Filing taxes can be confusing and stressful for many people. Even with tax preparation software and online guides, it’s easy to make mistakes or overlook deductions and credits you qualify for. That’s where tax lawyers come in.
Tax lawyers have expert knowledge about the laws, regulations, and policies affecting tax at all governmental levels.
When tax issues arise, consulting with a tax lawyer can help you resolve problems. They can also ensure you pay only what you legally owe – no more, no less. Here are some of the most common tax dilemmas that tax attorneys can help with:
Unreported or Under-reported Income
One of the biggest red flags for the IRS is when your reported income doesn’t match what they have on record, whether from your employer or other sources.
Even if unreported income was a mistake on your part, the IRS will still treat it as tax evasion. A tax attorney can help reconstruct your financial records, negotiate with the IRS on your behalf, and minimize any penalties. For instance, they may be able to prove the unreported income was non-taxable.
Tax Lawyers can help with Audit Defense
Getting audited can be intimidating and stressful. A tax lawyer is your best ally in an IRS audit. They understand audit protocols and can analyze the IRS’s case against you for errors.
An experienced tax attorney may be able to convince the auditor that your tax return was correct as filed. At a minimum, they can often negotiate down from the maximum penalties the IRS threatens audited taxpayers with.
Most people can simply file an amended return themselves to correct innocuous mistakes like transposed numbers or forgetting a deduction.
But major errors, or amending returns from multiple prior years, are more complicated. Tax lawyers can review your situation, advise you on the best approach, and handle communicating with the IRS.
If you failed to report income, a tax attorney can submit your amended return through the Voluntary Disclosure Program to minimize penalties.
Pass-Through Entity Tax Issues
Business structures like S-corps, partnerships, and LLCs don’t pay income tax at the corporate level. Instead, business profit or loss “passes through” to the owners’ personal returns.
But the pass-through system creates complications in how income is allocated, payroll taxes, and claiming deductions properly.
A tax lawyer experienced with pass-through entities can optimize your tax liability as the business owner.
Settling Tax Debt
If you owe back taxes, you can’t afford to pay, the IRS can impose severe collection measures. Some of these measures include wage garnishment or property liens.
A tax attorney can negotiate alternate payment plans or settlement offers with the IRS, including submitting an Offer in Compromise to settle your tax debt for less than the full amount.
They understand IRS procedures and financial documentation requirements to create the strongest case for debt relief.
Expat and International Tax Issues
Americans living abroad still have to file U.S. taxes on their worldwide income. But getting tax credits for foreign taxes paid, sorting out dual citizenship issues, reporting foreign financial assets, and more create complications.
Expat tax lawyers stay up-to-date on international tax laws and can handle your American taxes while you live overseas.
Estate and Gift Tax Planning
Very few taxpayers will owe federal estate tax, since the lifetime exclusion is over $11 million per person. But states have much lower estate and inheritance tax thresholds.
Plus, without proper planning, estates may owe capital gains tax on appreciated assets transferred at death.
An estate planning tax lawyer can explain which taxes your estate may incur and implement strategies like Bypass Trusts to minimize taxes owed by your heirs.
IRS Payment Plans and Installment Agreements
If you have unpaid taxes you can’t afford to pay in full, you may qualify for an IRS payment plan to pay over 6-36 months.
Alternatively, an Offer in Compromise allows you to settle tax debt for less than the full amount in cases of financial hardship.
A tax relief lawyer negotiates on your behalf to get these arrangements approved. They also ensure proper procedures are followed so you avoid defaulting on the payment plan.
Innocent/Injured Spouse Relief
Generally, married couples who file jointly are both responsible for the entire tax liability. But an innocent spouse can file Form 8857 to be relieved of tax debt if their spouse failed to report income or claimed improper deductions.
A tax lawyer can gather evidence and testify on your behalf to prove you weren’t involved in or aware of the tax underpayment.
Tax Penalties Appeal
The IRS imposes various penalties for late filing, underpayment, and other infractions. Many are automatic, but appealing can get fees reduced or eliminated if you have reasonable cause.
A tax attorney is familiar with the appeals process and common grounds for relief. For instance, they may cite extenuating circumstances like military service, natural disasters, or reliance on a incompetent tax preparer as justification to remove penalties.
Finally, on Common Tax Issues Solved by Tax Lawyers
As you can see, tax attorneys have the specialized expertise to address all types of issues that may arise related to IRS compliance, audits, collection enforcement, litigation support, and more.
Their understanding of tax codes and case law allows them to creatively resolve problems with the legal precedent to back it up. Whether you made an innocent mistake or are in serious trouble with the IRS, a tax lawyer has the skills to remedy the situation.
5 FAQs on Common Tax Issues and Tax Lawyers
Q: What can a tax lawyer do if I made a mistake on my tax return?
A: Tax lawyers can help reconstruct records, file amended returns, and negotiate with the IRS to minimize penalties.
Q: How can a tax lawyer help if I’m being audited by the IRS?
A: They understand audit procedures, can analyze the IRS’s case for errors, and negotiate down from maximum penalties.
Q: When would I need an expat tax lawyer?
A: Americans living abroad need help filing taxes properly, getting foreign tax credits, and handling dual citizenship issues.
Q: Can a tax lawyer help me settle my tax debt for less?
A: Yes, they can negotiate IRS payment plans or Offers in Compromise to settle tax debts for less than the full amount.
Q: What is innocent spouse relief?
A: It relieves one spouse from tax debt if their partner failed to report income or claimed improper deductions without their knowledge.