When they hear about “tax controversies,” many clients initially think of the IRS demanding audits. However, because taxes affect so much of our daily lives, tax controversies can take various forms. Local property tax appeals, state and sales tax controversies, and issues regarding federal and state income tax (at the audit and collections levels) are just a few common types of tax controversies you may face. These issues, among others, can cause significant financial burdens.
Here, we will discuss how tax controversy attorneys can help you resolve taxation issues at both the state and federal level. We will also survey common resolutions to tax disputes, focusing on one common avenue for resolution.
For questions about your potential tax liability and how our team can help you work out issues with either the IRS or the North Carolina Department of Revenue, give us a call.
What Do Tax Controversy Attorneys Do?
Hiring a tax litigation attorney can potentially save you from facing penalties, fines, and even criminal action stemming from noncompliance. However, it is vital to ensure that the attorney you’ve hired is experienced in handling tax-related cases: It is important to note that tax litigation attorneys offer a different skill set than tax planning attorneys. While the skill sets do overlap, tax litigation attorneys need to understand more than just the inner workings of the IRS and the tax code: They also need to understand the rules of evidence and civil procedure, as well as the administrative procedures involved in litigating tax cases.
When working with a tax litigation attorney, you will gain a professional and advocate who will apprise you of the advantages and disadvantages of different courts and litigation strategies, what evidence you need to support your claim, and the risks involved in litigating your case.
When Should I Hire A Tax Attorney?
While many tax-related issues can be resolved without engaging an attorney (for instance, if the IRS demands an audit, the key is to respond immediately upon receiving your first notice), there are some situations in which legal counsel can be enormously beneficial in helping you avoid serious consequences – particularly if legal issues are tied up in the disputes.
Some issues that may require the help of a tax dispute attorney include:
- Claims of tax fraud or tax evasion.
- Audits involving business-related taxes like payroll or sales tax investigations.
- An audit involving issues such as frozen assets, a deficiency balance, incomplete books or records, an inability to pay, a failure to file returns for a certain number of years, charges for taxes you do not owe, or the expiration of the statute of limitations.
- Audit rulings that you believe are inaccurate.
A tax attorney may also be helpful if:
- You intend to negotiate a settlement or payment plan for your outstanding tax balance. You may want to engage an attorney’s help in these situations because payment plans require thorough documentation in order to avoid further tax liability and collections attempts from the IRS.
- You hope to prevent tax-related issues from arising in the first place. For instance, if you have questions about how to keep business records, manage payroll tax, what comprises taxable income in your business, how to manage employee deductions, and other issues, you can work with an attorney proactively to keep issues from arising down the road.
What Are Common Solutions to Tax-Related Disputes?
Running into a tax dispute is never easy, but many are unaware of the plethora of options available to reduce possible penalties associated with tax issues. A tax attorney can work with you and your tax preparer to consider the best possible resolution.
A few common avenues for resolution include, among others:
- Offers in Compromise
- Installment payment plans
- Audit representation
- Tax court representation
- IRS appeals hearings
- Trust fund recovery penalties
- Innocent spouse representation
- Non-filer representation
- Tax levies, garnishments, and seizures
- NC sales and use tax audits
- Estate tax audits
- Jeopardy assessments
- Discharge of taxes through the bankruptcy process
- Independent contractor determinations
- Enrollment tax representation
What is an Offer in Compromise?
A common solution to tax issues, an offer in compromise is, in short, an agreement between a taxpayer and the IRS that settles the taxpayer’s liabilities for less than the full amount owed. To secure an offer in compromise, you will need to convince the IRS that:
- You are unable to pay the full amount owed within a reasonable timeframe, either as a lump sum or through a negotiated payment plan.
- The total amount of your tax liability is in question.
- Payment in full would cause an economic hardship or be unfair to you in some way.
To make this determination, the IRS will examine your income and assets in order to discern your “reasonable collection potential.” To do so, your attorney will help you provide detailed information about your financial situation on the IRS Form 433-A, the “Collection Information Statement.” This will include information about your cash flow, investments, credit, income, and debt, which the IRS will verify. Your attorney can help you gather this information.
The amount of your offer must be equal to what is called the “realizable value” of your assets, plus the amount of money the IRS can take from your income. For instance, if your assets equal $100,000 and the amount of your future income available to the IRS is $50,000, then your minimum offer should be $50,000.
Before working out an offer with the IRS, it is vital to speak with a tax attorney to ensure you are complying with the necessary formalities.
Contact Our Experienced Tax Attorneys
At Wilson Ratledge, our tax controversy attorneys represent taxpayers in disputes with the IRS and the North Carolina Department of Revenue. We regularly handle disputes involving tax liens, audits, and collections, as well as other various aspects of tax controversy and litigation. For assistance, contact one of our experienced North Carolina tax attorneys today at 919-787-7711 or via our contact form below. We look forward to serving you.