Why Hire a Tax Controversy Attorney?

What is Tax Controversy and why is it important to retain a Tax Controversy attorney as opposed to an attorney specializing in a certain area of the law? Why should attorneys and accountants refer cases to a Tax Controversy Attorney?

As an attorney for IRS Chief Counsel, my responsibility was to handle whatever case I was assigned.  I had to resolve or litigate the matter, no matter what the issue.  Every case was different, every case had different types of taxpayers or entities, every case had different facts, hence different issues.  Every case required research into that particular fact situation and legal issue.  You studied it, you evaluated it, you analyzed all the angles, and you formulated a strategy.  It would not have made sense to only know one type of issue, because there were so many different tax issues and different taxpayers.

          Granted, there were hot issues then, like TEFRA partnership cases.  We had test cases that litigated the reasonableness of actuarial assumptions in defined benefit plans, another hot issue at the time.  Hot issues then became FBARs and foreign reporting, conservation easements, micro-captives, the list is long. Now the hot issue is the taxation of cryptocurrency. Times change, laws change, the issues change.  Anyone in tax controversy understands this. Accountants are keenly aware of the constant change in tax laws and regulations. The hot tax issues of the day change and you have to be prepared to take on new issues, unusual fact situations, and new tax laws in order to resolve cases. Do you want someone who knows how to serve up today’s favorite flavor or do you want someone who knows how to serve all the flavors, formulate new ones, and understands how the whole ice cream factory works?  It makes a difference. Even now there are attorneys who claim to be experts in cryptocurrency, but do not have the breadth of experience to understand how the tax regulatory or enforcement system really works.

            Through the years I have learned that the most important skill a tax controversy attorney needs is experience with the process, how the taxing authorities “think” and how they will approach a case and understanding all of the options for addressing the case. Knowing how to research any issue and to use the right resources to do so.  Knowing how to analyze the facts of the case, whether it is a small business or a multinational corporation, and to apply the law to those particular facts.  Knowing how the taxing authority operates, how to read regulations and pronouncements they issue, how to navigate the system, who to call, how to negotiate and speak with them. It is important to understand where they are coming from and finding common ground if there is any; if there isn’t common ground, it is important to know how to take all necessary steps to challenge their position and protect the client’s interests because tax litigation is different than other litigation forums.  

             I often compare it to the medical profession.  If you have a myriad of problems, you would be mistaken to just go to a gastroenterologist.  He would see it only through his lens when it could be an endocrine problem or even an infectious disease problem.  Similarly, a surgeon may want to do surgery, when perhaps another physician might recommend physical therapy instead.  If you see the issue through only one narrow lens, the suggested resolution may not be the best option or the only option.  For example, a real estate attorney may be very good at what he does, but if he has a case that becomes a tax controversy matter, he could easily prejudice his client’s case and even lose a slam-dunk case if he doesn’t know how to navigate the process properly with the taxing authorities.  I’ve seen attorneys and accountants who were very competent in their specialties but who defaulted on serious tax deadlines resulting in assessments against their clients, causing cases to go to collection, for example.  They may have worried they’d lose the client if they referred it, or that they would get complaints from the client about the cost of seeking help from a tax attorney. However, that is penny-wise and pound-foolish. Had they referred the case to a tax controversy attorney, they could have continued to be a valued resource regarding the merits of the case, yet the client would have been better served and protected.   

            It does not matter what tax issue you have or what kind of entity you are, if your case becomes a “tax controversy” with a taxing authority, always seek out an experienced tax controversy attorney as early as possible in the process to protect your rights and to achieve the best outcome.