When Do You Need a Tax Attorney?
What to Look for in a Tax Attorney
Accountants and tax attorneys can both help in your hour of need, but the term "attorney" has a more ominous ring. It implies that you're not just wrangling with numbers—you're fighting the law. Tax attorneys can handle things that accountants can't, although you don't have to be in the fight of your life before an attorney's services—rather than an accountant's—can come in handy. They can handle both past problematic events and help plan your best course in the future.
Tax attorneys are lawyers who specialize in the complex and technical field of tax law. They're best for handling technical and legal issues associated with your tax situation. An attorney can step in after you have a problem, but consulting with one in advance can also help you avoid problems in the first place.
When Would You Need a Tax Attorney?
Tax attorneys must have a Juris Doctor degree, commonly referred to as a "J.D." They must be admitted to the state bar to practice. These are just the minimum requirements, however. Tax attorneys should additionally have advanced training in tax law. Most will have a master of laws degree in taxation, referred to as an "LL.M."
Some tax attorneys also have backgrounds in accounting, but they don't all involve themselves with preparing tax returns. Their expertise is focused on the legal implications of tax situations. If you're facing a complex accounting problem as well as a legal matter, you might want to look for an attorney who's also a certified public accountant (CPA) or enrolled agent (EA) so you can cover both bases. They're rare and they tend to be expensive, but they're out there.
If You Have a Taxable Estate
The Internal Revenue Service has its fingers in a lot of pies and not all of them pertain to personal tax returns. Estates must file returns as well.
As of 2020, your estate is taxable if its total value at the time of your death exceeds $11.58 million, or $23.16 million if you're married. That's a lot of value so most people won't have to worry about estate tax planning, but your heirs would have to pay an estate tax of up to 40% of the balance over the applicable threshold if your estate is worth this much.
The estate tax exemption effectively doubled in 2018 from what it was the year before, thanks to the Tax Cuts and Jobs Act (TCJA), but the TCJA is scheduled to sunset or expire at the end of 2025. It's possible that the exemption could drop back down into the $5 to $6 million range at that time, making estate tax planning a concern for more families.
A tax lawyer can help you devise estate-planning strategies to help you stay below the exemption threshold and avoid a significant portion of your estate going to the IRS.
If You're Starting a Business
What type of business entity should you set up? Do you want to incorporate? Can you function as a sole proprietor? Any business setup you choose will have tax ramifications. Legal counsel can advise you about the structure and tax treatment of your company, including some non-tax issues you might not otherwise have considered.
And if you engage in international business, you'll need help with contracts, tax treatment, and other legal matters. The assistance of a tax attorney can be invaluable in this type of situation.
If You Have Legal Issues
If you plan to bring a lawsuit against the IRS, if you're under criminal investigation by the IRS, or if you want to seek an independent review of your case before the U.S. Tax Court, you'll require the help of a knowledgeable, experienced lawyer. You'll want someone who is familiar with a courtroom. Certain non-attorneys can represent clients in court, but it's almost always better to be represented by someone who is well versed in the law.
This is especially true if you've committed tax fraud, such as knowingly claiming deductions or credits to which you weren't actually entitled.
Your relationship with your attorney and anything you say to or confide in them is typically privileged. This means they're under no legal obligation or duty to divulge to the court anything you tell them. This is not always true of accountants.
Questions to Ask a Tax Attorney
Here are a few questions to ask when you initially meet with a prospective attorney:
- Are they admitted to the state bar?
- What area of tax law do they specialize in?
- How much does the attorney charge?
- If the attorney can't personally help you, can you be referred to another tax attorney who might be more familiar with your type of problem?
Free and Low-Cost Legal Assistance
Tax clinics provide free or low-cost legal assistance to low-income taxpayers throughout the United States. They're funded in part by grants from the Taxpayer Advocate Service, which is an independent organization within the IRS. The employees and volunteers who work here are not employees of the IRS or the federal government.
You can find a complete list of low-income tax clinics by state on the Taxpayer Advocate Service website. Income limits apply, but services are also provided to those who speak English as a second language.
IRS. "Understanding Tax Return Preparer Credentials and Qualifications." Accessed Jan. 29, 2020.
IRS. "What's New—Estate and Gift Tax." Accessed Jan. 29, 2020.
IRS. "Low Income Taxpayer Clinics." Accessed Jan. 29, 2020.