sends many form letters, they usually send what’s known as “CP notices” to inform you that you owe more money to the IRS (CP is just an IRS code).

For example, the IRS sends CP501 to remind you that you have an unpaid balance due for the tax year. The agency sends CP2000 to inform you that the income on your tax filing doesn’t match the third-party-reported income the IRS received, such as on a W-2 or 1099 form.

If you don’t understand a notice or are worried it could turn into a bigger issue, consulting with a tax attorney is a good idea.

The tax attorney will have you sign IRS Form 2848, giving them power of attorney (POA) to communicate directly with the IRS so you don’t have to.

Don’t be alarmed by the term “power of attorney.” Unlike a POA used in estate planning, Form 2848 doesn’t give the attorney broad powers to manage your financial affairs or make medical decisions. It states right at the top of the form, “Form 2848 will not be honored for any purpose other than representation before the IRS.

Putting your attorney in charge of talking to the IRS can go a long way in reducing some of the stress of dealing with tax problems.

Final Word

Tax attorneys know a lot about tax law, but if you have a question about your tax return, an attorney isn’t the right person to contact.

For general tax questions or help preparing or amending your tax return, you’re better off hiring a certified public accountant (CPA), enrolled agent, or qualified tax preparer from H&R Block.

If you call your CPA or tax preparer with a tax problem that’s beyond the scope of their practice, they will likely refer you to an experienced tax attorney. Rather than continue to wait, contact an experienced tax professional and let them help you figure out which steps to take next.

Janet Berry-Johnson is a Certified Public Accountant. Before leaving the accounting world to focus on freelance writing, she specialized in income tax consulting and compliance for individuals and small businesses. She lives in Omaha, Nebraska with her husband and son and their rescue dog, Dexter.