All Tax Advisors Are NOT the Same

A tax dispute or audit  with the IRS is a fight. Don’t fool yourself to believe otherwise. The adversarial process does not have to be ugly. Frequently it is courteous and professional, but it is a fight. You need to hire an advisor with all the tools to go the distance and win the fight.

Your advisor should have the capability to handle all matters that arise during the course of the dispute. You do not want to change horses in the middle of the stream as this results in duplication of effort and increased costs.

Your advisor should have the following "tools":

Tax knowledge. This includes knowledge of tax law, tax regulations, tax rulings, tax court cases, audit procedures, appeal procedures, collection procedures, and tax litigation procedures.

Business knowledge. Your advisor needs to have sufficient business,
accounting, and financial training and experience to understand the business aspects of your case.

Legal knowledge. Many tax problems are intertwined with complex legal issues unrelated to tax law. This can include bankruptcy, contract law, tort law, agency law, etc. Your advisor needs to be able to sort through all these legal issues to solve your problem. Additionally your advisor needs to know what the IRS can and cannot legally do and what you can do to if they break the law. Lastly, your advisor needs adequate legal knowledge to recognize potential criminal issues and protect your interests.

Negotiation skills. Often the resolution of a tax issue with the IRS is not won or lost, it is compromised. Your advisor needs to be able to negotiate a good settlement when the circumstances dictate that compromise is the best option.

Litigation skills. Your advisor needs to be able to go to court on your behalf, whether it be a simple summons enforcement issue, litigation in U.S. Tax Court, or defense of your interests if the IRS alleges you committed a tax crime. Your advisor needs to know how to fight when necessary.

Lastly, your advisor needs the experience to know how and when to use each of these tools and skills to get the best result possible.

A tax advisor with all the above tools has the capability to pursue all available options to win your case. Often a tax dispute starts in one forum and either moves to another forum or requires simultaneous action in multiple forums. For example:

During the course of a routine audit, the IRS may issue a summons for documents to you, your spouse, your accountant, banks, employers, and virtually anyone else. If you do not believe that this information is relevant you will need to go to court to quash this summons. Likewise, if the IRS believes that you or someone else has not fully complied with a summons, they will go to court for summons enforcement. Your advisor needs to be able to deal with these court proceedings.

During the course of an audit, your accountant receives a grand jury subpoena. This clearly indicates that a criminal investigation is underway. You need a criminal attorney to assist you in this matter. Likewise you need an advisor that you can speak to in complete confidentiality. If your advisor does not have an attorney-client privilege, the IRS can force your advisor to disclose everything you have told them.

You are unable to get your audit resolved with the field auditor or the appeals officer. Therefore you need to go to the U.S. Tax Court, the U.S. Court of Claims, or the U.S. District Court. You need an advisor that can deal with these court proceedings.

In summary, your representative should have the knowledge, skills and experience to handle:

• IRS Administrative Proceedings
• Court Proceedings
• Criminal Investigations

Advisors of Merit vs. Advisors of Convenience ™

The world of tax advisors is divided into two classes, advisors of merit and advisors of convenience. Advisors of merit are advisors you choose because they have all the skills and knowledge needed to handle your case. Advisors of convenience are advisors chosen because they are local, are a referral from a friend, have handled matters for you in the past (i.e., business or personal attorney, tax return preparer, financial accountant) or for any reason other than they have ALL the skills and knowledge needed for your case. Obviously, you are better served by advisors of merit.

What to Look for in an Advisor of Merit

Tools. An Advisor of Merit should have all the tools described above.

Education. An Advisor of Merit should have excellent performance at excellent schools in all the areas necessary to render the services needed.

History of Excellence. An Advisor of Merit should have not only excelled at their education, but should have a history of excellence in all endeavors.

Experience. An Advisor of Merit needs to have sufficient experience to know how and when to use their Tools and Education.

What to AVOID in an Advisor

False Promises or Promises Made Before They Know All the Facts . The Internet and television are filled with advisors that promise to settle your IRS troubles for "pennies on the dollar." It is unconscionable that these advisors make such claims before they even know what your case is about. Using an advisor based on such unfounded claims is ridiculous. You would not go to a doctor that promised to make you well before you even told him what was wrong with you. Why go to an advisor that makes such unsubstantiated claims? If it was possible to settle all IRS claims for "pennies on the dollar", no one would ever pay taxes - they would just settle for "pennies on the dollar."

Even worse are the advisors that claim they settled someone's case for $3000 where the person owed $2 million. They attempt to have you believe that they can do the same for you, again without knowing what your case is about and without telling you the facts of the case they settled. Your case probably is not at all similar to the case they describe, especially since such "great results" often occur based on the taxpayer's horrible financial status and inability to pay rather than some great skill of the advisor.

IRS Consumer Advisory

In fact the IRS has issued a CONSUMER WARNING regarding these unfounded claims” which states in part:

IR-2004-130, October 25, 2004

WASHINGTON — The Internal Revenue Service today issued a consumer alert advising taxpayers to beware of promoters’ claims that tax debts can be settled for “pennies on the dollar ” through the Offer in Compromise Program.

Such promoters make money by inappropriately advising indebted taxpayers to file an application for an offer in compromise with the IRS, promising unrealistic results, even when the taxpayers do not meet the requirements of the program. This bad advice costs taxpayers money and time...

“This program serves an important purpose. But we do warn taxpayers to watch out for unscrupulous promoters charging excessive fees to taxpayers who have no chance of meeting the program’s requirements,” said IRS Commissioner Mark W. Everson. “Taxpayers should not be duped by high-priced promises.”... (emphasis added)

Avoid advisors that make promises before they know ALL the details of your case.

Always handled my returns . Your initial instinct to have the person who "always handled my returns" defend you may be wrong. The preparation of tax returns and the defense of IRS controversies are two VERY different matters, requiring very different skills. Simply going to the person who "always handled my returns" is falling into the trap of the advisor of convenience. Remember, you want an advisor of merit to defend you.

Moreover, choosing the person who "always handled my returns" may create a conflict of interest situation. In some cases, there are errors on the returns that are the fault of the preparer or based on previous erroneous advice of the preparer. In these situations you need someone else to defend you and place the blame where it belongs. If you don't have a fresh set of eyes review your case, how do you know if there was previous erroneous advice or a preparer error on the return?

Lack ALL the Tools to Go the Distance. Obviously, for the reasons discussed above, you want an advisor that has all the tools to go the distance and get you the best result possible .