What You Should Consider Before Hiring A Tax Attorney

Individuals and businesses engage tax attorneys for different reasons. Some need a tax attorney to assist with a commercial transaction by navigating tax consequences and mitigating tax liability. Others need a tax attorney to advise on business formation. While these clients need assistance from a transactional tax attorney, most people looking for a local tax attorney are facing IRS collections. In other words, most people searching for a tax attorney owe tax debt to the IRS or the State of California, and they need help getting out of collections and resolving that tax debt.

For those prospective clients who owe tax debt, there are some important things to consider before signing a representation agreement.

Payment Plan

Some tax resolution lawyers (that is, tax lawyers who help clients resolve tax debt) offer payment plans. After an initial payment the attorney files a power of attorney with the IRS and officially represents the client. In exchange, the client makes monthly payments toward a flat fee or initial balance before a specific tax service is provided. However, if the client falls behind on monthly payments the tax attorney can simply withdraw from the matter, leaving the client without the legal service and that much poorer. Accordingly, consider the value of payment plans in lieu of paying a flat fee upfront. If delivery of the legal service is contingent upon payment in full, perhaps a payment plan won’t provide sufficient value or timely service.

Flat Fee or Hourly Rate

Attorney pricing is very important to any client. Attorneys are notorious for being expensive, so you shouldn’t sign a representation agreement you don’t understand. With that said, many tax resolution attorneys offer flat fees for specific services. That means that the client will pay a specific sum of money in exchange for a specific service. For instance, a client may pay $5,000 for an offer in compromise application. Flat fees give the client greater certainty as to the total cost of representation.

Attorneys also charge by the hour for certain services, often in litigation or whenever the total amount of work required is difficult to estimate at the beginning of representation. In this instance, a tax attorney will charge a “retainer fee” and bill against that amount as they work on the case according to their hourly rate. For example, a tax attorney may charge a $5,000 retainer fee in an audit defense case and bill at $300 per hour. If the attorney works 10 hours on the case during the first month they may deduct $3,000 from the retainer fee.

Outcome vs Cost

Prospective clients should weigh the expected relief against the cost of hiring a tax attorney. The less tax debt owed, the less sense it makes to hire a tax attorney. For instance, a client wouldn’t pay a tax attorney $3,000 to secure an installment plan for repayment of a $3,000 debt; the attorney fees would equal the amount of debt. Likewise, attorneys can’t guarantee a particular outcome, so there’s some risk that the client won’t receive monetary savings through the engagement. For instance, an offer in compromise application could get rejected by the IRS. (Of course, an experienced tax attorney will only file an application that stands a good chance of being approved.)

To give a practical rule of thumb followed by many tax attorneys, a client must owe at least $10,000 in tax debt. If less than $10,000 of tax debt is owed, it may not make sense to spend money on attorney fees when the debt can be repaid, the client can apply for relief on their own, or the client can hire a less expensive professional.


Consider the fee structure before hiring a tax attorney. Is the tax attorney charging a flat fee or billing by the hour? Is the fee being paid through monthly installments? What happens if you miss an installment payment? Is the goal of representation worth the cost of hiring the attorney?

-To learn more about tax resolution visit The Sacramento Tax Blog for articles on IRS tax resolution, tax attorney fees, and offers in compromise.

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