IRS issues can hit anyone at any time, and it is important to weigh all options available to you.
The only way one can do that is by simply learning what it means to fight the IRS alone or fighting the IRS with an experienced lawyer by your side. The following will help you understand the difference between these choices and help guide you to the one that works best for your needs.
Should You Get a Tax Lawyer?
Most of the time, people hesitate to hire a tax lawyer because they are not sure if they even need one. Figuring out if you need one starts with asking yourself a few questions; for example, does the IRS issue sound complicated, such as an audit?
Having legal representation means that any negotiation between you and the IRS is done through a lawyer who knows what to say to get penalties reduced or to find a compromise between the two. Keep in mind that some complex tax situations are going to require knowledge of not only tax laws but the language used by IRS bureaucracies.
A lawyer will be there to cut through the jargon and help you understand the proceedings of the particular problem you are going through. Keep in mind that misunderstandings could end up costing more money or prolong this tax problem. There are times when the IRS actually asks inappropriate questions that a good lawyer can shield the taxpayer from.
It is easy to see how a tax attorney can not only help protect the taxpayer but also reduce the time spent dealing with this particular issue. According to Patrick Cox from Tax Defense Partners that the “goal is not only to attempt to achieve tax debt relief and tax debt settlement at the lowest amount allowed by law, or a payment schedule that least disrupts your economic life but also to reduce your anxiety and stress.”
A tax attorney that does not attempt to do this for his or her client may not be the best choice.
Consider the following points when looking for a tax attorney:
- The professional should be experienced in the tax issue you are dealing with.
- There should be third-party reviews about the lawyer you are considering.
- Check for accreditation and degrees that fortify this lawyer’s capabilities.
- Find out how this lawyer is going to get paid for his or her services before hiring.
Can Taxpayers do Anything on Their own?
As valuable as a tax attorney can be to a person going through tax issues, some individuals still want to do something to stay in control of the situation. The following are some of the things a taxpayer can handle as long as he or she has enough time and knowledge:
A small mistake or a routine interaction with the IRS can be done without legal representation. Most of the time, things like a small mistake on a tax return can be addressed by simply having a conversation with the taxpayer’s preparer.
A taxpayer that needs an extension to complete a tax return can also take care of this particular problem without the help of a lawyer. The only thing that is needed is a simple Form 4868. The instructions are on the form itself and are pretty self-explanatory.
Another thing a taxpayer can do on his or her own is submit an “offer in compromise.” The IRS has set up this program for taxpayers who cannot pay or have trouble paying what they owe. In essence, the taxpayer is petitioning the IRS to allow them to pay what they owe but at a much lower rate. This action is not too hard to do without the help of a lawyer.
It is clear that there are a few steps that anyone can take without hiring a tax attorney.
Of course, there could be other small issues that could be taken care of without any tax law help, but it is important that the taxpayer is honest with him or herself in these matters. Keep in mind that depending on the taxpayer’s tax issues, a small mistake could have dire financial consequences.
Hopefully, some of this information makes it easier for taxpayers to figure out when they need a tax attorney and when they can afford to skip one.
If there is any government agency everyone wants to avoid at all costs, it is the Internal Revenue Service. The tax collection division of the United States government has a long history of being extremely tough when it comes to settling tax debts with American citizens who may be attempting to skirt on their financial obligations to the government based on their personal income levels.
Tax evasion cases can often be very serious, and historically many delinquent taxpayers have faced jail time when they could not settle with the IRS. But, several years ago under the Obama Administration, the agency changed their mission statement to being a “kinder and gentler IRS” while announcing that some individuals who were delinquent on their income taxes could possibly be eligible for a significant reduction.
But, as with many other government programs, qualifying for the offer in compromise (OIC) tax relief benefit is not as easy as it may seem. And, there have been many individuals who submitted an OIC just to have it flatly rejected, usually based on the claims by a taxpayer that the obligation cannot be paid or would result in an insurmountable financial burden. Learn more about how an OIC works.
Here are a few advantages and disadvantages to consider when requesting an OIC approval.
Advantages of an Offer in Compromise
There are several advantages of filing an offer in compromise when there is a distinct possibility it will be approved. The first advantage is that the consistent cloud over your head of the IRS looming to foreclose ends with acceptance of the offer. Even the decision by the agency to investigate the offer can help.
The offer acceptance does not stop the repayment program, but it stops the anxiety of not knowing what will happen, especially when it could result in the shuttering of a personal business. It also means the credit score of the filer will improve as well in most cases when the IRS lifts the collection status of the account. Even an offer that is being investigated will halt the collection process until the IRS renders a final decision. The purpose of the policy is to give a fresh start to those who are delinquent, and many times this is the ultimate advantage.
Disadvantages of an Offer in Compromise
The disadvantages of filing an offer in compromise can be significantly worse than the advantages in an unacceptable situation. One of the first disadvantages is that the IRS will want a large amount of personal information regarding finances that will include a detail listing of income, debt liabilities, and personal assets. These assets can also include retirement accounts, which can make a major difference for those nearing retirement, because the IRS has a 10-year window in which to collect the final agreed upon financial amount.
The filer is also typically placed on probation for a period of five years when an agreement is fulfilled in installments, which can also place more pressure on the filer to meet the repayment schedule. Even when the IRS settles for a minimal amount, this can be a real ongoing problem for the filer.
Additional Potential Problems
The primary concern of the IRS is collection of the tax debt unless there are particularly egregious circumstances involved that indicate criminal behavior. The government agency could actually decide the debt cannot be collected, but that is not exactly forgiveness. The damage to credit scores will remain intact until the debt is settled. But, the biggest problem with an offer in compromise is convincing the agency to approve the request, as they deny up to two-thirds of all submissions.
Accepted offers often require the expertise of an experienced tax liability attorney who knows what to expect as a response from the IRS and understands how to craft an offer that the government may deem acceptable. There is always a 9-12 month investigation during the approval process and more problems can arise regarding taxes during that time.
There is nothing automatic about an offer in compromise to the Internal Revenue Service, and all filers should know that from the very beginning. That is why it is vital to have an experienced tax relief attorney representing your case when the IRS comes calling. It is not just an investment in your personal finances. It is an investment in your future.