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

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 to Look For in a Tax Attorney

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 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, 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.

Legal Skills

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.