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A common question about IRS problems is whether or not a tax attorney is needed usually asked as”can’t I just handle this myself and save some money?”

I think that many IRS problems can be handled without extensive help. For these simpler issues though, it would be wise to meet with an experienced lawyer and pay for some discussion time just to make sure the right path is being followed.

The following is list of the most obvious issues that I think necessitate the use of a lawyer.

• IRS Audit
• Tax Fraud/Evasion
• IRS summons on bank to produce records
• Large tax debt and need to obtain some relief in the form of an offer in compromise, bankruptcy, penalty abatement or installment agreement.
• Large tax debt and have lost an offer in compromise or recieved an unfavorable ruling from the IRS that needs to be appealed
• Trust Fund Recovery Penalty – Business owes payroll taxes and IRS is attempting to place the responsibility for a large portion of them on the taxpayer.
• Employment tax problem
• Unreported offshore bank accounts or other foreign financial accounts
• Unfiled foreign bank account reports with the IRS
• Independent contractor issues with IRS – The ISR is attempting to make a claim that the business’s independent contractors are really employees.
• Tax Lien Filing – If the lien is affecting business or credit, causing an inability to sell a home.
• IRS Levy
• Multiple years of unfiled tax returns (using your own cpa but under the “umbrella” of the attorney client privilege)

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1. Lawyer?

Debates abound about whether Tax Law issues should be dealt with by CPAs, Enrolled Agents or Attorneys. Attorneys are exempt from being forced to testify against clients in criminal settings of course, but there is a reason that is more relevant to the average taxpayer.

Attorneys are trained in the law. They understand how laws work and how to bring cases in Court. They are licensed to practice law. That training and licensure provides the Attorney an ability to give the client complete advice and representation.

“Complete” includes Tax Court representation and Bankruptcy Court representation. It also includes the ability to use that knowledge when analyzing every client’s case.

2. A Free Discussion

The first time that you speak with the lawyer, he or she may be answering a number of your questions. The lawyer is probably asking you just as many or more, and doing so in an effort to “gauge” you and your case.

I speak to each potential client over the phone for free. I ask a number of questions, and try to answer as many as possible. I am usually able to provide some general direction based on the discussion.

There is no reason to pay for the attorney’s time until it is relatively clear that the attorney can help.

3. Scare Tactics and Sales Technique

The airwaves, internet, and TV are loaded with tax experts. I wonder if there are more tax “resolution” firms then there are taxpayers sometimes. It has been said that many of these firms are simply salesmen dressed up as tax experts. If true, that would explain some of their high pressure tactics.

Here are some basic rules to live by when calling around.

Avoid firms that use scare tactics like:

“You need to hire us now or you may go to jail”

“You only have one shot at this”

Avoid Firms that make big promises before they have spent some serious time with you, the IRS and your documents.The offer in compromise is not for most, in fact, it only works for a chosen “few” on average. “Pennies on the Dollar” should be modern parlance for “run away”.

Avoid firms that encourage you to avoid looking into bankruptcy or into only one theory of resolution.They likely aren’t attorneys and don’t truly understand bankruptcy law and it’s serious interplay with tax debt and the offer in compromise process.

Avoid firms that send you a letter about your tax lien or call you after you receive the tax lien.

These firms are buying your address from a company that scours court records in hopes that they can be the first to high pressure you into paying for pennies on the dollar settlement.

4. What you want to hear vs. what you need to hear

Attorneys are licensed by their respective state bar associations and are bound by a code of ethics which is strictly enforced. Attorneys are trained to be ethical. Of course there are exceptions, but for the most part, attorneys try to give their clients the real “low down”.

In the tax world it is very important the taxpayer hear what they need to hear i.e. the truth… versus what they want to hear i.e. “no problem, just write us a check and the debt will go away”.

Going down the “want” to hear road, will lead to lost time, lost money, increased debt and more sleepless nights.

5. Direct Relationship

It would be wise to use someone local that maintains direct contact with you.

6. First Person

Resist the temptation to hire the first person you talk to. Look around, talk to a number of different people. It is a big decision with long lasting ramifications.

7. Don’t hire someone based solely on price

Fees are tricky. Many flat fee firms have figured out how to get the most money from someone in exchange for the least amount of work. There is little oversight in these relationships, the process is treated like a commodity, and the taxpayer ends up paying far too much OR worsenot enough to keep the representative’s interest in the case alive.

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Licensed Attorneys, Certified Public Accountants, and “Enrolled Agents” are allowed to represent clients in front of the Internal Revenue Service. Licensed Attorneys are automatically allowed to be admitted to practice before the U.S. Tax Court. CPAs and Enrolled Agents must pass a rigorous exam.

Anyone on the other hand, can own a business that “sells” tax controversy and resolution services to taxpayers nationwide. This ability to “sell” tax resolution services with little oversight has led to a tremendous amount of misinformation about a taxpayer’s ability to deal with overwhelming tax debt.

I receive a number of calls from taxpayers who are certain, based on an ad or telephone sales pitch, that they will be able to simply settle their tax debt for a very small amount.

Many who call have paid the company, went through the process, and failed.

Not only have they failed, they don’t really understand why, and probably paid a large sum for the opportunity.

Attorneys have as a profession become the butt of many jokes. Many are quite funny. Most attorneys I know however are smart, hardworking and have the best interests of the client at heart.

For these reasons as well as the following, I always encourage taxpayers to talk to a real, live, licensed, experienced, and local tax controversy attorney before deciding what to do about their tax debt.

1.Lawyers Are Regulated

Attorneys have all sorts of legal obligations placed on them by various regulatory systems that have been set up to ensure the highest standards of representation. These include state ethics rules, and IRS rules of practice. No CPA or Enrolled Agent is held to a standard as high as an attorney. Tax controversy businesses are unregulated. These regulations ensure that most attorneys are as mentioned above, hardworking and conscientious.

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If you are a “regular joe” taxpayer i.e. you are an employee or have a small business, advice as to what you should do with a large tax bill is all over the place. Even Yahoo online is providing advice.

It is true that there are just a few things that the law will allow you to do. First, make sure that the debt amount is accurate and challenge it if not. Second, file an offer in compromise if you are a truly good candidate (many aren’t), third, set up an installment agreement based on your ability to pay, fourth, negotiate non-collectible status, fifth use the statute of limitations to your advantage and last, file bankruptcy.

I discuss each of these options at other places in the site.

The point is that general advice about what to do is easy to find. If your situation is relatively simple the solution may be as well. BUT most taxpayers who owe large amounts of debt will benefit by using a knowledgeable tax attorney in ways they may not even know. If you are suffering, read as much as you can, but be careful about going it alone.

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Two recent court rulings have allowed lawsuits to continue against American Tax Relief. The suits allege that the “tax company” mailed postcards to people with tax liens and stated among other things that, “Congress has recently passed NEW laws, making it easier to settle tax debts,” “We can help you today,” and that American Tax Relief had “ … helped thousands settle their taxes for only Pennies-on-the-Dollar.” T

In both cases American Tax Relief requested dismissal of the lawsuits, arguing that their advertising was only “exaggeration” and that exaggeration by itself is not included in the list of prohibited conduct under New York consumer-protection laws.

In both cases the courts ruled essentially in favor of the plaintiffs and permitted the main provisions of the lawsuits to proceed to trial. The cases are Jonathan Mintz, Commissioner of the Department of Consumer Affairs, v. American Tax Relief, and Willie Mae Brown, On Behalf of Herself and Others Similarly Situated, v. American Tax Relief.

I always advise people with serious tax problems to hire a local tax attorney who will tell you the truth about your options, provide personalized and actual legal representation and who can be held more easily accountable than non-attorneys.

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1. Lawyers are Regulated

As an attorney I owe my clients all sorts of ethical obligations, including state bar ethics rules, and IRS rules. Asa member of the human race, I owe my clients a few moral obligations as well.

As far as the first type of obligations are concerned, confidentiality is a major requirement as are competence, and zealous representation.One of the most important obligations an attorney has, is to place the client’s interests before his own”interests” (more commonly know as his pocketbook).This does not mean that the attorney has to work for free, but it does mean that he can’t advise you to do something just because he would get a bigger fee as a result.

2. The Attorney is a Counselor

The main reason to hire a tax attorney is because he or she is a counselor in the true sense of the word. A Counselor can review your situation and consider all of your options. Available options are often legally intertwined therefore each option must be thoroughly considered, including tax related bankruptcy Anyone providing advice about tax debt who does not have experience with tax related bankruptcy, is not providing complete advice.

3. Attorney Client Privilege

When dealing with the IRS you should always used a licensed, experienced tax attorney and never a “tax resolution company”. What you tell your attorney is confidential. What you tell anyone else isn’t.

4. Better Problem Solving and Legal Analysis

- Most tax problems involve complicated legal issues that require an the attorney’s knowledge to understand and apply.

- Tax Attorneys know the tax law and internal IRS procedures.

- They know how to apply the law to the facts and argue accordingly. T

- They are more credible with IRS agents.

- Tax lawyers can produce technical memorandum on the facts and law to accompany the other legal documents, thereby increasing your chance of success.

- As a licensed attorney, admitted to practice in the U.S. District Court, Bankruptcy Court, and U.S. Tax Court, you have access to more options in dealing with your tax debt.

5. Negotiating Skills

Most tax controversy work involves some serious negotiation. The key to negotiating is knowledge and training. Attorneys are trained to analyze the facts in light of the law in order to put together arguments that support their client’s position as strongly as possible. They are not intimidated because they understand the law. These skills in combination with the ability to use the court system, provide the attorney with some real leverage.

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