Thinking of hiring a tax attorney but not sure how much it’s going to cost? Here are some things to consider when getting hired help with your taxes.
What is a Tax Attorney?
Tax Attorneys are Administrative Law attorneys in that the majority of their work consists of assisting individuals and businesses resolve issues with the Government.
There are three types of Tax Areas performed in working with the IRS and State collection agencies.
1) Preparing and Filing Returns
This entails reporting to the Government income and deductions to meet legal filing requirements. H&R Block, Jackson Hewitt, CPAs and tax preparers often do the majority of this work. (Note: There are good CPAs that can be more effective and less expensive than less experienced tax preparers. We work with and refer business to excellent tax preparers and CPAs).
2) Dealing with Audits and Examinations
This process is responding to questions, missing information and/or disagreements the Government has with a filed return.
3) Negotiating to resolve assessed tax balances.
Negotiating assessed balances does not contest the original balance in most cases but sets up a resolution to stop collection activity, collection rates of interest and a long term resolution that if successful will completely resolve the debt for the client in the long term. (This is often the most important part of the process as it determines what you actually end up paying in taxes).
Tax Attorneys can perform work in all three types of Tax Areas. Here at Guardian Tax Law, PLLC we specialize in Tax Area C. We do perform work in Parts A and B as needed.
A Tax Attorney should be able to:
- Review your case and give you a good outline of what your rights and options are. At times it might require a little bit of digging to get the whole story but most of the time we can tell in the first meeting where a case needs to go.
- Give you a good summary of your rights and options in dealing with the IRS, the good and the bad.
- Help taxpayers understand what led to their tax issue and work to make sure they do not repeat the same mistakes if relevant. They should also give sound advice moving forward to avoid tax issues in the future.
How much should it cost to hire a Tax Attorney?
Fees vary widely by company, complexity of a case and difficulty.
- Starting fees normal fees range from $500 to $1,500 to look into a case and see what needs to be done.
- Company billing policies vary widely. Look into reviews and comments to see if a company over-charges taxpayers. It is important to make sure a company has great experience but doesn’t try to take advantage of taxpayers either.
- Complexity of your case. Personal v. Business, active and open companies can require a lot more work than closed businesses as well as having multiple businesses. Split cases with spouses having separate liabilities or large assets that need protecting make cases more difficult too. The total taxes owed can make a case a lot harder to resolve as high dollar cases, more than $200,000.00 to more than $1,000,000.00 can require a lot more work to resolve.
- There should be some explanation and justification for the numbers quoted for Legal Representation. If a quote seems too high ask the Tax Attorney to explain the fees.
What kind of Billing makes sense for my case?
Fees vary by service performed and by how a case is billed. A few ways that cases can be billed out are as follows:
- Flat Fee service. This is preferred as the client knows beforehand how much they will pay for the legal representation. This is very helpful in measuring how much to spend to fight a certain amount of tax debt. Sometimes it makes more sense to pay off tax debts than to incur ongoing legal bills.
- Hourly Billing. This billing practice makes more sense for large, high dollar cases that require ongoing legal work. It is important to know what the hourly rate is, what will be charged as billable hours and what the estimated time frame is on a case. There are plenty of unforeseen reasons why a case can take much longer than anticipated – usually due to delays by the IRS or state tax agencies.
- Flat Fee portioned out by services provided. Some firms charge fees at various steps in a case. The pitfall is the full cost to be incurred is often not fully realized until the case is close to completion. It can make sense when doing an initial investigation into a case. It can help taxpayers afford a larger case but often costs a lot more than a traditional Flat Fee billing.
Transparency is key to finding a good Tax Attorney and making sure you are going to be billed appropriately. After the initial meeting in most cases you should know your rights and options, how much legal representation is going go cost you (estimated at least if not exact numbers) and how you are going to be billed.