What Does My Tax Lawyer Need to Know?

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Why Should You Consult a Tax Lawyer?

Receiving a notice from the IRS isn’t something that should be avoided. Often times, there are tight deadlines involved that can trigger serious consequences if not followed in a timely manner. Tax payers have due process rights and an experienced tax attorney will know how to navigate through the system and make the right decisions regarding how debt to the IRS will affect your financial future.  

What Kinds of Questions Will My Tax Lawyer Ask?

This entirely depends on the personal circumstances surrounding the amount and reason the back taxes are due. 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 that could have changed that specific tax year?

Bring Your IRS Letters

First things first, it’s important to come prepared with any communication received from the IRS to a consultation because it will help your tax lawyer get a grasp on the case against you and the deadlines that need to be met. These IRS letters contain valuable information. If the IRS changed something on your tax return, they’ll list it and you’ll be able to compare it with your original tax return. IRS letters will also contain information regarding response dates, which can trigger interest and penalty charges if not followed.

Bring Your Taxes and Any Other Relevant Information

Most of the information a tax attorney will need can come from your tax returns.  If you owe a lot more tax than you expected, the first and best thing to do is to find out why.  An attorney will want to cross reference the IRS letters with your tax returns to check for any errors or mistakes.

Did you have any qualifying deductions or credits that you missed on your return?  Did your tax situation change significantly from the year before?  Did you buy a house or open a small business?  Did you have an unusual tax event that led to an honest mistake?  An attorney can often negotiate with the IRS for an abatement reducing or waiving any penalties for honest mistakes.

Are You Financially Able to Pay the Full Amount?

If you can’t pay the full amount at the time it’s due, what money can you contribute towards an installment plan?  If you owe less than $10,000, the IRS will automatically approve a taxpayer for an installment plan without any additional information.  If the amount is more than 50,000, the IRS will likely want to see a financial statement in order to determine your ability to pay.  This will include information regarding your income, expenses, cash flow, assets and liabilities.

If you’re unable to pay the full amount, a tax attorney can try to negotiate with the IRS an offer in compromise (“OIC”), which typically settles your tax liabilities for less than the full amount.  Would this payment cause you an economic hardship?  What can you provide to prove this?  Are your debts higher than your assets? 

Are You Going Through a Divorce?

Believe or not, this question matters. If you and your spouse filed jointly, you’re jointly and severally liable for the back taxes and any penalties that arise from a joint return. Did one spouse earn all the income and one spouse stay at home? This won’t matter when filing jointly unless certain exceptions apply and, even after a divorce goes through, both spouses are still responsible for any back taxes resulting from a joint tax return. 

Spouses can sometimes apply for innocent spouse relief, separation of liability relief, or equitable relief when a spouse or former spouse failed to report income, improperly reported income or improperly claimed deductions and/or credits.  Was there a mistake that’s solely attributable to your spouse?  Were you aware of it?  Were you and your spouse separated at the time your spouse filed the return?

Are You Going Through Bankruptcy?

Filing for bankruptcy can affect the back taxes that you owe and it’s important to make sure your tax attorney is aware of any pending bankruptcies that have been filed.  Although filing for Chapter 7 bankruptcy will discharge personal obligation to pay back taxes, it doesn’t wipe out any federal tax liens on property.

Where Can You Find the Right Lawyer?

Tax laws can be very complex and hard to navigate. Hiring an experienced tax and finance lawyer that understands the processes and legalities involved will be crucial in settling your case with the IRS in the most financially prudent way possible.

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Last Modified: 03-22-2017 10:31 PM PDT

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