IRS tax matters are often urgent and almost always, overwhelming. Even a small oversight in the tax controversy process can cost you dearly in the form of lost appeal rights, lost rights to a refund, higher taxes and penalties, or a levy on your bank accounts or other property. In some cases, an action (or inaction) may put you at risk of criminal prosecution. A tax attorney is not just an advocate and confidante, but a guide to see you through the complex administrative and legal process of defending you against the IRS. Choosing the right representation for your situation is crucial to the outcome of your case. During your initial consultation, we can discuss whether hiring a tax attorney is right for you.
Tax Law: Complex and Ever Changing
The tax code is complex and frequently changes. A tax attorney understands and works through the finer details of the law. Further, a tax attorney is constantly studying and keeping track of changes in the tax code or IRS policies that may affect your situation. The tax law changes daily and the Tax Court often issues several opinions a day. IRS policies and priorities change almost as frequently. A good tax attorney will know when they should adjust their litigation position or representation accordingly. Their knowledge of the evolving tax law and IRS policies and procedures can help you achieve the most desirable outcome.
Accountant or Attorney?
Accountants and CPAs provide valuable accounting, money management, and tax return preparation services. They are indispensable to well-run businesses and households. While an accountant’s expertise is in accounting and tax return preparation, a tax attorney deals with the laws and procedures that govern how and whether those returns should be prepared and what your rights are in the case of a tax audit or an IRS collection action.
Though many accountants represent clients before the IRS, it is not always advisable, especially if the accountant also prepared the tax return at issue. There may be conflicts of interest. Further, communications between you and your accountant may be subject to disclosure to the IRS. And generally, only a tax attorney can represent you from “A to T.C.” (from audit to Tax Court).
Only attorney-client communications are subject to the broad and well-protected attorney-client privilege. When investigating a taxpayer (or when trying to put him or her in jail), the IRS frequently requests testimony and documents from professionals that the taxpayer hired to help prepare tax returns or manage their finances. In many situations, the communications must be disclosed and an accountant is forced to testify against their client. The accountant-client privilege is extremely limited (and generally does not apply to communications relating to tax return preparation), and there is no accountant-client privilege in criminal tax cases.
Great representation is not cheap, but bad representation is expensive. If you think you cannot afford to hire a tax attorney, you should consider whether you can afford not to. An attorney that focuses their practice on tax controversy matters may be able to identify, analyze, and respond to an issue more quickly and thoroughly than someone without similar experience. Thus, although an attorney’s hourly rate is usually higher than that of an accountant, their invoice may not be! Further, an experienced tax attorney should also know whether a certain legal position is likely to prevail and advise a client accordingly. Attorneys have an eye towards potential litigation or criminal prosecution. They understand that the “whac-a-mole” response to IRS inquiries and issues can exacerbate problems or create new ones in the future. Further, they consider not only whether they might be able to fix your problems, but how to best protect you as well.
Why Hire a Former IRS Attorney?
When you hire a tax attorney, the attorney’s experience, knowledge, and reputation are important factors to consider. A former IRS attorney has a strong knowledge of the tax code, but more importantly, IRS policies, procedures, and general practices. The attorney you hire will be advocating for you against the IRS. A former IRS attorney who, by definition, was previously employed to argue against the taxpayer, is familiar with the law and the tax controversy process and can anticipate likely IRS positions and decisions. This analysis will help you both decide whether you have a strong case or whether it is more efficient to settle the matter. Sometimes, a client may have a strong case, but the time and cost that may be consumed in getting the right result can outweigh the benefits. The attorney you hire should consider this as well. An attorney familiar with the IRS is in the best position to discuss how to proceed in a way that makes the most sense for you, your case, and your budget.