Tax Attorney: When and Why You Should Hire a Tax Lawyer

ByG. Dautovic
January 19, 2022

Tax attorneys can offer their clients a wide range of services, including filing taxes. They can help you with any tax and legal issues too complex for you to handle. But why should you hire a lawyer to help with tax problems when an accountant can also handle them?

Read on to find the answer to this question and everything else you may need to know about tax attorneys.

What is a Tax Attorney?

A tax attorney, also known as a tax lawyer, is an attorney specializing in the application and interpretation of tax policies and laws. Tax attorneys are often involved in litigation, advising taxpayers on the tax consequences of various transactions and representing clients who have tax disputes that can only get resolved in a courtroom.

These tax professionals may work in various settings, including accounting firms, law firms, federal and state agencies, tax courts, non-profit organizations, private organizations, corporate and business entities, and boutique tax firms.

When to Hire a Tax Attorney

While individuals and businesses can use tax software to help them with tax-related obligations, there are certain situations when hiring an attorney may be a preferable option.

Estate Planning

A tax attorney can help you with estate planning, handling paperwork, or devising estate planning strategies. For example, suppose you're considering buying a rental property but do not know its implication on your income tax returns.

In that case, a tax lawyer can help you take advantage of the federal tax code, which may reduce your income taxes. 

If you're considering transferring assets to loved ones or setting up trusts, a tax attorney can guide and advise you regarding some of the state and federal tax implications. A tax lawyer can explain the advantages of gifting within your estate plan and how to record gifts within your estate planning documents.

Starting a Business

A tax attorney can also come in handy when starting a business. Depending on where you do it and what kind of company you want to establish, many applicable laws could be different (forming an LLC in, say, Baltimore, Maryland will be quite different from setting up a corporation in California). 

These law professionals can educate you about the various taxes on different business entities and the tax implications on you as the business owner. Additionally, an income tax lawyer can advise you on withholding taxes, federal tax deposits, and 941 returns if you have employees. This lets you learn your tax responsibilities properly, allowing your business to thrive without legal setbacks.

Tax Disputes

IRS audits are routine, and you may handle this on your own or ask your accountant. However, if you disagree with an IRS tax audit, you may require an appeal, thus you may need a tax attorney. Depending on the situation, a tax lawyer can represent you in a tax court and may also negotiate a settlement with the IRS.

This means that they can help you settle your tax dispute for less, either through penalty abatement or another offer made as a compromise.

If you have not filed tax returns for a certain period, you may also hire an IRS tax attorney to communicate with the tax office on your behalf. They may help you prepare and file these returns with the IRS. If the filing results in tax debt, the tax lawyer can help you resolve this debt with an installment agreement.

How Much Does a Tax Attorney Cost?

The cost of hiring an attorney depends on the complexity of a case. It may also depend on where you live and the experience of the attorney you hire. Tax lawyers tend to charge a flat fee or an hourly rate fee in most cases.

If an attorney charges you by the hour, the hourly rate will vary depending on their experience and the size of the firm they work in. A flat fee is a one-time fee regardless of how many hours the lawyer spends on your case. Flat fees tend to apply to routine or straightforward cases.

The cost should be one of the factors you consider when hiring a tax attorney.

What Should You Look For in a Tax Attorney?

There are many tax attorneys, and choosing one without any prior experience in what to look for might be challenging. Here are some of the factors to consider when hiring a tax lawyer:

A Tax License

A tax attorney must have a law license to practice law. A license proves that an attorney has the qualifications, skills, and authority to offer tax guidance and represent you in tax disputes. You can verify if a tax attorney has a license by checking your state's bar association website.

Experience

Experience is one of the most important factors to consider when hiring any professional. Consider meeting with different tax attorneys and asking them about their experiences in handling tax cases. Be sure to choose one who has dealt with a similar case to yours, as they’ll undoubtedly be able to save you time and probably money, too.

Education

In most states, attorneys must have a law degree to obtain a license. Some tax lawyers have other qualifications, such as CPA licenses, and others have a master's degree in law or taxation. Consider choosing one that's more specialized as they likely have more knowledge about handling your case.

Also, if you find one currently pursuing tax courses, consider hiring them, too, as they may be cheaper or able to give you the most up-to-date tax advice.

Fees

One of the first things to ask your attorney should be how much they charge for their services. Lawyers have varying fees depending on the size and popularity of their firm, their location, experience, and reputation. Be sure to compare the fees of one attorney to the other to help you choose one that charges reasonably.

Also, find out why an attorney charges a certain amount to ensure that you're getting quality services.

Tax Identification Number

Any person who prepares tax returns for pay must have a preparer tax identification number from the IRS. If the IRS requests it, a tax attorney should sign your tax returns and give you their PTIN.

Why Should You Hire a Tax Attorney And Not a CPA For Your Tax Issues?

A certified public accountant can help you with many tax issues and offers similar services. Here is why you should opt for a tax attorney over a CPA, nonetheless:

Confidentiality

If you're having trouble with the IRS, an attorney can give you attorney-client privileges that a CPA cannot. In fact, a certified public accountant can testify against you in a court of law, while a tax attorney cannot divulge confidential information.

So, if you're looking for tax professionals who can protect you in case of a tax dispute or trial, tax attorneys are still your best option.

If you need to appear in a court of law due to tax issues, a CPA cannot represent you. A tax lawyer can come in handy since they have legal analysis, advocacy, and research skills required in handling tax cases. A lawyer can research various tax codes and IRS regulations to guide their clients better since they know how to interpret the law.

They also have the negotiation skills and confidence to represent their clients' interests and rights in disputes with the IRS.

FAQ

What does a tax attorney do?

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A tax attorney can help you better understand tax policies and laws and how they can impact you or your business. Tax attorneys often advise clients on wills, trusts, inheritance, personal wealth management, and estate planning. They can also help negotiate tax obligations, handle litigations and represent clients in audit hearings or court cases.

Are tax attorneys worth it?

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Yes. It is worth hiring a tax attorney because they have experience dealing with the IRS and may also represent you in the courtroom. Tax attorneys can help you resolve your tax issues quickly because they understand tax laws and have experience handling such cases, saving you time and money. In addition, they can offer you attorney-client privileges and guarantee confidentiality.

How much does it cost to hire a tax lawyer?

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The cost of hiring a lawyer for taxes varies from one attorney to the other. The fee may vary with the lawyer's experience, reputation, and experience. The complexity of your case and the law firm's size also contribute to the costs.

Do I need a CPA or tax attorney?

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You need one of them, at least. If you're looking for a professional to represent you in court and keep your tax information confidential, a tax attorney is a better option due to their confidentiality agreement with clients.

How do I choose a tax attorney?

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There are various factors to consider when hiring a tax attorney. The most common ones include their experience, education, fees, and licensing. Also, you may ask for references to verify that what they promise to offer is what they have provided for previous clients already.

About author

I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.

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