Tax lawyers are professionals who help taxpayers, such as individuals and businesses, solve tax problems. They also help their clients understand how to comply with tax requirements.
Unlike other types of tax professionals, tax attorneys generally focus on providing tax advice that requires a more detailed and nuanced understanding of tax law. This could mean providing a legal defense if you’re charged with tax evasion or representation during a tax audit where you have concerns about the legality of your tax decisions.
But tax lawyers can help you with other tax issues as well, such as negotiating with the IRS, creating or restructuring a business, working with mergers & acquisitions, determining how partnerships are taxed, representing you at administrative tax hearings, representing you before state tax boards or local county boards of equalization, and advising you on estate planning issues.
What Is a Tax Lawyer?
Tax lawyers are attorneys who focus their practice on taxation and can provide guidance on any tax-related issue. Whether you’re seeking advice on how to minimize your taxes, facing an IRS bill you can’t afford to pay, or having concerns about getting into legal trouble for something you did (or didn’t do) involving taxes, a tax lawyer can help.
To become an attorney, an individual must earn a college degree, graduate from law school, then pass a state bar exam. This extensive schooling trained them to learn how to read and understand statutes and case law, as well as interpret them in ways that can benefit future clients. But because law is an extremely broad field, most lawyers focus on a particular area of the law, such as family, criminal, personal injury, corporate, insurance, patent, immigration, or tax.
After graduating from law school and passing the bar exam, a future tax attorney will usually begin learning about the tax legal practice. For example, they may clerk for a judge who handles tax cases, work for the IRS, or join a law firm with a tax practice. From here they’ll learn the ins and outs of tax law and gain experience understanding how the tax laws and regulations apply in the real world.
Tax law is constantly changing because legislatures pass new laws, tax agencies like the IRS promulgate new regulations, and courts decide cases that offer different or new interpretations of those statutes and regulations. As a result, tax lawyers also need to keep informed on current and proposed legislation that will affect taxation. If you have a concern about how new laws might influence your situation, a tax lawyer is usually your first choice for getting an answer to your question. As focused as tax law is, it can be further divided into subfields, such as estate taxes, capital gains taxes, transfer taxes, international taxation, corporate taxes, and more.
When to Hire a Tax Lawyer
While most tax problems can benefit from the services of a tax attorney, not all tax problems require a tax attorney. There are other tax professionals, such as EAs (enrolled agents) or CPAs (Certified Public Accountants), that can perfectly handle a variety of tax issues.
EAs are great for negotiating with the IRS and CPAs often have a better understanding of the financial implications of a tax choice. However, neither possess the same level of understanding of the underlying statutes, regulations, and case law that support a particular tax argument or recommendation as an attorney does.
Many tax issues can be handled by a tax attorney, EA, or CPA. Yet there are some situations where you’re probably better off hiring a tax attorney. Some of these circumstances include:
- You need someone to represent you in a courtroom.
- You want the strongest level of confidentiality offered under the law (through attorney-client privilege).
- You have a legal question with no definitive answer that can be obtained from a plain reading of a statute or regulation.
Here are some real-life examples of when you might want to hire a tax attorney instead of a CPA or EA:
- You’re arrested for one or more tax crimes.
- The IRS suspects you of civil tax fraud.
- You’re not sure if you’re legally required to comply with one or more IRS requests for documents or information during a tax audit.
- You want to make an investment or business decision that involves an interpretation of a statute or regulation.
- The law isn’t clear as to whether a tax reporting or filing requirement applies to you, such as if you’re required to file a Report of Foreign Bank and Financial Accounts (FBAR).
- You’re unsure about whether your tax decision is legal tax avoidance or illegal tax evasion.
- You want to settle a relatively large tax debt with the IRS, but there’s some ambiguity as to whether you qualify for a specific program, such as an offer in compromise (OIC) or innocent spouse relief.
- You want to challenge or appeal an IRS collection action, such as a lien or levy.
- You want to implement a new retirement plan for your business’ employees, but need confirmation that it’s a qualified plan under IRS regulations.
- You want to create trust that will minimize taxes for your loved ones.
- You have assets overseas and need to know what the tax implications are for continued international ownership and for bringing that property to the United States.
- You’re going through a divorce and need to know the tax consequences for one or more distributions of marital property.
To reiterate, just because your tax issue involves one of the above situations doesn’t automatically mean you need a tax attorney. You might have a classic basis for submitting an innocent spouse relief request from the IRS and therefore, a tax attorney’s legal skills aren’t necessary. But if the law is unclear as to whether you qualify for this relief, then hiring an attorney to do the legal research to support your position may be needed.
Common Responsibilities of Tax Lawyers
Of the different types of tax professionals out there, tax lawyers have some of the broadest responsibilities. Basically, if an EA or CPA can provide a certain type of tax help, a tax lawyer can probably provide it as well, as long as they possess sufficient experience in that particular area.
In contrast, if there’s a service offered by a tax attorney, there’s no guarantee an EA or CPA can also offer it. A great example of this is representing clients in court. A tax attorney can potentially help you with any of the following tax matters:
- Drafting and filing tax returns
- Tax planning
- Understanding the tax implications of business reorganization, mergers, acquisitions, and restructuring
- Creating IRS-qualified retirement plans
- Researching tax laws
- Explaining complex tax concepts and principles
- Estate planning
Tax Lawyer FAQs
Do I need a tax lawyer or CPA?
It depends on several factors, such as your specific tax issue, how much of your tax matter involves financial advice versus legal advice, and the amount of experience the CPA or attorney has handling your type of tax case.
Generally speaking, CPAs are better suited for tax questions involving financial principles and concepts while tax attorneys are often better suited for tax questions involving legal interpretation.
Should I hire an enrolled agent instead of a tax lawyer?
Maybe. If you need help with non-legal matters, like setting up a generic payment plan, then an enrolled agent might be a suitable choice (although a tax attorney can help with this too). If you need someone to negotiate on your behalf before the IRS, an enrolled agent can likely meet your needs, as long as there aren’t legal questions at play or you’re not expecting to be in court.
Are tax lawyers more expensive than CPAs or EAs?
They can be, but if they are, it’s often due to their additional training and the fact that they can help you with tax matters that EAs and CPAs aren’t legally allowed to, like offering legal advice or representing you in court. Also, depending on the specific tax question, a CPA or EA could be more expensive, especially if it’s a unique situation that very few tax professionals have experience with.
Is it worth hiring a tax attorney?
This is a sometimes difficult question to answer. In certain contexts, the answer is an unequivocal, “yes.” For example, you’re arrested for tax evasion and facing the prospect of spending years in prison and being fined hundreds of thousands of dollars.
In other contexts, hiring a tax attorney could be overkill, such as preparing and filing a basic tax return. Although keep in mind that many tax attorneys will help individuals with their basic tax returns and charge a rate that’s competitive to what other tax preparation professionals charge for similar work.
Then there are “squishy” situations where the right EA or CPA might be able to help, but having the peace of mind that comes with hiring a tax lawyer might be worth the additional cost (assuming the lawyer is more expensive, which isn’t always the case).
Learn More About How a Tax Lawyer Can Help
What better way to decide if hiring a tax attorney is right for your tax situation than to speak with someone from a tax law firm such as Damiens Law. Our tax professionals will be more than happy to discuss your case and help you decide what your next moves should be, whether or not they require a tax attorney. You can reach us online or by calling us at 601-476-2693.
