How To Choose The Best Tax Lawyer

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Before he became a big-time TV star, the late Anthony Bourdain owed ten years of back taxes. “In my daily life, the goal was to muffle the anxiety that I’d feel as I tried to drift off to sleep knowing that, at any point, what little money I had in my bank account could be garnished by the IRS,” he said in 2017.

Anxiety isn’t a defense to tax nonpayment. In fact, pretty much nothing is a defense to nonpayment. The good news is that the IRS, and state tax authorities, don’t want to punish taxpayers, at least in most cases. Instead, they just want the money. The bad news is these government bodies have easy access to collection tools, like bank account levy and wage garnishment, that private bill collectors only dream about.

Writing a huge check to satisfy thousands of dollars in tax debt usually isn’t an option. If the taxpayer had that kind of money, s/he probably wouldn’t be delinquent. Fortunately, a number of options are available. All of them have pros and cons. The best tax lawyer lays all these options out, including bankruptcy[a], carefully explains the advantages and disadvantages of each one, and stands up for you through thick and thin.

What Does a Tax Attorney Do?

A tax law attorney gives distressed debtors a full range of legal options. Tax relief agencies, as outlined below, offer limited menus. Some possible tax resolutions include:

Chapter 7 Bankruptcy

The B-word is a dirty word to most people, mostly because the negative consequences are high. But desperate times call for desperate measures. If you filed the returns (reasonably) on time, the tax debt is more than three years old, and you meet other program requirements, Chapter 7 bankruptcy eliminates tax debt in as little as six months.

Chapter 13 Bankruptcy

Not everyone qualifies for Chapter 7, but almost everyone qualifies for Chapter 13. The “wage earner” plan gives debtors up to five years to repay allowed claims, including tax debt.

Furthermore, the Automatic Stay prevents all wage garnishment and other adverse actions. Additionally, Chapter 13 shields most assets from creditors, including the IRS. Exemptions vary in different states, but they usually include home equity, retirement accounts, motor vehicles, government benefits, and personal property.

These protections also apply in Chapter 7 bankruptcy. For this reason, tax law attorneys sometimes combine Chapter 13 and Chapter 7 into a “Chapter 20” bankruptcy.

Offer in Compromise

The taxpayer liquidates everything, writes the IRS a check, and the agency calls it even. “Compromise” is a bit misleading. The C-word implies some give and take from both sides. Instead, the IRS accepts or rejects an offer in compromise, take it or leave it. Usually, the IRS only considers OIC proposals if it believes the taxpayer couldn’t repay the entire amount over time in an installment agreement. More on that below.

Currently Not Collectible

CNC status is the Holy Grail of tax law payment relief. Penalties and interest might continue accruing on unpaid amounts. But otherwise, the agency leaves the taxpayer alone. It cannot garnish wages, levy bank accounts, or do other bad things.

Bureaucrats don’t apply this label unless, pardon the expression, the taxpayer doesn’t have a pot to piss in. If you have any assets beyond the clothes on your back and a part-time dishwashing job, you’re probably not eligible for CNC.

Innocent Spouse

This defense is also misunderstood. Many spouses are blissfully ignorant. But they aren’t innocent according to the IRS.

Assume Husband and Wife buy a large house, a pimped-out SUV, a vacation home, and other luxury items. When Husband prepares the couple’s tax return, he omits income streams, reducing their reported annual income to $100,000.

The IRS presumes Wife read the 1040 before she signed it. The IRS also presumes Wife isn’t stupid. Therefore, she knows they declared $100k. She also knows their declared income cannot possibly support their lifestyle. Unless a tax law attorney rebuts these presumptions, which is almost impossible, Wife is not an innocent spouse.

Installment Agreement

Under the Fresh Start Program, an installment plan is a lot like Chapter 13 bankruptcy. Basically, the IRS uses the ten-year collection statute of limitations to divide tax debt. If Frank owes $10,000 and the SOL expires in five years, he must pay about $200 per month.

Penalty abatement is available in installment agreements. The IRS only offers Penalty Abatement if the taxpayer shows reasonable cause. Some situations include natural disasters, death in the family, and other extreme events. Lack of funds isn’t reasonable cause.

What is the Difference Between a Tax Attorney and a CPA?

CPAs and tax relief agencies usually make big promises in radio, TV, and internet ads. CPAs may be better than lawyers when it comes to running numbers. But CPAs cannot offer any tax relief services, other than installment agreements, unless the situation is gift wrapped. These professionals cannot give legal advice and they certainly cannot represent people during formal or informal hearings.

When to Hire a Tax Law Attorney

Many people, even seriously delinquent taxpayers, don’t think they need tax lawyers. Anthony Bourdain was ten years behind and not even on the IRS radar. His case is not a one-off lucky instance. The formal audit rate is 0.25 percent.

Notice we said “formal”, in-person audit rate. Incidentally, we implore you not to watch this entire video. It’s pretty dull. The IRS conducts non-personal audits, usually with the dreaded and feared “Dear Taxpayer” letters, at record rates.

As a rule of thumb, if you are more than a year behind, and you cannot comfortably pay all taxes, penalties, and interest with one check, a tax law attorney should at least evaluate your case.

What to Look For in a Tax Law Attorney

If you want to know how to find a good tax attorney, look for the same qualities you look for in a family law attorney or other kind of lawyer.

  • Dedication: Tax law is a niche area, so not many attorneys are entirely dedicated to this area. But these lawyers are out there. As outlined above, tax law is so complex that you really don’t want a dabbler. So, take a little extra time and find a dedicated lawyer.
  • Accessibility: Tax law attorneys may not be physically accessible, but they’re professionally accessible. Most tax law offices are small operations with one or two lawyers and one or two assistants. Furthermore, if a lawyer is willing to meet with you at a place like a library study room, that effort solves the accessibility problem.
  • Experience: Many tax law attorneys are former IRS lawyers. That’s usually the kind of experience you want. These lawyers aren’t just familiar with your legal options. They also know how to anticipate and overcome IRS objections.

Penalties and interest usually compile monthly. So, the longer your search for the right tax law attorney takes, the more difficult, and expensive, your case is to resolve.

How Much Does a Tax Attorney Cost?

Most lawyers, including most tax lawyers, charge hourly fees or flat fees. Contingency fees are usually illegal in tax law cases.

Solid tax law attorneys who check the above-listed boxes usually charge about $300 per hour. If a lawyer charges substantially less, remember that you get what you pay for. Lawyers who charge substantially more often aren’t qualified either. We’ll give you an insider tip. If a lawyer thinks s/he cannot handle the case, s/he quotes a large fee. So, the potential client thinks “wow, this lawyer is so good I can’t afford him/her.”

More experienced lawyers often charge flat fees, such as X for OICs and Y for CNC matters. These lawyers estimate the time necessary and charge appropriately. Other than the time involved, some fee-setting factors include the lawyer’s experience, the matter’s complexity, the opportunity cost to the lawyer (i.e. a high workload in one case means a lawyer can’t take other cases), and the client’s ability to pay.

Picture of Bret Thurman

Bret Thurman

Bret is a former lawyer and full-time writer who knows how to simplify complex topics. He received his law degree from the University of Texas at Austin. For over twenty years, he handled a wide variety of cases, including criminal defense, personal injury, family law, and consumer bankruptcy.

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