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Does Hiring a Tax Attorney Raise Suspicion
Will Hiring a Tax Lawyer Make the IRS or Taxing Agency Suspicious? If you’re considering hiring a tax lawyer to assist with your tax matters, some clients have asked me whether doing so could raise red flags with the Internal Revenue Service (IRS) or other taxing agencies. They often ask me if the government may think that the taxpayer is automatically guilty or receive more suspicion. This is a common concern among taxpayers who want to ensure compliance while addressing complex tax issues. What some business owners or individuals don’t realize is that from the IRS, FTB or CDTFA’s perspective, having a tax attorney is the norm and an expected arrangement in all tax resolution situations.
Why Hire a Tax Lawyer?
Beyond the attorney client privilege, Tax laws are complex, with frequent updates and nuances that can be challenging for the average person to navigate. A tax lawyer provides specialized expertise to help you:
- Ensure Compliance: A tax lawyer ensures your filings align with federal and state tax laws, reducing the risk of errors.
- Resolve Disputes: If you’re facing an audit, lien, levy, or other tax-related issue, a lawyer can negotiate on your behalf.
- Plan Strategically: Tax lawyers can help structure your finances to minimize tax liability legally.
- Protect Your Rights: They advocate for you in dealings with the IRS or state agencies, safeguarding your interests.
Hiring a tax lawyer is a proactive step, akin to consulting a doctor for health concerns or an accountant for financial planning. It is “par for the course” in the world of tax audits, tax settlements and any tax investigations.
Does Hiring a Tax Lawyer Make the IRS Suspicious?
In short, no. The IRS recognizes that taxpayers often seek professional assistance to navigate the complexities of tax law. In fact, the IRS itself encourages taxpayers to seek qualified representation when facing audits or disputes and provide a specific form so an attorney can help you with your case (IRS Power of Attorney Form 2848) . According to IRS guidelines, taxpayers have the right to retain an authorized representative, such as a tax attorney, enrolled agent, or CPA, to handle tax matters on their behalf. However, certain circumstances surrounding your tax situation could draw scrutiny, regardless of whether you hire a lawyer.
Let’s break this down:
When Hiring a Tax Lawyer Is Unlikely to Raise Concerns. The IRS typically views hiring a tax lawyer as a routine action in the following scenarios:
| Situation | Why It’s Unlikely to Raise Suspicion |
|---|---|
| Routine Tax Planning | Seeking advice on deductions, credits, or structuring business transactions is standard practice. |
| Audit Representation | The IRS expects taxpayers to hire professionals during audits to ensure accurate communication and documentation. |
| Amending Past Returns | Correcting errors on prior returns with professional help shows a good-faith effort to comply. |
| Complex Financial Situations | High-income earners, business owners, or those with international assets often hire tax lawyers due to the complexity of their finances. |
In these cases, hiring a tax lawyer is seen as a responsible decision, not a cause for alarm.
When You Must Hire A Tax Attorney.
While hiring a tax lawyer itself isn’t suspicious, certain behaviors or situations could attract IRS attention. However, under these situations, hiring legal counsel may be your best option:
| Red Flag | Why It Might Attract Scrutiny | How a Tax Lawyer Helps |
|---|---|---|
| Unreported Income | Failing to report significant income, especially from cash-based businesses or offshore accounts, can trigger audits. | A lawyer can help disclose income properly and negotiate penalties. |
| Aggressive Deductions | Claiming unusually high or questionable deductions may prompt an audit. | A lawyer ensures deductions are legitimate and well-documented. |
| Late or Incomplete Filings | Missing deadlines or submitting incomplete returns can raise concerns. | A lawyer can file extensions or amend returns to correct issues. |
| Tax Shelter Involvement | Participating in questionable tax avoidance schemes is a red flag. | A lawyer can assess the legality of such schemes and guide you toward compliance. |
If your tax situation involves any of these issues, the IRS’s focus will be on the discrepancies, not the fact that you hired a lawyer. In fact, a tax lawyer can help mitigate these issues by ensuring proper documentation, timely filings, and transparent communication with the IRS.
How the IRS Views Professional Representation
The IRS explicitly acknowledges the role of tax professionals in its Taxpayer Bill of Rights, which includes the Right to Retain Representation. This means you’re entitled to hire a tax lawyer, CPA, or enrolled agent to represent you in dealings with the IRS. The agency interacts with thousands of tax professionals daily and views their involvement as standard practice.In 2024, the IRS processed over 150 million individual tax returns, with millions of taxpayers relying on professionals for preparation or representation. The IRS’s focus is on ensuring compliance, not penalizing taxpayers for seeking expert help. A tax lawyer’s involvement often streamlines communication, as they are familiar with IRS procedures and can present your case clearly and professionally.
Benefits of Hiring a Tax Lawyer
Hiring a tax lawyer offers several advantages that can actually reduce the likelihood of IRS scrutiny:
- Accuracy and Compliance: A tax lawyer ensures your filings are accurate and compliant, reducing the risk of errors that could trigger an audit.
- Confidentiality: Unlike CPAs or enrolled agents, tax lawyers offer attorney-client privilege, protecting sensitive communications from IRS disclosure in most cases.
- Negotiation Power: If you owe back taxes or face penalties, a lawyer can negotiate settlements, such as an Offer in Compromise, to reduce your liability.
- Proactive Tax Defense: A lawyer can identify potential issues before they escalate, such as unreported income or improper deductions.
When Should You Hire a Tax Lawyer?To illustrate when hiring a tax lawyer is most beneficial, consider the following chart:
| Scenario | When to Hire a Tax Lawyer | Expected Outcome |
|---|---|---|
| Facing an Audit | As soon as you receive an audit notice. | Professional representation to present your case and minimize penalties. |
| Owing Back Taxes | When you receive a notice of deficiency or collection action. | Negotiation of payment plans or penalty abatement. |
| Complex Tax Situations | If you have international income, own a business, or engage in complex investments. | Strategic planning to optimize tax outcomes legally. |
| Suspected Tax Fraud | If you suspect errors or omissions that could be construed as fraud. | Guidance on voluntary disclosures to avoid severe penalties. |
Contac Us
Hiring a tax lawyer does not make the IRS or other taxing agencies suspicious, it is considered routine in the tax world. The IRS is more likely to focus on your tax discrepancies than on the fact that you sought professional help. A tax lawyer can help you navigate complex tax laws, resolve disputes, and avoid pitfalls that may attract unwanted attention. Contact us today or call us to discuss your tax concerns (310) 788 9820.