When you need a tax attorney
Most tax preparation and routine IRS correspondence is handled by CPAs and enrolled agents. You need a tax attorney when:
- You receive contact from an IRS Criminal Investigation (CI) agent — this means you may be the target of a criminal investigation
- You're facing a significant civil audit (field audit, large proposed assessment)
- You want to negotiate an Offer in Compromise for a large tax debt
- You have unreported foreign financial accounts or foreign income
- You're considering tax-driven business transactions (mergers, acquisitions, restructurings)
- The dispute will go to US Tax Court or another federal court
- You're responding to a grand jury subpoena or John Doe summons
- A prior tax professional made significant errors
- The facts are complicated and you want to be sure what you say is protected
IRS audit: what it means and what to do
The IRS audits about 0.5% of individual returns and a higher percentage of business returns, particularly those with complex deductions, cash businesses, or reported losses over multiple years.
Types of IRS audits
- Correspondence audit — the most common. The IRS mails a letter asking you to verify specific items (a deduction, a reported credit, a discrepancy with a third-party information return). Handled entirely by mail.
- Office audit — you are asked to bring records to an IRS office for examination. More comprehensive than correspondence.
- Field audit — an IRS revenue agent comes to your home or business. The most serious civil audit. Covers a much broader range of issues.
- TCMP audit — Taxpayer Compliance Measurement Program. Comprehensive audit of an entire return, used to calibrate IRS data models. Very time-intensive.
IRS tax debt: your options
If you owe the IRS money and cannot pay in full, you have several options that a tax attorney can help you navigate:
- Installment Agreement — pay your tax debt over time in monthly installments. The IRS must accept installment agreements for balances under $10,000 (if you meet conditions). For larger balances, negotiation is required.
- Currently Not Collectible (CNC) status — if paying would prevent you from meeting basic living expenses, the IRS can temporarily suspend collection activity. Interest and penalties continue to accrue, but the IRS stops active collection.
- Offer in Compromise (OIC) — settle your tax debt for less than the full amount owed. The IRS accepts OICs when it doubts your ability to pay, doubts the liability itself, or when collection would be inequitable. The acceptance rate is roughly 30-40% for properly prepared applications.
- Innocent Spouse Relief — if you filed jointly and your spouse had unreported income or fraudulent deductions you didn't know about, you may be able to get relief from your share of the liability.
- Penalty Abatement — the IRS can waive certain penalties (late filing, late payment) for reasonable cause (illness, natural disaster, bad advice) or first-time penalty abatement for taxpayers with a good compliance history.
- Bankruptcy — some tax debts can be discharged in Chapter 7 or Chapter 13 bankruptcy, subject to complex rules about age and filing of the return. See also: Bankruptcy.
Foreign account and international tax issues
US citizens and residents are required to report worldwide income and, separately, to disclose foreign financial accounts above certain thresholds. The penalties for non-compliance can be enormous — willful failure to file an FBAR can result in penalties of 50% of the account balance per year, plus potential criminal prosecution.
The key compliance requirements:
- FBAR (FinCEN Form 114) — required when the aggregate balance of foreign financial accounts exceeded $10,000 at any point during the year
- FATCA / Form 8938 — higher thresholds, but stricter penalty structure for some types of foreign assets
- Reporting foreign business interests — Forms 5471, 5472, 8865 for foreign corporations, partnerships, and other entities
- Voluntary Disclosure Programs — the IRS has streamlined procedures for taxpayers who came into non-compliance non-willfully. For willful non-compliance, the Voluntary Disclosure Program can significantly reduce criminal exposure.
How much does a tax attorney cost?
| Service | Typical Cost |
|---|---|
| IRS correspondence audit representation | $500 – $2,500 |
| IRS office or field audit representation | $2,500 – $10,000+ |
| Offer in Compromise preparation & representation | $3,000 – $10,000 |
| Penalty abatement request | $500 – $2,000 |
| IRS collection issues (installment, CNC) | $1,500 – $5,000 |
| FBAR / foreign account disclosure | $2,500 – $15,000+ |
| Criminal tax investigation defense | $10,000 – $100,000+ |
| US Tax Court petition and litigation | $5,000 – $50,000+ |
| Tax attorney hourly rate | $250 – $450/hour |
For a full picture of legal costs, see our how much do lawyers cost guide.
Find a tax attorney in your city
Request a Free Consultation
IRS problem, tax debt, or audit? A vetted tax attorney in your city will follow up within one business day.
Related legal needs
Starting a Business
Business structure has major tax implications — get it right from the start.
Bankruptcy
Some tax debts can be discharged in bankruptcy under specific conditions.
Mergers & Acquisitions
Tax structuring is critical in any business acquisition or sale.
Business Litigation
Tax disputes in US Tax Court are a specialized form of litigation.
Frequently asked questions
When do I need a tax attorney instead of a CPA?
You need a tax attorney when: you're being audited by the IRS Criminal Investigation Division; you receive a summons; you're negotiating an Offer in Compromise for significant tax debt; you have unreported foreign accounts or income; there is potential criminal tax exposure; the dispute goes to US Tax Court; or you need attorney-client privilege to protect your communications. CPAs handle tax preparation and planning. Tax attorneys provide legal representation with privileged communications.
What is an IRS audit and what should I do if I'm selected?
An IRS audit examines your tax return to verify income, expenses, and credits. Correspondence audits are handled by mail. Office audits occur at an IRS office. Field audits (the most serious) involve IRS agents at your home or business. If you receive an audit notice: don't panic, don't respond immediately without review, don't provide more information than requested, and consider engaging a tax professional before you send anything.
What is an Offer in Compromise and can I qualify?
An Offer in Compromise (OIC) allows qualifying taxpayers to settle their tax debt for less than the full amount owed. The IRS accepts OICs when the taxpayer cannot pay the full liability, when the tax liability itself is incorrect, or when paying the full amount would cause economic hardship. The acceptance rate is roughly 30-40%. The process takes 6-24 months. A tax attorney significantly improves the likelihood of a successful OIC.
What is the IRS Civil vs Criminal distinction?
The vast majority of IRS tax problems are civil — audits, assessments, penalties, and collection actions. These result in money owed but not criminal charges. Criminal tax cases (tax evasion, filing false returns) involve willful conduct and can result in prison time. The IRS Criminal Investigation Division handles criminal cases. If you receive contact from CI agents (rather than regular revenue agents), retain a tax attorney immediately.
How much does a tax attorney cost?
Tax attorneys typically charge $250-450/hour. IRS audit representation runs $2,500-10,000. Offer in Compromise preparation and representation typically costs $3,000-10,000. Tax Court litigation is $10,000-50,000+. For simple tax debt issues, an enrolled agent may be sufficient. For anything involving potential criminal liability, IRS Criminal Investigation, or US Tax Court, hire a tax attorney.