An audit is a close review of a taxpayer's file by the IRS. Tax issues include failing to pay, incorrect processes, appealing an IRS action, criminal tax evasion, and fraud.
By Hannah Hilst | Legally reviewed by FindLaw Staff | Last reviewed February 13, 2025
This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw’s team of legal writers and attorneys and in accordance with our editorial standards.
The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area.
Despite trying to fill out your tax return correctly and ensure you paid your taxes, you may still run into issues with audits and tax debts. Problems from the collection of unpaid taxes and the audit of your tax return can strike fear in many taxpayers. With the resources below, you can learn about how audits work and what to do if it happens to you.
An audit is a close review of a taxpayer's file by the IRS. An audit happens when there is suspicion of fraud or errors in paperwork, but they are also conducted randomly or target a group that is subject to greater scrutiny. Any audit should be taken very seriously.
Some tactics can help avoid an audit. There are also strategies you can use if your efforts fail and an audit takes place.
Some common causes of IRS audits include:
Apart from avoiding these red flags, a taxpayer can also reduce the visibility of their return by hiring a tax professional, preparing the taxes digitally (or at least neatly and carefully), and filing on time.
The lawyer’s purpose is to protect the taxpayer from the IRS and auditor errors. They monitor the audit to ensure the IRS follows proper procedures and respects your rights. If a field auditor comes to your home or business, your attorney can help you obey the law while protecting your privacy.
But a tax audit isn’t necessarily adversarial. An attorney can also take steps to cooperate with the IRS requests and requirements. This cooperation helps resolve the audit quickly and might prevent further escalation.
An audit is a top reason to hire a tax attorney. Lawyers help taxpayers avoid mistakes, whether during the initial tax preparation or when responding to an audit.
During an audit, financial records and tax documents fall under scrutiny. Accounting skills may provide clarity.
Some tax lawyers are also certified public accountants (CPAs). While this certification is not required to practice tax law, it can show that an attorney meets state standards for accounting. Many law firms also work with non-lawyer CPAs. That means if you go to a tax attorney with a legal question, you don't need to turn around and find another tax professional to file a return based on the advice you receive.
Additionally, a tax lawyer can draft other documents that must be submitted to the IRS on your behalf, such as documents to support claims on your tax return.
A taxpayer is rarely facing a truly unique tax problem. Often, the IRS and the courts have already answered the question or ruled on a similar situation. A tax lawyer can review laws, regulations, and court decisions to find a solution to your tax question that should withstand IRS scrutiny. If you are facing a unique tax situation for which there is no prior guidance, an attorney interprets tax law to find a solution.
Millions of Americans operate small businesses that often generate their own tax issues. Additionally, U.S. tax law treats income from businesses that operate as sole proprietorships, partnerships, and S corporations as personal income to the owners. As a result, any business tax problems they are experiencing could impact their personal returns. Most tax lawyers work with small businesses and their owners to resolve any legal issues.
The IRS conducts several types of tax audits. Some pose a more serious threat to taxpayers than others. In many cases, the audit simply asks for additional paperwork to verify that your returns were correct. But sometimes, the IRS is investigating more serious issues. A tax attorney can help you prepare for the tax audit by helping collect the correct information and ensuring it is accurate. You can also authorize them to speak on your behalf during meetings with auditors.
When a taxpayer has a dispute with the IRS regarding their tax situation, they need someone to advocate on their behalf. While taxpayers always have the option of representing themselves before the IRS and the U.S. Tax Court, an experienced tax lawyer is almost always the better choice.
An attorney understands the rules and procedures for appealing an IRS decision through the agency's appeals process or in court. Additionally, a tax lawyer can represent their client in negotiations with the IRS to ensure they get the best deal possible.
Often, the best way to save money on your income is to make sure it is never subject to tax. A tax lawyer's knowledge of the tax code and IRS rules and regulations can help you structure your affairs to minimize your tax bill. This can be anything from helping set up tax-deferred retirement accounts to structuring your business to minimize tax payments. An attorney can also help with estate planning and setting up trusts.
If the IRS believes you have committed tax evasion or tax fraud, a tax attorney has passed the state bar exam and will represent you in court. The IRS usually imposes administrative penalties outside of the courts. But tax evasion and tax fraud are serious crimes that can lead to substantial fines and even jail time.
There are fine distinctions between the avoidance of taxes, the evasion of taxes, and tax fraud. Fraud is the easiest to distinguish. Fraud occurs when taxes are avoided or reduced through misrepresentation.
The IRS takes the position that it is not criminal to reduce, avoid or minimize personal income taxes by legitimate means. That is to say, avoiding taxes is different from evading taxes.
Avoidance of taxes does not involve concealing, lying, or otherwise misrepresenting facts from the IRS. Making a mistake is not criminal. Fraudulent or evasive activity requires an intentional act.
Some activities commonly found to be fraudulent or criminal include:
Tax disputes involving potential fraud or evasion are serious. Some state tax and federal tax controversies can lead to jail time. Getting legal representation for such cases can be as urgent as in any other criminal investigation.
A tax attorney can assist with the following tax matters:
Assets like cryptocurrencies and foreign accounts can lead to confusing tax situations. Finding a lawyer with experience in cases like yours may be helpful. For example, you may seek defense from an international tax lawyer if you have offshore bank accounts, foreign income, or overseas business operations.
The IRS has many options to pursue and collect debts. Initially, the IRS will contact you by mail with a written notice of the amount owed. Interest and penalties accrue for as long as the debt is outstanding.
The IRS may be willing to negotiate a compromise if you are unable to pay the debt in full. Monthly installment payments can be arranged. If you fail to negotiate an agreement, the IRS may move forward with a collections process that can lead to tax liens, levies, and the seizure of future IRS tax refunds.
One of the most drastic actions the IRS can take is to seize your home or business. The Internal Revenue Service Restructuring and Reform Act of 1998 gave U.S. District Court Judges and Magistrates the power to take a home or business. Even before this legislation, the IRS District Direct was already authorized to do the same.
In addition to the seizure of a home or business, the IRS is empowered to enforce collection through levy, seizure, and public sale of just about anything you own. Wage garnishment is also a tool for enforcement.
The IRS has broad authority and the consequences of nonpayment are serious. That’s why it is very important to reach a compromise or retain an attorney as early in the collections process as possible.
Your attorney can help reduce your exposure to tax-related consequences. They can help you understand your options to address the debt in a way that minimizes damage in other areas of your life. For example, they could help you apply for an offer-in-compromise or tax relief. A lawyer can even help dispute back taxes and penalties in some circumstances.
Unfortunately, it's impossible to give an average cost of what a tax attorney will charge for any given service. Their fees can vary by state or region, the services they provide, and their experience level. Most attorneys specializing in tax matters will charge an hourly rate of anywhere from $100 to $500 an hour for legal advice, but some will charge a lower flat fee for routine matters. Attorneys with fewer years of experience will sometimes charge a lower rate while building up their client base.
One way tax attorneys operate differently than most attorneys with other specializations is that they usually charge for their initial consultation. However, they are usually required to provide you with a breakdown of any fees they charge in advance, so there shouldn't be any surprise bills. Many lawyers are also willing to work out a payment plan with their clients.
If you have only a few questions about how items should be reported to the IRS on your tax return, consulting with a tax lawyer in advance may seem like an expensive proposition. But it may save you from paying additional taxes, penalties, and interest. Plus, if your actions get you into trouble with the IRS, you may still need to hire an attorney to represent you.
