When facing an IRS audit or settling a tax debt, a tax attorney can provide guidance and assistance on complex tax issues and settlement negotiations to achieve the best outcome.
Settling a Tax Debt
Determining the proper course of action when dealing with the IRS depends on a variety of factors. Many tax issues are complex because of complicated IRS rules and regulations and sensitive timelines. For taxpayers who are unfamiliar with the legal language and complexity of tax laws, it can be difficult to settle tax issues on their own. When trying to settle a tax debt, small mistakes can result in steep fines and penalties, even criminal charges that can land a taxpayer in jail.
When negotiating an IRS tax settlement, taxpayers should consider the advantages and disadvantages of hiring a tax attorney vs. self-representation. Although taxpayers can handle their own tax settlements, it’s not recommended if the tax debt exceeds $10,000, or if there’s a possibility of criminal charges for tax evasion or fraud. The IRS offers special programs to help taxpayers with tax settlements.
- Offer in Compromise – An offer in compromise (OIC) is a formal agreement between the IRS and a taxpayer that settles the taxpayer’s tax debt at a reduced amount. The taxpayer must meet IRS eligibility requirements.
- Fresh Start Program – The Fresh Start program simplifies qualifications for taxpayer installment agreements when the tax debt is $50,000 or less. The program also raises the minimum tax debt for tax liens to $10,000.
Hiring a Tax Attorney
The cost of hiring a tax attorney can vary significantly, based on location and complexity of tax issues. Some attorneys charge an hourly fee, while others require a prepaid retainer or charge a flat fee for basic services like creating hardship paperwork, submitting an offer in compromise, or establishing a payment plan. If a case goes to trial, fees are generally much more expensive, since reaching an agreement or settlement can take months in court. Although hiring a tax attorney may seem like a more expensive way to settle a tax debt, taxpayers must consider the alternatives of representing themselves. If there is a criminal investigation in a tax matter, the criminal investigation division with the IRS typically wins 80 percent of their cases, and the average sentence for convictions is three years and four months in jail.