Individuals and businesses who have tax debts with the Internal Revenue Service (IRS) should carefully consider how to approach the matter. Resolving the issue as quickly as possible can help limit financial and legal penalties. The IRS is an extremely powerful agency with the authority to pursue tax debts through a variety of methods, many of which can be extremely stressful for the taxpayer. If you owe money to the IRS or are facing an audit or another type of tax issue, it is important to be aware of all of the resolution options and determine which strategy best fits your situation.
Tax issues handled by IRS tax lawyers
Tax attorneys are available to handle most types of issues with the IRS. However, areas of specialization may vary from firm to firm. Some firms may only handle one type of case or a handful of types, while others may have experience in the full range of IRS tax issues. Those who are considering hiring an IRS tax lawyer should search for someone who has experience in the specific tax issue they face.
Tax attorneys are available to assist those who have been audited by the IRS. The majority of audits are related to a single, simple issue – such as proof of a business expense that was listed as a deduction. Taxpayers who have proof of the disputed issue can usually resolve the matter quickly by providing that proof to the IRS. However, taxpayers who face more complex audits that dispute multiple issues with tax returns or involve significant amounts of money often consider contacting an IRS tax attorney.
In these more complicated audits, an attorney can provide their client with legal guidance throughout the entire process until the matter has been settled. Additionally, an attorney can act as their client’s legal representative during communications with the IRS.
Tax Liabilities and collections
Tax attorneys are often hired to handle IRS tax liabilities and to represent taxpayers who are facing IRS collections actions. An attorney may attempt to negotiate with the IRS for the alleviation of certain collections methods, such as liens on properties, tax levies on bank accounts, and wage garnishments. Depending on the circumstances of the case, the IRS may be willing to consider an alternative agreement and cease the current collections method. An attorney can also attempt to negotiate an installment agreement for taxpayers who are unable to pay their tax liabilities. In addition, legal counsel can also help file delinquent returns and attempt to minimize penalties for the taxpayer.
Offers in compromise
Some taxpayers who owe the IRS money may qualify for an offer in compromise. This allows the taxpayer to settle their debt for less than the full owed amount. This is available in situations where the IRS is doubtful that they will be able to collect the full tax liability in the foreseeable future, when there is doubt regarding the accuracy of the debt, or when paying the debt would create significant financial hardship for the taxpayer. This program helps many taxpayers escape unmanageable tax debts, but it does not apply to everyone and the process can be complicated.
An attorney can help a taxpayer determine if they meet the requirements for an offer in compromise and offer legal guidance throughout the application process. This may include helping the client meet all legal requirements and representing the client during meetings and correspondence with the IRS.
Contact Damiens Law’s Mississippi and Tennessee IRS tax lawyers to learn more about filing an offer in compromise.
Taxpayers who are facing criminal tax investigations or charges should consider speaking with an attorney who has experience in this area of criminal defense. A conviction for crimes like tax evasion and tax fraud could carry a penalty of several years in prison. Some tax attorneys represent taxpayers under criminal investigation, both in the criminal justice process and in dealings with the IRS.
How does an IRS tax lawyer help their clients?
Every tax debt case is different, so the applicable methods will vary. However, a tax attorney may offer the following forms of legal guidance:
- Case evaluations – An effective and experienced tax attorney will analyze the details of their client’s case and their unique tax situation to determine the best way to handle the dispute with the IRS. The attorney can also provide their client with private legal guidance on the matter, which is protected under attorney-client privilege.
- Representation with the IRS – Tax attorneys can represent their clients in all interactions with the IRS, including in-person meetings, visits to the taxpayer’s property, and mail correspondence.
- Tax liability relief negotiation – An experienced attorney’s knowledge of tax law and the IRS approach to tax liability relief can be useful for negotiating offers in compromise, installment plans, and the lifting of tax levies, liens, and wage garnishment.
- Legal counsel in court appearances – Those who have been charged with tax crimes are entitled to legal counsel and should consider speaking with a tax attorney with experience in the charges they face, such as tax evasion or fraud.
- Innocent spouse relief – If one spouse violates tax laws – such as by failing to report income – the other spouse could potentially qualify for innocent spouse relief. A tax attorney can provide legal counsel through this process, which primarily involves proving that their spouse acted without their consent or knowledge.
- Bookkeeping and tax preparation – Many business owners hire tax attorneys to help prevent any problems with the IRS. Tax attorneys who are hired in this capacity may provide oversight for accounting and tax preparation and ensure that the business is in accordance with the requirements of the IRS.
The IRS collections process
According to the Internal Revenue Service, the collections process begins when a taxpayer receives a bill after not paying their taxes in full. This process ends once the liability has been satisfied or after the IRS may no longer legally seek the taxes – such as failing to collect the debt within the statute of limitations (generally 10 years). The unpaid balance of the liability will accrue interest that compounds daily and may also be subject to late payment penalties.
Reaching agreements with the IRS (such as offers in compromise or installment plans) may help lessen the financial burden for those going through the collections process. However, those who are unable to pay their balance and do not reach an agreement may be subject to aggressive collections tactics, such as:
- Seizure of assets like bank accounts, wages, retirement income, and social security benefits.
- The IRS may seize physical property, such as real estate, cars, and boats.
- Future tax refunds (both federal and state) may be seized and applied to the balance of the federal tax debt.
What to do about a large IRS tax liability
It is usually in the best interest of the taxpayer to pay the liability as quickly as possible. While paying the liability in full may not always be possible due to financial issues, the IRS is normally willing to work with taxpayers toward finding a viable solution. In many tax situations, allowing the collections process to run its course without attempting to negotiate can result in severe financial penalties. Conversely, negotiating with the IRS can sometimes minimize financial penalties and may help the taxpayer settle their balance more easily. While these negotiations do not require legal counsel, those who have large IRS tax liabilities should consider speaking with a tax attorney.
When does the IRS file criminal charges?
The IRS will not normally file criminal charges for honest mistakes made on a tax return. Instead, they will give the taxpayer a chance to correct their mistakes. IRS criminal investigations most commonly involve large-scale tax fraud or tax evasion, such as deliberately failing to file a return, reporting income improperly, or taking unjustified business deductions. If the IRS criminal investigation determines that the taxpayer intentionally failed to report significant income, they will likely pursue criminal fraud charges.
Contact our IRS tax lawyers for legal guidance
Most taxpayers dread getting into a financial dispute with the IRS, but fortunately, there are ways to remedy the situation and resolve the debt. Depending on the tax situation of the individual or business, the IRS may be willing to negotiate an arrangement that allows them to more easily collect the tax liability in a reasonable amount of time. While individuals and business entities are free to attempt these negotiations on their own, legal counsel may be useful during this process.
An IRS tax lawyer can help their clients approach the situation with a sound legal strategy that allows them to resolve the liability. The team of veteran Mississippi tax attorneys at Damiens Law helps out clients with a wide range of tax issues, including the collections process and resolving tax debts.
Contact our tax law firm today at 601-957-9672 for a free case evaluation.