What do tax attorneys do
A tax attorney is a lawyer who advises clients on tax law, represents them in disputes with tax authorities, and helps resolve difficult tax problems. In the United States, a tax attorney can generally represent a client before the IRS in audits, collection matters, appeals and other federal tax matters. IRS Form 2848, Power of Attorney and Declaration of Representative, allows an eligible representative to receive specified tax information and act for the taxpayer on listed matters and tax periods.
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Tax Attorney Services at a Glance
| Service | What the Tax Attorney Does |
|---|---|
| Tax planning | Advises on legally reducing tax exposure before a transaction or filing |
| IRS audits | Communicates with the IRS, prepares responses and challenges incorrect adjustments |
| Tax debt | Negotiates payment arrangements, collection alternatives and offers in compromise |
| Tax appeals | Represents the taxpayer in IRS Appeals and prepares arguments based on the facts and tax law |
| Tax litigation | Handles or coordinates tax disputes that proceed to court |
| Business transactions | Reviews mergers, acquisitions, sales, reorganizations and entity structures |
| Estate and gift tax | Advises on wealth transfers, trusts, estates and potential tax liability |
| Tax compliance | Helps correct past filings, respond to notices and reduce future compliance risk |
What Does a Tax Attorney Do for Individuals?
A tax attorney helps individuals with legal or high-risk tax issues, including:
- IRS audit notices
- Unpaid federal or state taxes
- Tax liens, levies and collection actions
- Penalties and interest disputes
- Unfiled or incorrect tax returns
- Cryptocurrency, foreign-account or international tax issues
- Divorce-related tax questions
- Inherited assets, trusts and estate taxes
- Large real estate or business transactions
- Allegations of tax fraud or willful noncompliance
A tax attorney can communicate with the IRS on a taxpayer's behalf after receiving proper authorization. IRS Form 2848 identifies the representative, the tax matters covered and the tax years or periods involved. The taxpayer can limit the authorization to specific issues and later revoke it.
What Does a Tax Attorney Do During an IRS Audit?
During an audit, a tax attorney may:
- Review the IRS notice and identify the tax years and issues involved.
- Examine the taxpayer's returns, records and supporting documents.
- Prepare a response to the IRS.
- Communicate with the IRS examiner.
- Challenge proposed adjustments based on tax law or incorrect facts.
- Negotiate the final result where appropriate.
- Request an appeal if the taxpayer disagrees with the outcome.
The IRS allows taxpayers to request an appeal when they disagree with an eligible decision and have evidence or legal arguments supporting their position. IRS Appeals handles proposed adjustments, penalty appeals, interest abatements and some collection disputes.
A taxpayer does not always need to attend an IRS interview with a representative. In most situations, the IRS must suspend an interview if the taxpayer asks to consult an authorized representative, although exceptions can apply.
Can a Tax Attorney Reduce Tax Debt?
A tax attorney may help reduce, settle or manage tax debt, but no attorney can guarantee that the IRS will forgive a specific amount.
Depending on the facts, the attorney may help with:
- An installment agreement
- An offer in compromise
- Currently not collectible status
- Penalty abatement
- Collection Due Process hearings
- Appeals of liens, levies or rejected proposals
- Correcting returns that overstated the tax owed
An IRS offer in compromise can settle eligible tax debt for less than the full amount owed. The IRS generally evaluates the taxpayer's ability to pay, income, expenses and asset equity. The program is not suitable for every taxpayer, and the IRS advises taxpayers to consider other payment options first.
What Does a Tax Attorney Do for Businesses?
For businesses, tax attorneys commonly advise on:
- Choosing between corporations, partnerships and limited liability companies
- Business purchases and sales
- Mergers and acquisitions
- Partnerships and shareholder agreements
- Payroll and employment tax exposure
- Sales and use tax disputes
- State and local tax obligations
- International transactions
- Tax treatment of business losses and deductions
- Executive compensation and equity awards
- Business succession and ownership transfers
A tax attorney may work alongside a CPA. The attorney focuses mainly on legal interpretation, tax risk and dispute strategy. The CPA may handle accounting records, financial statements and tax return preparation.
What Does a Tax Attorney Do in Tax Court?
If an IRS dispute proceeds beyond the administrative process, a tax attorney may:
- Evaluate whether litigation is worthwhile
- Prepare pleadings and legal arguments
- Gather documentary and expert evidence
- Negotiate a settlement
- Represent the taxpayer in court
- Coordinate with accountants, appraisers or other specialists
Not every tax attorney litigates. Some focus on tax planning, business transactions or tax compliance. When court action is possible, ask whether the attorney regularly handles tax controversy and litigation. A tax lawyer's title alone does not establish courtroom experience.
Tax Attorney vs. CPA vs. Enrolled Agent
| Professional | Main Strength | IRS Representation |
|---|---|---|
| Tax attorney | Legal advice, tax disputes, planning and litigation | Attorneys generally have unlimited representation rights before the IRS |
| CPA | Accounting, tax preparation, financial reporting and tax planning | CPAs generally have unlimited representation rights before the IRS |
| Enrolled agent | Federal tax preparation and IRS representation | Enrolled agents generally have unlimited representation rights before the IRS |
| Tax return preparer | Preparing tax returns | Representation rights may be limited, especially if the preparer is not an attorney, CPA or enrolled agent |
The IRS states that attorneys, CPAs and enrolled agents may represent taxpayers in all types of IRS matters, including audits, collection issues and appeals. Other preparers may have limited rights tied to returns they prepared and signed.
Which Professional Should You Hire?
- Hire a tax attorney when the issue involves legal interpretation, an IRS dispute, possible fraud, significant tax debt, litigation or a complex transaction.
- Hire a CPA when you primarily need accounting, financial reporting, tax preparation or business tax planning.
- Hire an enrolled agent when you need federal tax preparation or IRS representation but do not require broader legal services.
- Use a regular tax preparer for a straightforward return with no audit, collection problem or unusual legal issue.
A CPA or enrolled agent may be the better choice for routine tax preparation. A tax attorney is usually the better fit when the central problem is a legal dispute or the potential consequences are substantial.
Do Tax Attorneys Prepare Tax Returns?
Some tax attorneys prepare tax returns, but many do not. A tax attorney may instead:
- Review a return prepared by a CPA
- Advise on the tax treatment of a transaction
- Correct a previously filed return
- Respond to an IRS notice
- Represent the taxpayer during an audit or appeal
Ask the attorney whether the engagement includes return preparation, legal advice, IRS representation or all three.
When Should You Hire a Tax Attorney?
You should consider hiring a tax attorney promptly if you:
- Receive an IRS audit notice or notice of proposed adjustment
- Receive a notice of intent to levy or a federal tax lien notice
- Owe more tax than you can realistically pay
- Have several years of unfiled returns
- Are accused of tax fraud or intentional underreporting
- Own a business facing payroll tax problems
- Are selling or buying a business
- Are dealing with estate, trust or gift tax issues
- Have foreign income, foreign accounts or complex cryptocurrency transactions
- Disagree with an IRS decision and may need to appeal
You may not need a tax attorney for a simple tax return, a basic filing question or a minor notice that you can resolve with clear documentation.
How Does a Tax Attorney Get Authority to Act?
A taxpayer commonly authorizes a tax attorney by filing IRS Form 2848. The form identifies:
- The taxpayer
- The representative
- The tax form or tax issue
- The tax years or periods covered
- The authority granted to the representative
The authorization can be limited to specific tax years or issues. The taxpayer can also revoke it.
Bottom Line
The right tax professional depends on the problem. A CPA or enrolled agent may be enough for routine preparation and federal tax representation. An audit, serious tax debt, suspected fraud, complex business transaction or possible litigation calls for a tax attorney.