How To Tell When You Should Hire A Lawyer For Taxes

Having a tax problem with the IRS or state tax authority is a scary thought that can keep anyone up at night. What’s most frustrating is that even with the best of intentions, issues can still come up. If you have tax issues, you might wonder whether you need professional help to fix them.

If it turns out you need assistance, do you need to hire a lawyer for taxes? The quick answer is that it depends on the tax issue you’re dealing with. 

1. Significant tax audits 

Tax audits might be one of the most concerning tax-related problems that people worry about. This is because it can happen to anyone, even if they did nothing wrong.

Getting audited means spending countless hours gathering and organizing documents and constantly wondering what sort of issues might come up during the audit if you accidentally say or do the wrong thing.

A lawyer can help by protecting your audit rights, explaining what’s going on, and how to respond to keep the IRS happy. They can also guide you on what to say during an audit interview.

For example, if you’re dealing with a correspondence audit, a lawyer can help you avoid sending the wrong documents to the IRS. If you’re facing an in-person audit (field or office audit), a lawyer can help you prepare for the interview by quizzing you on questions the IRS revenue agent is likely to ask.

2. Tax debts, asset seizures, and liens

If you owe back taxes, the IRS and state taxing authorities have powerful tools at their disposal. For starters, they can place a tax lien on your assets. A tax lien is a legal claim a tax agency places on property. If you have a lien on your property, then you must pay off the balance of the debt before you can sell it. You may also be limited in using that property as collateral for another loan.

There’s also the tax levy, which allows a tax agency to take a taxpayer’s property to pay off a tax debt.

The most prominent tax levies are wage garnishment and bank levies. In these situations, the IRS can require a bank or employer to deduct money from a paycheck or bank account and send it to the IRS to pay off an unpaid tax balance. 

The IRS and state tax agencies don’t typically need a court order to use a tax levy or lien. As long as they provide notice and wait the required number of days for the taxpayer to respond, they can use the lien or levy.  

3. Estate planning

One of the primary considerations in estate planning is determining how to protect property from creditors and reducing tax obligations after death. There are several tools that can serve these purposes, such as Trusts.

A lawyer is also required to prepare the necessary documents. Given the importance of minimizing taxes in estate planning, it makes sense to hire someone to help. Some lawyers are also CPAs, which helps during more complex estate planning.

4. Tax court

If your tax matter requires you to be in court, you’re going to want to hire a lawyer who can represent you before the IRS. Enrolled agents and CPAs can sometimes represent their clients before the IRS in certain administrative actions. However, they can’t represent their clients in a court of law.

5. Criminal tax defense

Facing the prospect of criminal prosecution means you have more at stake besides money. In addition to potentially having to pay significant fines, you could also face multiple years in prison.

Despite the challenges that come with prosecuting tax crimes, you should still hire a lawyer if you’re facing possible criminal charges. They can help you look for errors in the prosecution and nuances in the tax law that can make the difference between a guilty or not guilty verdict.

6. Tax return backlog

Even if you don’t owe money for taxes, you still want to file tax returns to let the IRS know why you don’t owe money. You also need to file to be eligible to receive a tax refund.

When you don’t file a required tax return, you could face failure-to-file penalties, plus interest. This is in addition to the tax you may owe for the year you didn’t file the return.

A lawyer can confirm if you might have missed filing one or more tax returns. A lawyer can also see if you’re eligible for penalty abatement. You may be eligible if this is your first time with a missed tax return or if you had a reasonable explanation for not filing.

7. Bankruptcy

You can file for bankruptcy without a lawyer. It’s not recommended that you take this approach, though, due to the strict deadlines and complex paperwork required. A lawyer may discuss bankruptcy as an option for you. If so, they may handle the case or they may refer you to another lawyer that can.

8. Complex business transactions or transitions

A lawyer can be indispensable during business transactions and transitions in multiple ways. For example, they can advise you on the best way to structure the transaction to keep your tax bill as low as possible. 

Or, if you’re undecided on a particular tax classification for your business, business structure like an S-corp, a lawyer can explain how to make the most of its tax advantages. 

Other ways a lawyer can help include:

• Carefully analyzing a business’s tax and financial records during the due diligence phase of a business sale.
• Explaining which financing options offer the best tax advantages.
• Identifying any new tax compliance obligations that you might be responsible for, such as sales tax collections and additional tax filing requirements.

When you may not need a lawyer

As beneficial as lawyers can be for small businesses and individuals, not all tax matters may require their services. Below are common tax issues that may not require a lawyer:

• Basic tax filing: If a tax professional is needed in these situations, usually a tax preparer (or at most, a CPA) should be enough.
• Straightforward audits: A CPA or enrolled agent will often have the experience and skills necessary, and can tell you if you need additional help.
• Underpaid or back taxes from a previous year: As long as you can pay the unpaid tax balance in full or resolve the tax bill with a payment plan or other arrangement, you may not need a lawyer.
• Requesting basic forms of tax relief: Taxpayers can request several forms of tax relief, like certain appeals and penalty abatement, with a phone call to the IRS.

One of the biggest challenges when dealing with taxes is trying to figure out if and when to hire a lawyer. Sometimes, all you need is to explain your situation to a lawyer or ask a few questions to quickly find out. 

It’s these situations where LegalShield can really help. We offer several plans, including Personal Plans and Business Plans, where you can decide which benefits you need for your particular budget.

Questions to ask a lawyer

Once you make the decision to hire a lawyer, you’re probably wondering how to choose the right one. Below are several questions you should ask when making your selection.

1. What states are you admitted to the bar? Do you have other credentials related to my issue?

As long as a lawyer is licensed to practice law in at least one state, they can represent you before the IRS. However, if your tax issue concerns state tax laws, then you’ll need to make sure your state tax issue is from the same state where the lawyer is licensed.

If you’re dealing with a very unique or complex tax matter, you might want to see if a lawyer has an LL.M. in the area of tax law or is a CPA.

Often where a lawyer is admitted to practice and their additional certifications are listed on the lawyer’s webpage, along with other information about their experience in certain types of law.

2. Do you have experience working on my specific type of situation?

Some lawyers choose to focus on a particular area of practice. But even this focus can be further broken down into smaller and more targeted practice areas. 

However, lawyers aren’t allowed to call themselves “specialists” or “experts” in a particular area unless they’ve first obtained certain credentials, such as a certification from the appropriate accrediting body. They can still explain how much experience they have handling certain types of tax cases, though.

3. What are your legal fees?

Wondering how much a tax lawyer costs is probably one of your biggest concerns when selecting a lawyer. When you ask a tax lawyer how much they’ll charge to handle your case, there are a few things to keep in mind:

• They can’t always quote you an exact price, but they might be able to give a rough estimate. Even if they charge a flat rate for certain services, don’t be surprised if they give a price range.
• Most tax lawyers either bill by the hour or a flat fee for particular tasks or tax cases.
• As a general rule, the fees will reflect the complexity of the situation.

4. Can I sue the IRS for damages?

Most lawyers don’t handle cases where their clients sue the IRS for wrongdoing. That said, if you feel that the IRS has engaged in predatory practices that have caused you harm, you can bring this up during the consultation.

5. What happens if I lose? Do I still have to pay legal fees?

Asking this question helps you determine how a lawyer charges for their services. Some lawyers work on a contingency fee. This means they don’t get paid unless they recover something for you. In a tax matter, this might be a percentage of the amount a lawyer reduces from your tax bill.

Talk to a LegalShield provider lawyer and get legal help now

Imagine one day you check your mail, and there’s a letter from the IRS. You open it up and see that it’s an official notice with “CP” or “LTR” code at the top, followed by several numbers. After reading it, your only takeaway is that the IRS believes you owe money, yet you don’t know why or what you should do next.

This is where LegalShield’s business and personal plans come in handy. For a monthly fee, you can talk to a provider lawyer about any number of legal concerns about you, your family, or your business. They can also explain when to hire a lawyer and when you can handle the tax issue on your own or with another tax professional, like a CPA or enrolled agent.

Sometimes, the biggest challenge with taxes is dealing with the fear of the unknown. Consider enrolling in one of LegalShield’s member plans, and don’t lose sleep over unanswered legal questions and concerns about your taxes.

Frequently asked questions

What do lawyers do?

A tax lawyer helps their clients with legal matters. This can include matters from unpaid taxes to representing clients in court. Unlike a CPA, a lawyer focuses on tax questions involving the law, not principles of accounting or finances.

When should a small business hire a lawyer?

Small businesses should consider hiring a lawyer if they’re facing a large tax bill that they disagree with. Even if they agree they owe the unpaid tax balance, if they can’t pay it off in full, a lawyer can help find alternative payment arrangements or even settle the tax debt for less than the full amount.

A lawyer is also helpful if the small business has certain tax issues. For instance, the business might have several years’ worth of unfiled tax returns or new tax obligations the business doesn’t fully understand.

How do I interview a lawyer?

Some lawyers offer free consultations. Before the consultation, you can write out a list of questions to ask, as well as bring relevant tax or financial documents to reference during the consultation. After the consultation, feel free to follow up with any additional questions if you’re still not comfortable after the initial consultation. Be prepared though that the lawyer may not give you legal advice about your specific case at your consult, but instead discuss processes with you.

Is a lawyer worth it?

This is a difficult question to answer. It depends on the facts of your case, your comfort level with risk, and your familiarity with tax law. Yet nothing beats the peace of mind of having a tax professional examine your case and explain what’s going on and what you need to do next. 

If you’re not sure if you should hire a lawyer, you can still schedule a free consultation with a lawyer to help you decide.‍

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