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Powell Tax Law Blog

3 min read
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Tax Controversies and Disputes: When to Consult a Tax Attorney for Legal Protection

Even the most organized individuals and businesses find the prospect of doing their taxes daunting. While most tax matters can be handled independently, there are situations where controversies and disputes with the IRS arise, and consulting a tax attorney makes sense.

The NASDAQ says that under certain circumstances, hiring an attorney is not only advisable but necessary. A tax attorney can help with many different legal issues too big to tackle on your own, such as:

  • Keeping clients out of jail for tax fraud or tax evasion.

  • Creating partnerships and structuring complex estate plans.

  • Assisting with nonprofit organization formation, mergers and acquisitions, offers in compromise, and other complex business matters.

  • Some tax attorneys are also accountants, but most are rarely involved in filing tax returns. Like other types of legal specialties, tax attorneys might work as sole proprietors, in small firms or within large business law firms or partnerships.

  • In some states, tax attorneys might also handle real estate sales transactions.

The IRS understands that taxpayers may want to be represented by tax attorneys to help settle disputes and controversies with IRS Form 2848 allowing taxpayers to assign Power of Attorney to someone who can then represent them before the IRS.

“Remember, an IRS problem is a legal problem,” tax attorney Steve Powell says. “Facing the IRS, the largest tax collection agency in the world can feel overwhelming. By hiring an experienced tax attorney, you can be assured that you have representation every step of the way.”

Understanding Tax Controversies

Tax controversies and disputes can arise from various situations, including:

  • Audits and Examinations: The IRS or state tax authorities may decide to audit your tax return, examining it in detail for accuracy and compliance. An audit can lead to disputes over deductions, income reporting, and other tax-related matters.
  • Tax Fraud Allegations: Accusations of tax fraud or evasion can have serious legal consequences. These allegations may arise from intentional misreporting, hiding income, or engaging in other activities to evade taxes.
  • Disputes over Tax Liability: Differences in interpretation between taxpayers and tax authorities regarding the amount of tax owed can lead to disputes. This may involve issues such as the classification of income, deductions, and tax credits.
  • Appealing Tax Assessments: If you disagree with a tax assessment or penalty imposed by tax authorities, you have the right to appeal. Handling an appeal requires a thorough understanding of tax laws and procedures.

When to Consult a Tax Attorney

While some tax matters can be resolved without legal assistance, there are key scenarios where consulting a tax attorney is highly advisable:

  • Complex Tax Issues: When tax issues become intricate and involve complex legal interpretations, seeking the expertise of a tax attorney is crucial. They have the knowledge to navigate complex tax laws and regulations.
  • Facing an Audit: If you are facing an audit, having a tax attorney by your side can help ensure that your rights are protected throughout the process. They can provide guidance on responding to audit inquiries and represent you in discussions with tax authorities.
  • Allegations of Tax Fraud: Accusations of tax fraud demand immediate legal attention. A tax attorney can assess the situation, formulate a defense strategy, and represent you in dealings with tax authorities or, if necessary, in court.
  • Criminal Tax Investigations: If you're facing a criminal tax investigation, the stakes are incredibly high. Hiring an experienced tax attorney is imperative to protect your rights, navigate the legal process, and defend yourself against potential charges.
  • Disputes with Tax Authorities: When disagreements with tax authorities escalate, a tax attorney can act as an intermediary. They can negotiate on your behalf, present legal arguments, and work towards a resolution that is fair and favorable to you.
  • Delinquency and Penalties: Facing tax delinquency or accumulating penalties puts you in a precarious position. A tax attorney can help you navigate repayment options, negotiate penalty reductions, and develop a plan to resolve your tax debt effectively.
  • Appealing Tax Assessments: If you plan to appeal a tax assessment, a tax attorney can guide you through the process. They can help build a strong case, present evidence, and advocate for your position during the appeal.
  • Proactive Tax Planning: Engaging a tax attorney proactively can help you navigate potential issues before they escalate. They can provide strategic advice on minimizing tax liabilities, ensuring compliance, and avoiding disputes altogether.

Beyond The Red Flags: Proactive Protection

Of course, you do not have to consult a tax attorney to react to a controversy or dispute but you can also reach out to tax attorneys to prevent future problems.

Here are some proactive items a tax attorney can help taxpayers with:

  • Review your tax returns: Identifying potential errors or missed deductions can save you money and future trouble.

  • Develop tax strategies: Optimizing your tax deductions, credits, and overall tax structure can significantly reduce your tax burden.

  • Plan for business growth: As your business grows, navigating complex tax regulations becomes crucial. A tax attorney can help ensure compliance and maximize tax benefits.

  • Prepare for life changes: Major life events like marriage, inheritance, or retirement often have significant tax implications. Consulting a tax attorney beforehand can help you plan effectively and avoid unexpected tax liabilities.

Early action is key. The sooner you involve a tax attorney, the better they can assess your situation and develop a successful defense or strategy.

An experienced tax attorney levels the playing field and fights for your best interests, especially since negotiating with the IRS or defending yourself in court against their resources can be challenging.

“Hiring a tax attorney is like investing in your peace of mind,” explains Powell. “Tax controversies can be stressful and emotionally draining. Knowing you have a knowledgeable advocate by your side can provide invaluable reassurance and allow you to focus on what matters most.

Consult with the experienced tax attorneys at Powell Tax Law today to make sure you receive the fair and just treatment you deserve when tax controversies and disputes arise.