There is often some confusion around the role of a Tax Attorney. They are not CPAs or Accountants, but rather they are attorneys that specialize in tax law and legislation.
What Does a Tax Attorney Do?
Attorneys working specifically on tax-related matters may serve in government bodies, nonprofit organizations, corporations, or law firms. Whatever the context for their work, however, these professionals all help clients manage issues related to tax law. In general, they provide services that may include:
- Researching tax laws that could influence an organization’s business strategy
- Advising clients on how to structure transactions in a way that provides tax advantages
- Choosing a business form (LLC, S-type corporation, etc.) for a new business — and creating the documents necessary to create that legal entity
- Managing the timely filing of all paperwork required for compliance with state, federal, and (if necessary) international law
- Representing client interests in court and in communication with the IRS or other relevant regulatory/enforcement bodies
The Decision Whether to Get a Tax Attorney
When you ask a lawyer just how much his services are going to cost you, they might hem and haw, and with good reason. Your case may seem straightforward at first, then some complication arises that takes much more of the attorney’s time than was initially anticipated.
A better question is to ask them is their hourly rate. If they charge $300 an hour and it takes them 10 hours in audit time, court appearances and phone calls to the IRS to resolve your problem, you’ll spend $3,000, at a minimum, not accounting for unexpected complications. Experienced tax lawyers typically charge $200 to $400 an hour , but their rates are subject to inflation just like everything else. Expect to put down a retainer based on how much time the lawyer thinks they’re going to have to put into your case. They’ll bill their time against this money until it runs out, then you may be asked to put down another deposit if your case is still ongoing.
Many situations can arise in business that can necessitate the help of a tax attorney, and they’re not limited to audit notices from the Internal Revenue Service.
- A tax attorney reviews the various legal types of business structures to determine which might be best for your enterprise at startup.
- A tax attorney reviews business contracts and may assist in negotiations, such as the purchase or sale of a business, and to determine and advise you on the tax effects of these deals.
- A tax attorney can advise on the treatment of sales and expenses and deductions at tax time, particularly more complex deductions like depreciation.
- Both CPAs and tax attorneys can represent you in an audit, but only a lawyer can represent you in tax court if the audit ends unfavorably and you want to appeal, or if the IRS levels charges against you.
- A tax attorney can help determine the best form of bankruptcy for your needs if your business should experience financial difficulties. He can advise you on the potential tax effects of various actions during and after bankruptcy.
If you decide to use or retain a tax attorney, look for one who specializes in working with the Internal Revenue Service. Some attorneys may have considerable experience at the state level but rarely practice at the federal level. You’ll want someone who can successfully represent you at an audit, and who has the know-how to negotiate an appropriate settlement in worst case scenarios. Tax law can involve several courts and hearing panels, from administrative appeals to tax court and even to the U.S. Court of Appeals and the Supreme Court.
A tax attorney who specializes in all areas may be pricier, so focus on the expertise you need for your unique situation. It may be possible to use a CPA for some purposes, such as tax preparation or general guidance, reserving an attorney for more serious questions and issues.
