8 Warning Signs You Need To Hire A Tax lawyer
Most people handle routine tax filing with software or a CPA. You input your W-2, claim your deductions, and file by April 15th. Simple enough.
But tax situations don’t always stay simple. Business ownership, investment income, international transactions, and IRS disputes create scenarios where your CPA’s expertise isn’t enough. Our friends at Crepeau Mourges discuss how tax attorneys bring legal protections that accountants cannot provide, including attorney-client privilege and representation in court. A qualified tax lawyer becomes necessary when your tax situation crosses from financial planning into legal territory.
Understanding When You Need Legal Representation
The line between tax preparation and tax law isn’t always obvious. Generally, if you’re dealing with potential penalties, criminal exposure, or disputes with tax authorities, you’ve moved beyond what a CPA can handle alone.
The Eight Red Flags
1. You Receive A Criminal Investigation Notice
The IRS Criminal Investigation Division handles suspected tax fraud, evasion, and other tax crimes. If you receive communication from CI, not just a regular audit notice, you’re potentially facing criminal charges.
According to the IRS Criminal Investigation division, these investigations have a conviction rate exceeding 90 percent. You need legal representation immediately. Do not speak with investigators without an attorney present.
2. You Haven’t Filed Returns For Multiple Years
Unfiled tax returns don’t disappear. The IRS eventually catches up, often when you least expect it. Non-filing can result in substantial penalties, interest accumulation, and potential criminal charges for willful failure to file.
We help clients address unfiled returns strategically. Sometimes filing all returns at once isn’t the best approach. We evaluate your situation, calculate potential exposure, and develop a plan that minimizes penalties while bringing you into compliance.
3. You’re Facing An IRS Audit
Most audits are straightforward correspondence audits that CPAs handle routinely. But certain red flags indicate you need legal counsel:
- The audit involves multiple years
- IRS agents request interviews or depositions
- The examination focuses on fraud indicators
- You’re unsure whether your deductions were legitimate
- The proposed adjustments are substantial
Attorney-client privilege protects communications with your lawyer in ways that accountant-client privilege does not. This protection becomes valuable if the audit escalates.
4. You Owe More Than You Can Pay
Owing back taxes doesn’t mean automatic financial ruin. The IRS offers several resolution options including installment agreements, offers in compromise, and currently not collectible status.
However, negotiating these agreements requires understanding which option fits your situation and presenting your case persuasively. We analyze your financial condition, evaluate available options, and negotiate with the IRS to reach manageable resolutions.
5. The IRS Files A Tax Lien Or Issues a Levy
Tax liens damage your credit and complicate property sales or refinancing. Levies allow the IRS to seize bank accounts, wages, or other assets. Both actions indicate the IRS has exhausted standard collection procedures.
You can challenge liens and levies, request releases, or negotiate alternative collection arrangements. These processes have strict deadlines. Missing them can result in losing your appeals rights.
6. Your Business Has Payroll Tax Problems
Payroll tax issues are particularly serious. The IRS prioritizes employment tax collection because these are trust fund taxes, money withheld from employees that the business holds in trust for the government.
Business owners and responsible officers can be personally liable for unpaid payroll taxes through the Trust Fund Recovery Penalty. This penalty equals 100 percent of the unpaid trust fund portion and applies even if the business was struggling financially.
7. You’re Involved In International Tax Matters
Cross-border transactions trigger additional reporting requirements. Foreign bank accounts, foreign businesses, foreign gifts, and foreign trusts all require specific forms and disclosures.
The penalties for non-compliance are severe. FBAR violations can result in penalties of $10,000 per violation for non-willful failures and up to $100,000 or 50 percent of the account balance for willful violations. We help clients navigate offshore voluntary disclosure programs and ensure compliance with international reporting obligations.
8. You’re Buying Or Selling A Business
Business transactions have significant tax implications. Asset sales are taxed differently than stock sales. Earnouts create deferred tax issues. Allocation of purchase price affects both buyer and seller.
Tax planning during the transaction structure saves substantially more than trying to fix problems after closing. We work with business attorneys and accountants to structure deals tax-efficiently.
The Value Of Attorney-Client Privilege
One advantage tax attorneys offer that CPAs cannot is attorney-client privilege. Communications with your lawyer about tax strategy and representation are protected. If the IRS issues a summons for documents, privileged communications remain confidential.
This protection matters most when you’re uncertain about past tax positions or worried about potential exposure.
Taking Action Now
Tax problems grow worse with time. Penalties and interest compound. The IRS becomes less willing to negotiate. Your options narrow. We help clients address tax issues proactively, whether that means resolving current disputes, planning future transactions, or bringing past non-compliance into order. Contact us to discuss your tax situation and develop a strategy that protects your interests.