Tax law is the body of laws and regulations that govern the tax process in the United States. These laws are extensive, complex, and constantly changing.
What Does My Tax Lawyer Need to Know?
- What is an Income Tax Lawyer?
- Why Should You Consult a Tax Lawyer?
- What Kinds of Questions Will my Tax Lawyer Ask?
- Should I Bring my IRS Letters?
- Should I Bring my Taxes and any Other Relevant Information?
- Are You Financially Able to Pay the Full Amount?
- Are You Going Through a Divorce?
- Are You Going Through Bankruptcy?
- Where Can You Find the Right Lawyer?
What is an Income Tax Lawyer?
An income tax lawyer is a lawyer, also called an attorney, that specializes in filing income taxes for individuals and businesses. Tax lawyers also handle other issues that arise with individuals and the IRS.
A tax lawyer can advise clients on their complex tax issues. A lawyer can handle any disputes that arise with the Internal Revenue Service (IRS) and state taxing agencies.
Why Should You Consult a Tax Lawyer?
When an individual receives a tax notice from the Internal Revenue Service, it is not something that they should ignore or avoid. In many cases, there are specific deadlines involved that may trigger serious consequences if they are not followed in a timely manner.
Tax payers have due process rights in these cases. An experienced tax lawyer will know how to navigate through the system and make the correct decisions regarding how the debt to the IRS will affect an individual’s financial future.
It is important to note that, even if an individual misses a year or files taxes late by accident, it is best to resolve the issue up front instead of avoiding it or attempting to hide it. A tax lawyer will be able to advise an individual regarding the best steps forward.
Even if an individual has not filed taxes in several years but they cooperate and admit to not filing their taxes, they may be able to negotiate with the IRS to reduce or remove their fees. This approach may be successful in situations where an individual can show they had reasonable cause for failing to pay or file their taxes.
An individual may demonstrate reasonable cause by evidence demonstrating that they made a valid and prudent attempt to meet the tax deadlines but a sound reason prevented them from doing so. Sound reasons may include:
- Serious medical conditions;
- Natural disaster; and
- Other grounds that may be found on the IRS website.
What Kinds of Questions Will my Tax Lawyer Ask?
An individual’s tax lawyer will ask them a variety of questions regarding their financial situation. The specific questions asked will depend on the individual’s personal circumstances surrounding the amount they owe and the reason any back taxes are due.
Questions a lawyer may ask include:
- How much do you owe?
- Do the back taxes span multiple years?
- Did the IRS make a mistake about the amount owed due to an error on your tax return?
- Can you afford the payment?
- Are you going through a divorce?
- Did you have a significant event happen in that specific tax year?
Should I Bring my IRS Letters?
Yes. It is essential to come to an initial consultation with an attorney prepared with any and all communications the individual received from the IRS. This will help the individual’s tax lawyer to gain an understanding of the case against them and the deadlines that must be met.
IRS letters contain important information. If the IRS changed something on an individual’s tax return, it will be listed and the individual will be able to compare the change with their original tax return. IRS letters also contain information regarding response dates, which can trigger interest and penalty charges if they are not followed.
Should I Bring my Taxes and any Other Relevant Information?
It is also important for an individual to bring their tax return and any other relevant information. The majority of the information that a tax attorney will need comes from the individual’s tax returns.
If the individual owes a lot more tax than they expected, the first and most important thing to do is find out why. A lawyer will want to cross-reference those IRS letters with the individual’s tax returns to check for any errors or mistakes.
Questions the attorney may ask regarding the tax returns include:
- Are there any qualifying deductions or credits that you missed on your return?
- Did your tax situation change significantly from the year before?
- Did you open a small business or buy a house?
- Did you have an unusual tax event that resulted in an honest mistake?
In many cases, a lawyer can negotiate with the IRS for an abatement that reduces or waives any penalties for honest mistakes the individual made on their tax return.
Are You Financially Able to Pay the Full Amount?
If an individual is not financially able to pay the full amount at the time it is due, they must determine what amount they can contribute towards an installment plan. If they ow less than $10,000, the IRS will automatically approve the individual for an installment plan without requiring any additional information.
If the amount owed is more than $50,000, the IRS will most likely require a financial statement from the individual in order to determine their ability to pay. This will include information regarding the individual’s:
- Cash flow;
- Assets; and
If the individual is unable to pay the full amount when it is due, a tax lawyer can attempt to negotiate with the IRS using an offer in compromise (OIC). An OIC typically settles an individual’s tax liabilities for less than the full amount owed. Thie questions the lawyer may ask include:
- Would this payment cause you economic hardship?
- What can you provide to prove this?
- Are your debts higher than your assets?
Are You Going Through a Divorce?
Although it does not seem like this would have any bearing on an individual’s taxes, this question matters. If an individual and their spouse filed jointly, they are jointly and severally liable for any back taxes and any penalties that may arise from a joint return.
Even if one spouse earned all of the income and the other spouse stayed at home, this will have no bearing when filing jointly unless certain exceptions apply. Even after a divorce is finalized, both spouses are responsible for any back taxes resulting from a joint tax return.
A spouse may, in some cases, apply for innocent spouse relief, separation of liability relief, or equitable relief when a spouse or a former spouse failed to report income, improperly reported income, or improperly claimed deductions or tax credits.
An attorney may ask questions such as:
- Was there a mistake that is solely attributable to the other spouse?
- Were you aware of it?
- At the time your spouse filed the return, were you and your spouse separated?
Are You Going Through Bankruptcy?
If an individual has filed for bankruptcy, it can affect the back taxes that they owe. It is important to make sure the individual’s tax attorney is aware of any pending bankruptcies that have been filed.
Filing for a Chapter 7 bankruptcy may discharge the individual’s personal obligation to pay back taxes. However, it does not wipe out any federal tax liens on property.
Where Can You Find the Right Lawyer?
The laws that govern taxes are very complex and often difficult to navigate. It is important to hire an experienced tax lawyer who is familiar with the processes and requirements. This will be crucial in settling your case with the IRS in the most financially beneficial way possible.
Need a Tax Lawyer in your Area?
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