You may be thinking "If I can’t pay the IRS how do you think I can afford a lawyer?"
However, sometimes you have to consider your options realistically. The IRS isn’t going away anytime soon and if you owe them money you will often need competent advice.
So before answering the question, here are some ideas:
The IRS allows Attorneys, CPAs and Enrolled Agents to represent taxpayers.
There are many tax professionals offering their services to taxpayers but many are not attorneys. Why should you consider hiring an attorney to handle your tax debt problem instead of other tax professionals?
Around 14 million taxpayers are on the IRS' radar, and they are pressuring taxpayers for payment. There are certain advantages to hiring an attorney that specializes in tax debt relief.
So what's the difference between a CPA, an enrolled agent, and an attorney?
Sometimes Certified Public Accountants (CPAs) offer to represent their clients before the IRS but most of them do not. They are too busy doing what CPAs normally do, including giving tax strategy advice, preparing returns, IRS regulations compliance, etc. CPAs represent clients throughout the year, but during certain times they focus on deadlines to help clients file returns.
Unless the CPA firm has a dedicated division, often a CPA will not handle emergencies such as stopping a bank levy or wage garnishment. Handling IRS emergencies is a normal part of what a professional does to handle your tax debt problem.
Enrolled Agents can also represent clients before the IRS but are normally not as knowledgeable as CPAs and Attorneys.
According to the IRS website, to become an Enrolled Agent you need at least five years’ experience as an IRS employee (certain positions).
Otherwise, you can take these steps:
- Obtain a Preparer Tax Identification Number;
- Apply to take a test;
- Achieve passing scores on all 3 parts of the exam;
- Make formal application; and
- Pass a tax compliance check.
There is no educational requirement as attorneys and CPAs are required to have. While there are competent Enrolled Agents, the requirements to become an attorney or CPA are much higher.
Additionally, attorneys and CPAs work for their clients who pay them to solve their problems. While IRS employees can have the requisite knowledge, their paycheck does not depend on private taxpayers who must go up against the IRS.
This pressure on attorneys and CPAs gives these professionals experience that IRS employees don’t have.
Why you should hire a competent attorney rather than a CPA or an Enrolled Agent?
A competent tax debt relief attorney provides certain benefits to taxpayers that neither CPAs nor Enrolled Agents can offer you.
Attorney-Client Privilege: When you hire an attorney there is a legal concept known as the attorney-client privilege. This concept protects the taxpayers in that all communications between the attorney and the client are kept strictly confidential.
When you are represented by an attorney you can disclose all relevant information to the attorney; this is so you can get proper advice in often delicate legal situations. This privilege is not something that a Certified Public Accountant or an Enrolled Agent can offer you.
- Tax Court Appearance. A tax attorney can not only represent you before the IRS at meetings with the IRS employees, they can respond to IRS notices and letters, and meet with the IRS agents and officers without you being present. But the unique advantage of hiring an attorney is that the attorney can represent you in Tax Court which CPAs and Enrolled Agents cannot do for you.
- Often Have Better Experience and Background: If you select an attorney that has handled other areas of the law related to IRS tax debt, such as bankruptcy, he or she will usually have background and experience. That will give you a wider variety of solutions available to solve your tax debt problem. Generally, a CPA or an Enrolled Agent will not have the training and experience to give or understand bankruptcy advice from an attorney that usually handles bankruptcy work.
Attorneys are also trained and experienced in researching law in various areas; generally they spend more time and effort drafting persuasive arguments to government authorities. This is unique to attorneys as opposed to other tax professionals.
IRS Problems? Choose an attorney that specializes in tax debt relief.
Like other professionals, when attorneys specialize on one area, such as in handling tax debt cases, the client greatly benefits.
In the same way you would want a brain surgeon (instead of a general physician)to remove a brain tumor, specialization in legal matters greatly benefits the client.
Be careful when an attorney lists several areas of the law that he or she practices in.
After practicing law for over 40 years I can tell you it is not possible to be competent in many areas of the law.
Drawbacks of picking a non-specialized attorney.
Tax laws are very complex and dabbling in this area can be dangerous to the client. Not only are tax laws complex, they are constantly in flux based on new court decisions, new legislation, changing regulations and practices.
By selecting an attorney specializing in tax debt relief, you will usually find the attorney competent in this area. Additionally, you will usually get more competence at the same or better price. They will have the wisdom that comes from lessons learned only through experience.
This is because the attorney has built his or her knowledge in a specialization. They will be able to quickly identify problem areas and legal solutions much more easily than an attorney that doesn’t handle tax debt problems regularly.
A specialist attorney usually also has set up systems to handle many similar types of cases in which the law firm regularly handles. This reduces the cost when a specialist handles your case, but with a higher level of competence.
The cost of hiring a specialist attorney.
Specialists make more money than generalists, but often it is not because they charge more (even though a higher fee is usually justified). They can develop systems, train staff, create checklists and create office policies around handling tax debt relief cases. Specialists in this area of the law can make more money because they can handle many more cases at a lower overhead than attorneys that don’t handle tax debt cases regularly.
Once you decide to hire an attorney that specializes in tax debt relief cases, being able to afford to pay your attorney is often a concern. Here are some thoughts on this concern.
How Can I Afford To Pay My Attorney?
Fixed fees. I recommend hiring an attorney that charges you a set fee for services rather than an hourly rate. My experience is that clients want to know exactly what the attorney is going to charge, as opposed being surprised. They don't want to wind up with a higher than expected legal bill, with the attorney spend more time than predicted. Clients can’t know if they can afford to pay their attorney if they don’t know how much the legal fees will be!
Payment plans. Because legal fees can be more than the client can afford to pay their attorney all at once, the attorney may provide a payment plan for services. To resolve tax debt cases can take months or even a year (or longer in certain situations). There are many times than I will accept payments over a reasonable period of time.
Bank drafts or automatic debit of credit card. Many attorneys do not mind allowing payments if they are reasonably sure the payments will be made. You may offer the attorney to automatically draft your bank account or credit card over a reasonable period of time. This will greatly increase the chances of being able to afford to pay your attorney.
The IRS allows attorney’s fees in your budget.
When you offer payment plans to the IRS (full or partial payment of your tax debt) the IRS will generally allow you to deduct reasonable monthly fees until your legal fees are paid off. This makes it much easier for you to afford attorney’s fees. If you don’t have legal fees the money you budget for legal fees will then normally have to be paid to the IRS anyway. There are installment agreements that the IRS allows without you having to justify a budget that includes attorney’s fees. Ask you attorney about this option.
A couple more tips.
- Pay your attorney first. When you hire an attorney with experience, they can often delay the deadline you have to make IRS payments for several months. Often, the solution for your IRS tax debt can involve monthly payments. Before you are required to begin to make payments to the IRS, you can make monthly payments to your attorney.
- Shop around. There are many tax professionals that offer services to resolve your tax debt. Take advantage of free consultations that many professionals offer. Once you are convinced the tax professional is competent and trustworthy then try to get the best deal for the services you need. Most attorneys understand that you can choose another competent professional based on price. While they might not lower their fees you can at least select someone who is reasonable in charging fees.
When the IRS starts sending you notices of past due taxes, penalties and interest you should consider hiring a competent tax debt attorney. Preferably someone that specializes in this area.
Then take the time to discuss with the attorney how you can afford to pay the legal fees to the attorney you have selected.
You may be surprised to find that you can indeed afford a competent tax debt relief attorney to represent you before the IRS.
Find a free consultation.
Take advantage of attorneys that offer a free consultation to evaluate your case. This allows you to wait to pay until you are convinced it is in your best interest to hire an attorney.
Are you are worried about the IRS levying your bank account or filing a federal tax lien against you?
Find out what you can do to avoid these IRS collection actions by scheduling a Free IRS Lien/Levy Strategy Session with Attorney Tony Ramos Today.