Category Archives: Tax

South Dakota v. Wayfair: Is SCOTUS On The Verge Of Drastically Altering The E-commerce Ecosystem?

South Dakota v. Wayfair e-commerce rulingAttention e-commerce entrepreneurs and businesses: The Supreme Court of the United States is currently reviewing a seismically important case, South Dakota v. Wayfair. If South Dakota wins, online storefronts will likely become subject to the same taxation standards as brick-and-mortar retailers.

South Dakota v. Wayfair: Case Basics

Plaintiff: South Dakota

Defendant: Wayfair (the online retailer)

Gravamen:  Can the state force out-of-state online retailers who don’t have a physical location in South Dakota to remit a 4.5% tax on resident sales?

South Dakota v. Wayfair: Case Details

Background: Quill Corp. v. North Dakota

South Dakota v. Wayfair is inextricably linked to the seminal 1992 Quill Corp. vs. North Dakota, which established the tax nexus standard.

In Quill, an Illinois office supply corporation, which advertised software in a mail-order catalog, didn’t want to remit sales tax to North Dakota for residents who licensed the program.

Ultimately, the court sided with Quill and established the current precedence: states can’t collect sales tax from online purchases unless the seller has a physical presence — or “nexus” — in the region.

Why did the court side with Quill and devise the “nexus” test? The Justices reasoned that companies don’t use tax-maintained resources, like roads, when they don’t have a physical presence in a state and shouldn’t have to assume the tax burden.

Enter E-commerce: Does Quill Still Make Sense?

Fast-forward twenty years. E-commerce is king. And on account of Quill, states and municipalities say they’re losing between $8 and $13 billion a year in tax revenue. Nearly all states have expressed frustrations with the standard and feel that today’s e-commerce realities render the ruling obsolete. After all, someone is delivering the billions of e-commerce packages across the country; state roads and resources are being used for online purchases.

Quill defenders argue that small businesses may bear a burden if SCOTUS overturns the ruling, as they’d be forced to establish complicated systems to collect remittance from 10,000 taxing jurisdictions. To that point, however, opponents argue that advancements in computer software make the task manageable for businesses of all sizes.

For the most part, brick-and-mortar retailers are rooting for South Dakota’s victory and Quill’s demise. In short, they want to “level off” the tax playing field, which they feel is done by making e-commerce retailers collect and remit local and state sales taxes.

Where Does the SCOTUS Bench Currently Stand?

According to reports, Justices Roberts, Alito, and Kagan feel Congress should “devise a new system” in large part because it would be unreasonable to require mom-and-pop online retailers to navigate thousands of tax jurisdictions. Roberts specifically mentioned that lawmakers should probably establish a “minimum threshold.”

The entire bench, however, does not agree with Roberts, et al. “Overturning precedents,” worried Justice Sonia Sotomayor, “will create a massive amount of lawsuits.”

For her part, Justice Ruth Bader Ginsberg questioned Congress’ ability to craft a cure for the problem. “If time and changing conditions have rendered [the Quill decision] obsolete, why should the court say: Well, we’ll let Congress fix it?”

The newest member of the bench Justice Neil Gorsuch seems primarily concerned about leveling the playing field for online and offline retailers, inquiring: “Why should this court favor a particular business model that relies not on brick and mortar but on mail order?”

Justice Breyer asked questions but didn’t stake a position either way.

The Justices will deliberate on the matter and hand down a ruling within the coming months.

Will Overturning Quill Raise Online Prices?

What happens if the justices vote to overturn Quill and eliminate the nexus tax standard? Well, we all may see a spike in online prices. However, Amazon has been collecting sales tax in most states for some time, so the shift may not be that noticeable to consumers. Yet, it could have a significant impact on profit margins for online sellers and e-commerce entrepreneurs.

Connect With An E-commerce Lawyer

Gordon Law Group works with e-commerce businesses across the country. We also help overseas companies comply with U.S. standards and regulations. Our team can help with everything from affiliate contract drafting to tax compliance to intellectual property registration and litigation.

If you’re in need of an e-commerce lawyer, please give us a call. We help businesses everywhere.

Internet Sales Tax Law: Amazon Gives Account Info To Rhode Island

Internet sales tax lawyerDue to Rhode Island’s Internet sales tax, Amazon is handing over the names and addresses of online sellers who sold goods to residents in 2017.

Amazon to Online Sellers: We Sent Your Info To Rhode Island

Recently, Amazon.com wrote selected sellers explaining that the e-commerce giant had handed over their contact information to Rhode Island authorities. Some recipients scratched their heads and wondered: “What does Rhode Island want to do with me? I don’t live there.”

In the interest of brevity, here’s the legal scoop on Amazon’s letter regarding Rhode Island’s Internet sales tax:

Online Sellers Must Register In Sales Tax States

Businesses must register with every state in which they remit sales tax. The concomitant paperwork can prove exceptionally complicated; because as stated earlier, simply using a warehouse or vendor in a given state can tie you to it for tax purposes.

If you need help sorting through it all, give us a call.

What Will Rhode Island Authorities Do With The Amazon Online Sellers Data?

Rhode Island authorities will likely compare Amazon’s data with the state’s business registration records. Agents will research discrepancies. Then, people with a nexus to Rhode Island, who previously failed to register or submit taxes, may have some negotiating to do.

If you find yourself in that position, our e-commerce tax team can, and will, help. We’ve untangled similar knots for other online sellers across the country.

Contact An E-commerce Lawyer

Are you an online seller or e-commerce business that needs help with Internet sales tax? We can help. Our e-commerce legal team helps individuals and companies across the country — and overseas — overcome tax controversies and build beneficial tax positions. Let’s discuss how we can assist you. Get in touch today to begin the conversation.

2018 New Tax Structure: A Cheat Sheet

Here’s a handy chart that succinctly explains the major changes in the updated tax code.

Old Tax Code New Tax Code Winners Non-Winners
# Of Household Income Tax Brackets: 7 # Of Household Income Tax Brackets: 4 People Whose Tax Bracket Is Lowered People Who Are Bumped Up To The Next Tax Bracket
Child Tax Credit: $1,000 Child Tax Credit: $2,000 – Expires in 2025 People With Kids; Especially Families With Several Kids Who Make Below $400,000 Child-Free People Never Benefit From Child-Related Tax Breaks
Threshold Where Child Tax Credit Refund Is Phased Out: AGI of $75,000 (Single) / $110,000 (Joint) Threshold Where Child Tax Credit Refund Is Phased Out: AGI of $200,000 (Single) / $400,000 (Joint) – Expires in 2025 People With Kids; Especially Married People With Kids Child-Free People Never Benefit From Child-Related Tax Breaks
AMT Exemption Amount: $54,300 (Single) / $ 84,500 (Joint) AMT Exemption Amount: $70,300 (Single) / $109,400 (Joint) – Expires In 2025 People Who Fall Into The Alternative Minimum Tax Brackets Will Be Able To Apply Larger Exemptions This Change Won’t Affect People Who Weren’t Previously Subject To AMT Rules
Inheritance Tax Threshold: $5.5M Per Individual Inheritance Tax Threshold: $11M Per Individual – Expires in 2025 People Who Inherit Money; They Don’t Have To Pay Gains On The First $11M Of Inherited Wealth This Change Won’t Affect People Who Don’t Inherit Money
No “Pass Through” Deduction For Businesses Creates a 20% “Pass Through” Deduction For Qualified Businesses Businesses That Can Now Take Advantage Of This Deduction NA
Standard Corporate Tax Rate: 35% Standard Corporate Tax Rate: 21% Businesses That Paid A Higher Tax Rate Under The Old Code Businesses Whose Deductions Brought Them Below The 21% Threshold Under The Old Code
Standard Deduction: $6,350 (Single) / $12,700 (Joint) / $9,350 (Household Heads) Standard Deduction: $12,000 (Single) / $24,000 (Joint) / $18,000 (Household Heads) – Expires in 2025 Anyone Who Takes The Standard Deduction Will Benefit NA
SALT Deductions: Unlimited SALT Deductions: Capped at $10,000 – Expires in 2025 NA Anybody Who Was Able To Claim More Than $10,000 In SALT Deductions

FBAR Delinquency: Jail Sentence For Swiss Account “Tax Dodger”

FBAR delinquency lawyerThis year, The IRS and SEC are on the lookout for FBAR delinquency cases. If you have overseas accounts or assets totaling more than US $10,000, connect with an FBAR lawyer. Failing to file now could evolve into a massive legal hassle later.

Authorities Recently Threw A Man In Jail Over FBAR Delinquency

Some people walk a fine legal line by hiding foreign financial holdings.

It’s not wise.

Take, for example, this recent case out of Connecticut. The Department of Justice slapped a “sophisticated business executive who ran family businesses with operations in the United States and internationally” (whom we’ll call “Tim”) for FBAR violations.

Originally from Korea, Tim had been living in New England for years but stashed $28 million of inheritance money in offshore accounts. Ostensibly a fan of conspicuous jewelry and lavish homes, according to authorities, Tim “conspired with a host of foreign enablers to conceal his assets and income in Swiss accounts held in his name, the name of a relative, and in the names of sham corporate entities.” Authorities also accused Tim of structuring “financial transactions in a manner that allowed him to utilize [offshore] funds in the United States while concealing his ownership and control.”

Well, the law caught up with Tim, and now he has to spend six months behind bars and pay a $14 million penalty.

Do You Have Foreign Holdings That Exceed $10,000?

People with foreign assets equaling or exceeding $10,000 should find an FBAR tax lawyer pronto. This year, the U.S. Department of Justice seems keen to uncover undeclared offshore holdings — including cryptocurrencies. So, if you’ve neglected your Foreign Bank Account — or have been lax with previous years’ calculations — it’s time to square things away. We can handle it for you and prepare a position that keeps dollars in your pocket.

Contact An FBAR Lawyer Who Can Help You Overcome Any FBAR Requirement Woes

The Gordon Law Group has years of FBAR experience. We know all the ins-and-outs of foreign disclosures; moreover, we’re skilled at crafting money-saving, tailor-made tax positions. If you have previously unreported international holdings, don’t worry. Our FBAR tax law team has successfully negotiated favorable settlements for people in myriad situations that, at first, seemed dire.

But don’t wait. The time is now to clear up any tax matters — including FBAR requirements.

Let’s start the conversation by exploring your options. Get in touch today!

E-commerce Tax: What Online Sellers Need To Know In 3 Minutes

e-commerce tax law tipsWe get it: You’d rather sit through a 5-hour Nickelback concert (sorry Nickelback fans) than deal with the tax man — but alas, with the entrepreneurial glory must come a bit of paperwork pain.

But there’s great news: Our e-commerce tax team can handle it all for you.

We’ll calculate your state sales tax commitments and business reporting requirements. Even better? We’re known for reducing the tax debts of online businesses, affiliate marketers, and e-tailers by up to75%; and we’re often able to do the same for new clients.

So, if you’re looking for an e-commerce tax lawyer, get in touch today! We’re ready to take those tax woes off your plate.

In the meantime, we’ve put together a quick list of things to remember about online sales tax reporting requirements. Questions? Shoot us a message or give us a call. We’ve got the answers to your e-commerce tax questions.

4 Things Every Affiliate Marketer and Online Seller Should Know About E-commerce Tax Reporting Requirements

Connect With An E-commerce Tax Lawyer

Do you need help sorting out taxes for your e-commerce business? We can handle it for you. Our e-commerce tax team will calculate how much you owe and where. We’ll also make sure you pay the least amount possible by applying every possible deduction and credit.

Get in touch today to begin the conversation and start exploring your e-commerce tax options.

 

Cryptocurrency Tax Write-Offs and “Trader” Tax Designations

cryptocurrency tax write-offs lawyerThe new tax code is raising lots of questions, including: Should Bitcoin investors register as “traders” to save on taxes? And “What cryptocurrency tax write-offs are available?”

You’re busy, so let’s break this down, quickly.

Cryptocurrency Tax Write-Offs: How It Used To Work

Under the old tax code, using miscellaneous deductions, some cryptocurrency entrepreneurs could write off expenses (i.e., Internet costs, computers, subscriptions, etc.) that exceeded 2% of their adjusted gross income. However, the new tax code doesn’t accommodate the tactic.

Cryptocurrency Tax Write-Offs: Switch To “Trader”?

Since the new tax code doesn’t allow for the same itemized blockchain-related deductions, people are asking if they should register as “traders,” to take advantage of benefits delineated in Tax Topic 429, which absolves traders from paying tax on gains derived from qualifying securities trades.

Is it a viable option that makes financial sense? Depends.

Due to the 2% threshold, a limited number of people saw significant benefits from deductions. Moreover, most folks likely won’t meet the requirements to become a professional, registered trader. Entities that do enough token trading to qualify as a cryptocurrency hedge fund, however, may want to explore the possibility.

And lest we not forget: The SEC has yet to move Cryptocurrencies, in an of themselves, under the securities umbrella.

Connect With A Cryptocurrency Tax Lawyer

The IRS and SEC are currently laser-focused on the digital currency scene and aggressively pursuing ICO fraud and crypto tax evasion.

Get in touch with the cryptocurrency tax law team at Gordon Law. We can handle all your digital currency reporting needs, including calculations and figuring out the best money saving position for your exact situation. Get in touch today to start exploring your options.

Coinbase, The IRS, and Cryptocurrency Law

cryptocurrency tax lawyer
The IRS and Cryptocurrency: Will the agency cross-reference Coinbase records with tax returns?

You’ve probably heard the news by now: Several months back, a federal California court forced Coinbase to fork over account records. The ruling means that IRS agents can now identify people who’ve bought and sold over $20,000 worth of BTC between 2013 and 2015. What does that mean for token investors and traders? It may be time to consult a crypto tax attorney.

The IRS and Cryptocurrency: Uncle Sam Wants His Cut

According to the IRS, about 900 people declared digital currency gains between 2013 and 2015 — which is a far cry from the 14,000 accounts affected by the Coinbase decision. The discrepancy is glaring; our guess is that a whole lot of people will start getting letters from the IRS asking about crypto holdings.

Folks who have already made a good-faith effort to report cryptocurrency gains probably have nothing to fear. But if you’ve willfully been hiding assets, it’s probably time to consult a tax attorney who is up-to-date on digital currency; because as it stands now, the IRS views tokens as a taxable commodity.

State and Federal Politicians Are Mulling Over Potential Crypto Laws

Recently, several representatives in the House introduced a bill that would tax exempt crypto transactions under $600. In other parts of the House, another group of lawmakers is considering a bill that would empower border agents to probe, “How much crypto do you have in your wallet?”

Cryptocurrencies also have state legislators scrambling — and they’re approaching the issue from completely different corners of the ring. Some jurisdictions are positioning themselves as “consumer advocates” and trying to implement what they see as fraud-deterring regulations. Other states are clearing their law books of potential regulatory obstacles, as they see crypto and blockchain as “the next Internet.”

What Does All This Cryptocurrency Regulatory Movement Mean?

All this regulatory movement has cleaved a philosophical split in the sector. One faction of the crypto community thinks it’s a travesty. Others insist it’s a harbinger of widespread acceptance that will spur industry investment and innovation.

At the risk of sounding non-committal, there are merits to both viewpoints, but the looming question remains: Can lawmakers craft responsible legislation that both protects consumers and buoys the burgeoning blockchain industry? Time will tell.

Connect With A Cryptocurrency Lawyer

Do you need a crypto lawyer? If yes, you’ve landed in the right place. Our firm, Gordon Law, handles all manners of cryptocurrency issues — from the transactional to litigatory. We can walk you through an ICO or represent you in a crypto-tax entanglement with the IRS. Get in touch today to begin the conversation. Consultations are free.

Should I Fully Disclose To the IRS? [infographic]

Taxpayers who fully disclose income and assets to the IRS can receive assistance through the Voluntary Disclosure Program, a federal program that’s designed to help taxpayers who face severe penalties.

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What should I Fully Disclose to the IRS

IRS Voluntary Disclosure Program

Under the IRS Voluntary Disclosure Program, taxpayers can get assistance with previously unreported tax liabilities.The program offers assistance to taxpayers who would otherwise face serious penalties, including criminal prosecution that could result in incarceration. A voluntary disclosure is often a deciding factor in decisions about criminal prosecution. To take advantage of the program, a taxpayer must be willing to cooperate with the IRS in determining his/her correct tax liability, which may involve a tax audit, then make arrangements to pay the tax owed plus interest and penalties. The IRS Voluntary Disclosure Program is not available to taxpayers who do not come forward on their own merit, nor does it protect taxpayers whose unreported income is from an illegal source.

The IRS Voluntary Disclosure Program offers assistance to qualifying taxpayers with unreported income and/or seriously delinquent tax returns.

Unreported Income

The United States punishes tax evasion more harshly than most countries. Taxpayers who are caught willfully cheating on their taxes face severe penalties. Federal sentencing guidelines state that someone who evades between $30,000 and $80,000 in taxes can be sentenced to 15 to 21 months in prison, without the benefit of parole. In addition, the taxpayer will still owe back taxes, interest, and penalties. In general, criminal prosecution is typically limited to cases with a minimum of $100,000 in total tax loss.

Delinquent Returns

Taxpayers with several years of delinquent tax returns may face serious penalties, including criminal charges and prosecution. Through the Voluntary Disclosure Program, taxpayers can file delinquent tax returns for a period of six years and make arrangements to pay tax liabilities, interest, and penalties. The IRS imposes a statute of limitations of six years on prosecution for delinquent tax returns.

If taxpayers voluntarily disclose unreported income or unfiled tax returns, strict guidelines must be followed. The voluntary disclosure must be made to the Criminal Investigation Office of the IRS, where it is evaluated by a special agent who determines accuracy and completeness. The evaluation process usually takes about 10 working days. If the taxpayer is accepted into the Voluntary Disclosure Program and fails to cooperate with the IRS or make required payments, he/she may be referred back to Criminal Investigations.

The Road to Tax Lien Relief

chicago tax lawyerIf a tax lien is imposed for failing to file a tax return or failing to pay income taxes that are due, the IRS offers tax lien relief through its Fresh Start Program.

Tax Liens

If an individual owes federal taxes and fails to pay them on time, the IRS can file a tax lien as a way to collect the debt. When a tax lien is initially imposed, it’s only between the IRS and the taxpayer, but it becomes public record if the taxpayer doesn’t attempt to resolve it within 30 days. Once the tax lien becomes public, it can create a variety of problems for the taxpayer because it becomes visible to employers, banks, and creditors. A tax lien can impact a person’s ability to find a job, acquire housing, and get loans and credit cards. It can lower a person’s FICO score by as much as 100 points. As long as a tax lien remains, it can attach to all existing assets including personal and business real estate, personal property, motor vehicles, bank accounts and securities, and assets acquired in the future.

The Fresh Start Program

The IRS can impose a tax lien on any taxpayer who owes more than $10,000 in unpaid taxes, and they have up to 10 years to collect on the debt. In 2011, the IRS established its Fresh Start Program to help individuals and businesses with tax debt. The program raises the minimum tax debt for tax liens to $10,000, provides ways to pay off tax debts for $50,000 or less, and helps taxpayers remove tax liens. When a taxpayer owes unpaid or delinquent taxes, the Fresh Start Program helps qualifying taxpayers pay off their tax debt through installment payments or settle their debt for less than the total amount owed. The program also provides a way to withdraw a filed Notice of Federal Tax Lien by filing a one-page form (Form 12277), if certain conditions exist:

If you have a tax lien, contact an attorney at Gordon Law to discuss options for removal.

Requirements of an Offer in Compromise

Offers in Compromise Chicago Tax LawThe IRS allows individuals who meet qualification and eligibility requirements to settle their federal tax liability with an offer in compromise. An attorney who specializes in tax law can explain federal regulations and necessary qualifications.

What is an Offer in Compromise?

An offer in compromise (OIC) is an agreement between the Internal Revenue Service and a taxpayer that allows the taxpayer to settle his/her tax liabilities for less than they owe. In most cases, a taxpayer will not be granted an offer in compromise unless the proposed payment is at least equal to or more than the amount that’s reasonably collectible. The IRS measures a taxpayer’s ability to pay the settlement amount by evaluating his/her assets, such as real property, other property, automobiles, and bank accounts. The IRS may also evaluate the taxpayer’s anticipated future income, then deduct certain amounts allowed for basic living expenses.

What are the Qualifications?

To qualify for an OIC, a taxpayer must meet specific requirements:

Typically, an application fee must be submitted for the amount listed on Form 656. If the offer in compromise is based on doubt of liability, or an individual taxpayer qualifies for low-income under federal poverty guidelines, the application fee is waived.

Regulations for Acceptance

If a taxpayer qualifies for an OIC, three regulations govern acceptance:

If the IRS accepts an offer in compromise, the taxpayer must fully comply with tax laws and avoid further tax delinquencies. If acceptance terms are not met, the IRS can place the OIC in default, consider the agreement null and void, and collect the entire amount of the tax liability, fewer payments made, plus interest and penalties. The IRS can also apply current tax refunds to the tax liability. If an offer is accepted based on doubt of collectibility or effective tax administration, the taxpayer must file timely tax returns and pay taxes owed in a timely manner for five years from the date of the OIC acceptance.

Are Payment Terms Accepted?

In most cases, taxpayers will not qualify for an offer in compromise if they have the ability to pay the tax liability in full or through an installment agreement. Individuals who do qualify have two payment options:

Lump Sum Cash Offer

If a taxpayer selects the lump sum cash option, he/she may pay the tax amount owed per the OIC agreement in a lump sum or installment payments. When paid in installments, the total tax liability must be paid within five months after the offer is accepted by the IRS. A non-refundable payment equal to 20 percent of the tax liability must be paid with the OIC application.

Periodic Payment Offer

If the taxpayer chooses the periodic payment option, the tax liability can be paid in six or more monthly installments, but not to exceed a 24 month period after the offer is accepted by the IRS. The first installment payment must be paid with the application and is non-refundable. If the taxpayer is still being evaluated for a periodic payment offer, non-refundable installment payments must continue during the evaluation period.

What if the OIC is Rejected?

If the IRS rejects an offer in compromise, the taxpayer has the right to appeal through the IRS Office of Appeals. When an offer is rejected, the IRS notifies the taxpayer by mail. The letter explains the reason for OIC rejection and steps to take to file an appeal. The appeal must be made within 30 days from the date of the letter.

In certain cases, an OIC may be returned to the taxpayer rather than rejected. This can occur if the taxpayer fails to submit necessary information; fails to include the required application fee or first payment with the application; has not filed required tax returns; has not paid current tax liabilities; or files for bankruptcy. If the IRS returns an OIC to the taxpayer, there is no right to appeal, but the taxpayer can submit another offer.

Year End State and Local Tax Strategies in Anticipation of Revised Tax Code

state and local tax strategiesIn the past few months, both houses of congress have passed bills which, if put into law, will present the most significant overhaul of the United States Tax Code in thirty years.

The House of Representatives passed their version of this bill on November 16.  Then, while you were sleeping on December 2 the United States senate approved its version of tax reform legislation.

While there are many complexities to the reform, and although the bills have yet to be reconciled and signed into law, it is the expectation of many experts that the 2018 tax year will see sweeping take effect.

One of the changes most likely to impact middle class taxpayers is the push to “simplify” the code by approximately doubling the standard deduction in an attempt to move individuals away from itemizing deductions.

To further the effort to limit itemization of deductions, both the House and Senate versions of the bill also limit previously favorable itemized deductions to Illinois homeowners, such as eliminating the state and local income tax deduction, which allows taxpayers to deduct income taxes paid at the state level, as well as capping taxes paid for real property to $10,000 per year.

To maximize those deductions while they are still available, individuals should consider making certain payments prior to December 31, 2017 so that the payments are captured in the 2017 tax year (when they can still be used) versus the 2018 tax year (when they may be limited or eliminated).

 

 

The ability to prepay taxes varies by county.  For example, property owners are only able to prepay 55% of most recent tax bill.  In Lake County, homeowners have the ability to prepay up to 100% of the most recent bill.  In Will County, homeowners can prepay up to 110% of the most recent bill.

If planned for properly and executed, these payments can save taxpayers money on their 2017 taxes and have no impact on their 2018 returns.  As all individuals tax situations are different, it is advised to discuss these payments with a tax professional prior to remitting them.

Contact an attorney or the Gordon Law Group for further assistance.

Should I Hire An Attorney To Help Me With An IRS Tax Settlement Or Can I Do It On My Own?

When facing an IRS audit or settling a tax debt, a tax attorney can provide guidance and assistance on complex tax issues and settlement negotiations to achieve the best outcome.

Settling a Tax Debt

Determining the proper course of action when dealing with the IRS depends on a variety of factors. Many tax issues are complex because of complicated IRS rules and regulations and sensitive timelines. For taxpayers who are unfamiliar with the legal language and complexity of tax laws, it can be difficult to settle tax issues on their own. When trying to settle a tax debt, small mistakes can result in steep fines and penalties, even criminal charges that can land a taxpayer in jail.

When negotiating an IRS tax settlement, taxpayers should consider the advantages and disadvantages of hiring a tax attorney vs. self-representation. Although taxpayers can handle their own tax settlements, it’s not recommended if the tax debt exceeds $10,000, or if there’s a possibility of criminal charges for tax evasion or fraud. The IRS offers special programs to help taxpayers with tax settlements.

Hiring a Tax Attorney

The cost of hiring a tax attorney can vary significantly, based on location and complexity of tax issues. Some attorneys charge an hourly fee, while others require a prepaid retainer or charge a flat fee for basic services like creating hardship paperwork, submitting an offer in compromise, or establishing a payment plan. If a case goes to trial, fees are generally much more expensive, since reaching an agreement or settlement can take months in court. Although hiring a tax attorney may seem like a more expensive way to settle a tax debt, taxpayers must consider the alternatives of representing themselves. If there is a criminal investigation in a tax matter, the criminal investigation division with the IRS typically wins 80 percent of their cases, and the average sentence for convictions is three years and four months in jail.