One of the most important indications of when you need a tax attorney is any dispute with or contact from the IRS or any California tax agency. This is especially true if the matter involves an audit (or questions regarding tax return item(s), the potential for a bank levy or wage garnishment, allegations of potential tax evasion (such as failure to disclose offshore income or assets or file an FBAR) or challenges associated with a tax account (such as in the case of a company’s sales and/or use tax).
In general, another primary situation when you need a tax attorney would involve the ownership of a business or professional practice, especially if the company conducts interstate or international business transactions. Businesses consistently under-value the need for and importance of accounting and tax exposures. Accounting systems should be carefully crafted to capture information at every point in the process of your business, in order to not only complete tax returns and financial reports, but to provide insight and up-to-the-minute information on crucial business issues. A tax attorney is a valuable partner not only to ensure reporting and compliance, but to reduce local, state, national and international tax exposure through the structure of your entity/entities and associated transactions.
Those businesses and individuals who conduct international business or have foreign investments, trusts or business ownership. The presence of international tax issues, tax reporting, business or investment are primary examples of when a tax attorney is especially beneficial. It is important to not only structure how you conduct your transactions, but where and when you realize income or losses, as well as the structure of the entities or nature of those activities (i.e. Passive Activity Losses or PALs and Passive Income Generators or PIGs).
Estate planning, especially the personal estate a business owner is another time to consider a consultation with a tax attorney. Those with substantial assets must consider how to structure their affairs to protect assets (especially from potential creditors), minimize risk, and conduct any transactions in a manner that reduces any resulting tax obligations. Your tax attorney should work with business owners to discuss and implement a business succession plan, as well as provision for a spouse, children, loved ones and the interests they care so much about.
Real estate transactions are another example of when you need a tax attorney. Residential real estate transactions in California are most often 7 figures or more. Commercial real estate developers, investors and those who hold or invest in multi-unit properties will often require the services of an experienced tax attorney. Tax-deferred exchanges, and substantial capital gains should be reviewed to analyze risk and the opportunity to structure holdings and transactions to minimize tax exposure while protecting associated assets.
Often, one of the primary issues when you need a tax attorney involves the need for the protections of the "attorney-client privilege." The nature of tax issues, an IRS audit or State tax investigation often requires the taxpayer to share confidential (and in some cases undocumented or creatively applied) information with their advisor in order for them to understand the issues at hand and respond to the taxation authorities. The IRS and California's tax agencies can compel non-attorney advisors to provide the information you share with any accounting, tax or financial professionals through a simple subpoena. Information you thought was private is now in the hands of the IRS to be used against you. If there are potential criminal implications, your CPA or tax advisor can actually be forced to be a witness against you.
