Professional tax attorneys are available for consultation, advice or legal representation in all aspects of tax law. They work with individuals, businesses and nonprofits.
Liana Zelli, an attorney at Bull’s Eye Financial Professionals in Burbank, California, says the three most common requests for tax help her company receive are these:
Tax debt that an individual or business cannot pay. Her firm submits an Offer in Compromise (if the client is a viable candidate) and tries to settle the debt with the government.
Representation when an IRS revenue officer is assigned to a tax debt
Tax attorneys also help with general taxes, payroll concerns and issues surrounding fraud. These experts can provide guidance when forming a business or corporation to help the owners understand tax liability. Several factors affect the cost of hiring a tax attorney.
Hourly rate or retainer
Some attorneys charge set fees for certain tax services, and others charge an hourly rate, charging the client a retainer based on that rate to start. Hourly fees for tax attorneys range from under $200 to over $450 per hour, depending on a firm’s reputation, a lawyer’s experience and other factors such as geographic location.
Zelli says Bull’s Eye Financial Professionals charge set fees based on the resolution of a case and services the attorney is hired for. These fixed rates are based on the tax issues at hand, the client’s expectations and what can be actually be done, and the severity of the case. If a client asks for help at the last minute and the case requires a lot of work in a very short period of time or if the case is particularly complex, the rates will usually be higher. According to Zelli, fixed rates can start around a few thousand dollars and go up from there.
Going to trial
Federal tax matters rarely go to trial, says Zelli of Bull’s Eye Financial Professionals. "Even when a tax court petition is filed, it tends to settle out in the Appeals Division of the IRS, or sometimes cases are filed in District Court." In a situation where a case does go to trial, it’s important to weigh what the cost of litigation is versus the tax amount in controversy because trial fees are generally hourly and can add up quickly.
Legal assistance with the IRS
When money is owed to the IRS, a tax attorney can help cut through the red tape and work toward a resolution. Here are some sample cases where a tax attorney made a difference.
Client owed $90,000 to the IRS
Situation: The IRS audited the client, stating the client owed $90,000 in taxes. The client hired Bull’s Eye Financial Professionals for representation. The law firm worked with the IRS, so the client never had to be in direct contact with the government. The lawyer filed a petition with the Tax Court, arguing how and why the tax due was incorrect. After the case was assigned to the Appeals Division, the lawyer provided proof to support the argument.
Outcome of case: A U.S. Tax Court Petition was filed, and the case was resolved in Appeals, reducing the liability (taxes client owed) from $90,000 to $19,000.
Length of time: Three months to resolve
Legal fees paid by the client: $5,000
Client owed $250,000 to the IRS
Situation: The client was a medical professional in California who had not worked for several years but still held his professional license. If you hold a professional license in the state and don't file a tax return, the Franchise Tax Board (FTB) assumes you were working and does an assessment of what they think you made (based on employment data in the state) and then you are on the hook for that amount. The client hired Bull’s Eye Financial Professionals because the FTB claimed he owed approximately $250,000, based on several years of assessments. Furthermore, because he was a medical professional, the governing medical board was threatening to revoke his license. Bull’s Eye Financial Professionals represented the taxpayer, contacted the FTB to discern the issue, filed original returns and continuously contacted the FTB to ensure that the returns were received and being worked on so nothing slipped through the cracks.
Outcome of case: FTB cleared his $250,000 debt, and the client owed only $1,000 in filing fees and late penalties.
Length of time: Nine months to resolve
Legal fees paid by client: $7,000