When Should You Speak With A Tax Attorney?

To the extent most folks can picture tax attorneys, the image is often one based on commercials where lawyers say they'll fight the IRS. In reality, a tax attorney can deal with an array of other issues, too. Let's take a look at what four such situations are where you can benefit from talking with a tax attorney.

Starting a Business

Many tax implications arise from how a business is organized. For example, your choice of accounting methods, between cash and accrual, will dictate how much perceived audit risk your company will have. Similarly, certain tax benefits may be derived from organizing your company as an LLC versus an S corporation or some other structure. The advantages of each approach may not be evident until you've explained your situation to a lawyer.

Dealing with an Estate

The old saying about death and taxes being the only certainties in life exists for a reason. The government, it should be pointed out, won't be done taxing you just because you've shuffled off this mortal coil. Instead, your estate will need to settle its outstanding tax debts with local, state and federal governments before proceeds can be distributed. Likewise, you'll want to organize your estate in a manner that ensures that the beneficiaries face the least tax burden possible.

Responding to Notices from Agencies

If you listen to ads from some tax attorneys, you'd be convinced that the IRS is a giant monster sent to destroy your standard of living. In reality, though, the IRS is a boring bureaucracy that deeply enjoys sending an endless stream of notices once it has taken an interest in a particular taxpayer.

Most cases can be addressed by making sure you handle the notices you receive in a timely fashion and competently. For example, the risk of a default judgment in a tax case goes up significantly if the taxpayer fails to provide sufficient supporting documentation that's requested from the IRS and other agencies. In many instances, simply presenting evidence that backs up your argument will be more than sufficient to close the case. It's best, however, to have a tax attorney review the notice and figure out what sorts of documents will be required.

Large Profits

Suppose you sold your home for three times what you originally paid. Insulating yourself from taxes on those profits is essential. A tax attorney may be able to help you reinvest those profits in a manner that defers a portion of the bill to a later date.