If you receive a notice from the IRS regarding small mistakes and omissions with your income tax return, you can probably deal with the IRS directly or by giving your tax preparer a quick call. However, if there is any chance your case could go sour, you need to call a qualified and experienced tax attorney, and pronto. A good rule of thumb is that if you’re asking yourself whether it’s serious enough to merit calling a tax attorney, it probably is.
Maybe these two true life stories will help:
In January 2014, Beanie Beans founder Ty Werner was convicted of evading $5.5 million in taxes owed on the $27 million in interest accrued from millions of dollars stashed away in a Swiss bank account. The sentence? Two years on probation and some hefty fines, which were small change for a billionaire like Werner.
Unrelated, and a couple of months earlier, Daniel Thody, a defense contractor was found guilty to five counts of tax evasion for failing to report $15,000 and $50,000 in taxes from $1.8 million earned as a contractor for the Department of Defense. He faces up to 25 years in prison, 5 years for each count.
Which one do you think hired a tax attorney and which one thought representing himself would be the smarter option?
Three good reasons you should lawyer up when dealing with the IRS:
1. Taxpayers with Legal Counsel are Treated Better. It’s unfair, even illegal, but it’s also human nature. IRS agents are flesh and blood and if they can get away with bullying someone into their interpretation of the law, they probably will. A tax attorney can ensure the IRS is playing by the rules and treating you fairly. IRS investigators are much more careful about asking inappropriate questions or wasting your time with unnecessary requirements, if they know they are dealing with a tax attorney.
You don’t have to worry about an IRS agent getting upset with you for hiring a tax attorney either. The good ones prefer dealing with tax professionals because they don’t have to waste their time and patience explaining you the ABC’s of a tax audit or the basic IRS guidelines for a criminal investigation. In fact, hiring an experienced tax attorney is generally seen as a sign of good faith to resolve your tax issues.
2. The IRS Has Serious Muscle. The IRS is a behemoth of an agency, one of the most powerful organizations on the planet. From 2008 through to 2014, over 50 bankers from Switzerland, India, Israel and other countries have been indicted for helping rich Americans squirrel billions of dollars into offshore accounts.
If you think this is just posturing, you may want to talk to former banker Raoul Weil. In October 2013, he was picked up in Italy while on vacation with his wife and extradited to the United States. He is now on trial for conspiring to help thousands of Americans hide $20 billion in numbered accounts at UBS.
In 2013, the IRS also cracked the code of silence of Swiss financial institutions and got UBS, the largest Swiss Bank, to divulge confidential information on American tax evaders, and pay a $780 million penalty.
3. Only a Tax Attorney Can Represent You in a Criminal Investigation. When it comes to tax planning, business budgeting and asset management, a CPA is – all things being equal – more useful than a tax attorney is. But when you have a dispute with the IRS, especially if you’re accused of tax fraud or tax evasion, a tax attorney is the only intelligent choice. Tax attorneys are the only ones who can represent you in a court of law and provide you the legal advice and analysis you need. Anything discussed with your tax attorney is protected under the attorney-client privilege. Unlike CPA’s and accountants, attorneys cannot be subpoenaed to testify against a client in a criminal procedure.
What Should You Do?
Tax attorneys know how the IRS operates. So they know what to say, what not to say, and what buttons to push when negotiating your case. Hiring a tax attorney sends the IRS a clear and powerful message. You’re taking the investigation seriously; you’re not going to let IRS agents push you around; and you want to work with the IRS to avoid criminal charges.
Tax problems are usually a serious matter and must be handled appropriately so it’s important that you’ve hired the best lawyer for your particular situation. Hiring a firm highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.
Original Post By: Jeffrey Kahn
Subscribe to TaxConnections Blog
Enter your email address to subscribe to this blog and receive notifications of new posts by email.