Is It Worth It To Hire a Tax Attorney?

Taxes are complicated, with the IRS often acting overly aggressive in pursuit of what it believes it’s owed. Often, people and business owners employ a certified public accountant to ensure compliance with tax laws as well as file the individual’s or business’ taxes correctly. However, if they are done incorrectly or if the taxes are never properly paid, this can result in the IRS seeking legal remedies to collect what is owed. Is it worth it to hire a tax attorney? The answer is often “yes,” as these professionals can offer advice, ensure compliance, and represent you in court if needed.

What Is a Tax Attorney?

Per the name, a tax attorney is a lawyer who focuses on tax law. These attorneys can assist with a wide range of tax law issues. This ranges from determining tax implications of financial activities to advocating on behalf of their clients and negotiating with the IRS.

Accountants can help a person or business in filing taxes. However, they are not as well-suited for helping when a client faces legal trouble. That is where a tax attorney can step in and serve.

Within the world of tax attorneys, there are several specialized fields a lawyer may focus on. This is important when choosing a tax attorney, as you should look for someone whose knowledge of the law fits your needs.

A tax attorney has the same training as any other attorney. This includes receiving a J.D. degree from an accredited law school. Like other practicing lawyers, tax attorneys must also pass and be admitted to the state bar where they conduct their work.

However, many tax attorneys go beyond these basic requirements. Most well-regarded tax attorneys have a Master of Laws degree in taxation. Sometimes they also have an accredited background in accounting, such as a CPA or enrolled agent.

What Types of Issues Do Tax Attorneys Handle?

One can employ a tax attorney for many reasons. They are often used in issues of dispute resolution or litigation, also known as tax controversy. But, they can also offer their knowledge, skills, and experience during the tax planning and compliance stages.

Tax Planning

Tax attorneys can work with clients to prevent legal issues from occurring. Planning issues may arise in complex situations, such as those involving businesses and estates.

Three types of tax attorneys handle planning issues. The first is a general or business tax attorney. These lawyers often work as consultants to companies or other attorneys to provide their tax law expertise. As an example, a business tax attorney may consult a lawyer who represents a nonprofit entity that is merging with a for-profit one. General tax attorneys also work on issues of bankruptcy or corporate reorganization. This is because there can be major tax implications in both cases.

Estate planners are another type of tax attorney who deal with planning issues. These attorneys work with clients to create and establish trusts or wills to ensure money ends up in the correct hands when the client passes. Estate planners often administer a trust and may guide establishing private foundations that can help shield funds from taxes or enable their use for charity.

The last type of tax attorney to work with planning issues is an ERISA attorney. These attorneys have specialized knowledge of the Employee Retirement Income Security Act. They work with organizations or individuals to ensure the offered or received benefits meet the standards set by the IRS through ERISA.

Tax Compliance

Sitting somewhere between tax attorneys who focus on planning issues and those who deal with issues of dispute resolution or litigation are attorneys who specialize in tax compliance. These lawyers analyze personal or business-related events that have already happened to best decide how they should be reflected on tax returns. Attorneys with a compliance focus may work on the planning process to make compliance easier. But they often concentrate on document preparation, tax filing, and record-keeping.

Tax Controversy

If there is a dispute regarding filed taxes, an attorney who specializes in tax controversy is needed. These lawyers are often employed when a client is undergoing an audit or facing litigation. These tax attorneys work both on the administrative level and in courtrooms. Whether the issue is a civil or a criminal matter or occurs at the local or federal level, tax controversy specialists advocate on their client’s behalf and negotiate legal outcomes that better benefit their client.

When Do You Need a Tax Attorney?

Generally, there are four critical times an individual may need a tax attorney. In these situations, a legal professional can provide much-needed expertise.

Starting a Business

When you start a new business, you may be creating a brand-new tax entity. A tax attorney can walk you through the potential tax implications and offer advice as to which business structure will best fit your needs.

Selling or Buying a Business

If a tax entity is merging with or being acquired by another tax entity, the financial implications are often complex. A business tax attorney can assist in these complicated ventures and help you better understand how your taxes will be impacted.

Creating an Estate

Should you want to leave money to your family, friends, or others once you pass, a tax attorney who specializes in estate planning can help you understand the tax ramifications. This can prevent unwanted hassles when any of your heirs attempt to collect what you left them.

Undergoing an Audit

Of course, if you’re accusing of not following tax law, a tax attorney should be at your side. A legal professional can help you appeal an audit decision and serve as your advocate in court settings.