When Is It Worth it to Hire a Tax Attorney?

Millions of taxpayers deal with tax issues each year. Whether building up back taxes, missing a deadline, or getting hit with a penalty, tax problems can be stressful and financially damaging. You never want to make your situation worse with the IRS.

Fortunately, you can handle many tax concerns on your own—like filing an extension request, filing your taxes online, or dealing with a low amount in tax liability—but there are also many cases when you’d be better off hiring a tax attorney. Maybe you owe a very large balance in back taxes, or you get an alarming notice from the IRS.

The cost of services may hold back some taxpayers from contacting an attorney. But in the long run, working with an expert may end up saving you money and effort. 

So, do you need a tax attorney? And when are attorneys worth the cost? This guide breaks it all down to help you understand when a tax attorney is a must.

When Can I Handle Taxes on My Own?

First, let’s talk about the more basic tax obligations and issues that usually don’t warrant working with an attorney. These are situations that you can easily resolve on your own and don’t take up that much of your time. Here are a few examples:

• You owe a low amount in taxes: If you owe, say, less than $10,000 in taxes, you may be able to simply pay off your balance in one lump sum or pay off your balance over just a few months. These situations usually aren’t dire yet. Even if you owe a larger amount of money, you may be able to easily set up a payment plan online by yourself.
• You are applying for a payment plan: Many times, the IRS will approve a requested installment agreement, especially for lower balances. These plans allow you to make a set monthly payment until your balance is paid off. The process is pretty simple to request a plan.
• You incurred a penalty correctly and want it removed: If you fail to file or pay taxes on time, you may get a notice about a penalty in the mail. If you know this penalty is correct, you can usually take care of it on your own by following the enclosed instructions or calling the IRS to request penalty abatement. In contrast, if you think the penalty is incorrect, you may want an attorney to help you dispute it.
• You need to amend your tax return: Many people need to send in amendments if they made a mistake, received new information, or need to claim a credit they didn’t know they qualified for. Amendments are usually straightforward to manage directly with the IRS.

If you don’t have questions about a tax issue, you understand your obligations, and you know the process for resolving it—these are usually manageable on your own. The extra cost of hiring a tax attorney may not be worth it in these cases.

When Do I Need a Tax Attorney?

Now, you’re likely wondering when it does make sense to work with a tax attorney. Because hiring one is an added expense, you want to be sure you are smart about the investment. An attorney is a must when any kind of tax court situation arises since a certified public accountant (CPA) or enrolled agent (EA) cannot represent you. 

These are common situations when you would need a tax attorney:

• You have large tax debt: When you have a lot of taxes owed, more than $10,000, and can’t pay them, it’s time to get help. Attorneys can help you understand the legal steps the IRS will take to try to collect what you owe and how to deal with your debt.
• You don’t agree with the taxes assessed: You have rights as a taxpayer to appeal IRS decisions or assessments when you don’t agree with them. It’s best to talk over the situation with an attorney and get help filing and navigating an appeal.
• You are dealing with tax fraud charges: If you’re being accused of tax fraud or tax evasion, you need a tax lawyer. You could face civil penalties and even criminal charges in these situations.
• You are facing a tax audit: The IRS audits businesses and individuals for a number of reasons. A tax attorney can help you ensure compliance and understand your rights and best practices throughout the process. 
• You need help understanding legal implications: Tax law is complicated. It’s never a good idea to try to understand all of it on your own when you’re dealing with a tax problem. Tax attorneys are experts in understanding the law and how emerging or changing laws impact you.
• You have complicated business taxes: Finally, many businesses have exceptionally complicated tax processes and obligations. They decide to hire an attorney so they can rest assured they’re doing everything correctly to avoid penalties. This is a wise step when complex requirements arise.

Tax attorneys are valuable resources when you need help. Consider working with a tax lawyer if you find yourself involved in these scenarios.

Other Reasons You May Hire an Attorney

You may require a tax attorney even if you’re not in hot water with the IRS. There are some gray areas because every person’s circumstances are a little different. 

For example, maybe you have a complicated financial situation and just don’t have the time to sift through everything and stay tax-compliant. Maybe you don’t have the bandwidth to manage IRS communications yourself. Or perhaps you simply want another set of eyes—and legal ones at that—so you know you’re compliant and stay that way in the future.

Think about your ability to handle your specific issue on your own, whatever it is. Anything involving a courtroom warrants a tax attorney. However, you could decide to get more routine tax help from these experts to get extra reassurance.

If you’re still unsure whether an attorney is worth the cost, your next step should be a cost-benefit analysis. List out the likely expenses involved along with the benefits of getting legal help. Does the cost outweigh the risk of not consulting an attorney? 

You could even ask for a free consultation and estimate from a few attorneys to understand how their pricing works. This will help you understand exactly how much it will cost to work with an attorney for your issue. They’ll also explain the benefits of working together.

Alternatives to Hiring a Tax Attorney

Other professionals out there provide similar tax services to attorneys but may offer more affordable prices—though not always. Here are two of those options and how they differ:

Certified Public Accountants

CPAs can help you file your tax return and generally understand your tax requirements. But they also provide advice and guidance on your accounting practices and business finances. They may help you generate financial reports, create a budget, or plan for the future. They do not give legal advice about taxes.

Enrolled Agents

EAs can give you tax guidance in your dealings with the IRS, and they can represent you in certain situations—collections, appeals, and audits. However, EAs also cannot represent you in legal matters or give you legal guidance.

When you’re dealing with more basic tax matters, or you have accounting questions, these two could be better options. Sometimes prices may be comparable to lawyers, so keep that in mind. But when you need someone to represent you in court or advise you on legal tax matters, always talk to an attorney.

How to DIY Common Tax Situations

Dealing with any kind of tax issue can be stressful and daunting. More basic concerns, however, can be handled if you have the right information. Let’s look at a few examples of processes you can probably manage yourself:

• Installment agreements: The IRS makes it easy for taxpayers to apply for payment plans. Their website states, “You should request a payment plan if you believe you will be able to pay your taxes in full within the extended time frame.” Visit the Online Payment Agreement Tool to apply online for either a short-term or long-term payment plan, depending on the level of taxes you owe. You will agree to a monthly payment and a set agreement period to get your taxes paid off.
• Amended tax returns: If you need to correct a mistake on your submitted tax return, you can file an amendment. You have three years to file an amended return from filing your original—or two years from when you paid the tax, whichever is later—to claim a refund. You’ll file Form 1040-X, Amended U.S. Individual Income Tax Return, and you can usually file it electronically. Note that you’ll need to submit everything that you submitted with your original, even if all documents don’t have changes.
• Offers in compromise (OICs): An OIC allows you to settle your tax debt with the IRS. In some cases, it’s pretty simple to submit your financial information along with an offer, which is what you are showing the IRS you can afford to pay. The IRS will grant the OIC if what you provided is all they can reasonably expect to collect from you.
• Partial payment installment agreements (PPIAs): This is a special arrangement with the IRS wherein you pay what you can throughout the agreement period, and then once it’s over, you don’t pay the rest of what you owe. You may qualify if:
  • Your balance is more than $10,000
  • You can only afford a lower monthly payment
  • Your income doesn’t allow you to pay your full balance
  • You have filed all your past tax returns
  • You don’t qualify for an OIC
  • You’re not in the bankruptcy process
  • Your asset equity wouldn’t cover your tax debt in full

You can apply for a PPIA by submitting Form 9465, a Collection Information Statement, your tax return, and any supporting financial documents.

• Currently not collectible: The IRS will temporarily stop collections in some instances. If you’re having trouble paying what you owe—and doing so would cause financial hardship—the agency may agree to put a hold on collections. However, remember this is only temporary, and you’ll need to pay when your financial situation improves.

These are common options that will help you pay off your tax debt or remain in good standing with the IRS. Often, you can handle these requests on your own. But remember that when you’re not sure what you should do or are facing serious IRS penalties and charges, it’s best to talk to a tax attorney about next steps.

Making the Decision to Hire a Tax Attorney

Anytime you’re facing a tax problem, assess the level of severity and whether you understand how to handle it on your own. Remember that it’s never worth the risk if you’re dealing with a very large tax bill, being audited, going to court, or being charged by the IRS.

If you’re hesitant because of the cost of a tax attorney, remember that many firms offer a free initial consultation. They can get the basics of your situation, walk you through their process, and talk about what the cost would be. Weigh the cost with the risks you’re facing.

Working with a tax attorney can give you peace of mind so you know you’re complying with tax laws and getting expert help when you need it. Find an attorney who will be reasonable in cost and will be honest with you about your situation.

The team at Damien’s Law is ready to assist you. Set up a free consultation to learn how our process works and how we’ll help you navigate the IRS.