Case Study: Why Hiring a Tax Attorney is the Best Way to Fight the IRS and Win

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What are your chances of getting hit by lightning in your lifetime? 1 in 3,000 or a 0.03% chance.

Your chances of dying during a shark attack? Even higher at 1.5%. And, that’s if you get attacked.  

How about your chances of winning a case against the IRS? It has to be pretty low, right?  

The Federal Government is a pretty airtight operation, after all.

Surprisingly, taxpayers win some or all of their cases about 14% of the time.

Counsel represented more of those cases than not. And only 6% of those who tried without a tax attorney won and their attempts were based on frivolous arguments.

Why is it better to fight the IRS with a lawyer on your side rather than on your own? Here’s why.

1. Famous Cases Where People Fought the IRS and Won

Cases in which people fight the IRS get significant press coverage, especially if they win. It seems, however, that for the majority of Americans, this doesn’t affect the perception that it’s impossible to fight the IRS. Here are a few cases where people won against the IRS.

A Nurse and the IRS

Here is one of those rare cases where someone represented herself and won. She wasn’t a lawyer. She was a shift nurse at a hospital in Maryland.

In 2006, the IRS notified Lori A. Singleton-Clarke they would audit her 2005 tax return. She had reported $50,000 in income from her nursing job. She’d also included deductions for her MBA for health management professionals from the University of Phoenix.

Because the school was an online school, the IRS attempted to discount her deduction and claimed she owed an extra $2,126. She had claimed other deductions and agreed to remove those. But when the IRS wanted her to leave off the school expenses, she refused.

After several notices, Lori filed a challenge to the IRS at the U.S. Tax Court. She couldn’t afford a lawyer, so she took on the IRS like David against Goliath.

The IRS cited Treasury Regulation 1.162-5(a) that states your professional educational expenses must enhance a current skill set. It can’t qualify you for a new job. They argued that the MBA had nothing to do with her current role as a nurse.

Singleton-Clarke Claimed the courses she took gave her credibility in her job and made her more effective at her current position as a head nurse. The court sided with Singleton-Clarke, and they allowed the expenses.

Woman Avoids Jail by Fighting the IRS

Fighting the IRS won’t always get you out of paying your taxes. Some people have refused to pay their taxes so long the IRS charges them criminally and sends them to jail. One woman fought her criminal charge and avoided jail.

The IRS charged Vernice Kuglin with six accounts of tax evasion. Vernice had studied the constitution and believed the Federal Government didn’t have the power to tax her income. According to her, the IRS is misapplying what the founding fathers set forth. Eventually, her rebellion caught up to her.

Vernice enlisted the help of Larry Becraft who specialized in protester cases. And it mainly because of his involvement that Vernice was able to avoid jail time.

Becraft presented to the jury a story. Vernice had asked the IRS to explain the tax laws to her, and the IRS had ignored her requests for justification. The jury sided with Ms. Kuglin, and they acquitted her of all criminal charges.

Unfortunately for Vernice, this did not determine whether the IRS had the right to take her money or not. And she still had to pay her taxes to the Federal Government.

Wesley Snipes Loses

We figured we should balance the narrative with a case of loss and woe. You won’t always win your fight against the IRS. Remember, they are a powerful arm of the government, and you only have a 14% chance of winning.

The IRS doesn’t care a wit whether you’re famous or not. They only care that you have money and that you’re paying them their “fair share.” Wesley Snipes thought his celebrity status would get him out of paying over $23 million.

Snipes counter-offered $842,000. The IRS said “no.”

Tax evasion isn’t a recent phenomenon for our venerable vampire. In 2008, the court convicted wesley snipes of three misdemeanor counts of failing to file his tax returns. He spent time in a minimum security Federal prison.

He’d listened to a couple of tax fraudsters who claimed Snipes didn’t have to legally pay his taxes. These were accountants Eddie Ray Kahn and Douglas P. Rosile who ended up with longer jail terms than Snipes.

What’s the lesson here? Don’t fight the IRS when you’ve committed a crime. Oh, and don’t try to use your celebrity status; it just doesn’t work.

2. How Does Tax Court Work?

Do you know your tax rights? If you did have to go to court against the IRS, could you legitimately defend yourself? Most people wouldn’t be able to answer either of those questions with certainty.

Here’s how the U.S. Tax Court works and what you should expect if you have to appear there.

How Does a Dispute End Up in the U.S. Tax Court? Who Sends It There?

You have two choices when the IRS audits you: agree or disagree. If you take the blue pill, you pay your taxes and move on. If you take the red pill, you receive a “notice of deficiency” from the IRS, and you have ninety days to petition the Tax Court.

You take the case to the U.S. Tax Court. You’re suing the IRS. Are you feeling powerful yet?

Who Runs the Tax Court?

The Tax Court is not one single location. Nineteen judges travel to the fifty states and preside over cases. There is no jury in the U.S. Tax Court.

The only time a case goes to civilian court is when the IRS wants to bring criminal charges against an individual. In the Vernice Kuglin case, a jury acquitted her of her crimes.

How Do You Present Evidence in U.S. Tax Court?

You need some airtight evidence that the IRS is wrong about your taxes before you sue them. If you claim a deduction for mileage, you drove for your business, and the IRS says you didn’t travel those miles, you at least need a mileage log.

Even a mileage log might not be sufficient. You need the receipts for the gas and maybe even invoices for sales you made while driving. It all comes down to the records you keep in this case.

When you submit the evidence, the IRS then has a responsibility to prove them wrong or accept them. Since you’re suing the IRS, the burden of proof is initially on you, and you toss it on them once you provide sufficient evidence.

Who Can You Bring Alongside You in Court?

You can bring anyone you like alongside you in court. But unless you plan on bringing someone for emotional support, your best option is an attorney who is an expert in tax law. Unless your accountant can provide evidence or be a witness, they’ll be useless in the tax court as representation.

What you need is an attorney who has been admitted to the bar of the Tax Court. They’ve been trained in the particulars of tax law. They’ll be familiar with past cases and know how to use precedent in your favor.

Witnesses are also useful. The court doesn’t care about your character as in a murder trial, but they care about whether you violated tax law. You need witnesses who can back up your evidence against the IRS.

This could mean an employee who can verify your expenses or a client who received your services. An employer who can show the court what they require you to pay out of pocket for your job can also be an asset in your case.

The Types of Court Cases

You will most likely want to file your case as a small tax case unless you owe more than $50,000. A regular tax case is more expensive and is generally for those who owe much more than the $50,000 limit. Be sure you make your designation when you file your petition on the court website.

If you are going to represent yourself, then choose the Small Case Tax court. This option is more informal than the regular U.S. Tax Court.

Remember, the IRS has no say in your designation. If you get any resistance from the IRS or the IRS mistakenly places you in a different court, contact an attorney right away.

What Happens When a Judge Makes a Determination?

If you’re familiar with a regular court in the United States, you may expect the judge to make a determination right away. Often, in smaller courts, you’ll sit across the table from a judge, and they’ll hear you talk and make a decision within a few minutes to an hour. This isn’t the case with the tax court.

You’ll present your information to the traveling judge. The judge will weigh the case along with the other cases he must preside over. If the case isn’t complicated, you might hear back from the court in a few months. But if the case is involved, you might not hear again for a year or two.

What Happens If You Lose?

Remember, your odds of winning still aren’t high. You’re more likely to lose than win unless you have some incredibly airtight evidence you’re right. So, what happens if you lose?

The biggest downside to the Small Case Court: you can’t appeal. While it’s cheaper and more informal, you’re stuck with the judge’s decision no matter what.

If you choose the regular tax court, you can appeal if you lose. You have ninety days to file an appeal to the U.S. Court of Appeals which is above the U. S. Tax Court.

Also, a note of warning: don’t bring a frivolous case to the court. If you waste the court’s time, you could incur a penalty on top of your taxes. A frivolous lawsuit usually means a case meant to annoy the other party, and it includes any case without sufficient evidence.

Don’t look like a fool. Have everything together and do your research before you approach the court.

Can I Deduct the Cost of Tax Court on My Taxes?

If the case is related to your business, you may deduct the expenses. Otherwise, you can’t.

If the case involves both business and personal taxes, you can only deduct the cost of the business portion of the case. The court will try both parts of your audit, and you will easily be able to separate the expenses.

How to Find a Reputable Tax Attorney

There are many underqualified practitioners out there. The last thing you want is to put your life in the wrong people when the IRS comes looking for you.

Below are some things to consider that will help you choose the best tax counsel.

1. Proper Qualifications

A tax counsel with the proper qualifications must have a Juris Doctor degree which is commonly referred to as J.D. They must also have been admitted to the state bar.

In addition to the above, a tax counsel needs to have advanced training in tax law. That will most likely come from a master of laws degree in taxation (LL.M.)

It is not uncommon for tax counsel to also have a background in accounting. A CPA is, therefore, an added bonus that can help them better serve your tax needs.

2. Speak Directly to An Attorney Before You Sign Up

Nowadays unscrupulous people take advantage of those who need tax counsel services to con them of their money. A notorious example of this is the tax debt resolution scams that people lose a lot of money on.

When you call a tax counsel’s office, you may get salespeople talking to you. No matter how refined and qualified they sound you should not sign anything before speaking to the lawyer directly.

Lawyers are legally bound by ethical obligations provided by the state bar to follow specific guidelines. As a result, it is possible to verify if you are taking to an actual lawyer by cross-checking this information.

3. Check Their Track Record

Nothing speaks to the capabilities of a tax counsel than the testimonials of those who have passed through their hands.

When you’re looking for a tax counsel, you can ask your family and friends for a referral. In case they do not know of anyone they can point you to, you can check out tax attorney reviews.

Looking for client reviews to hear what past clients have to say and you may find that the firm helped someone in a very similar situation to yours.

Should Hire a Tax Attorney to Fight The IRS?

A tax defense attorney can always help. Even if your chances of winning aren’t great and you know it, a potential settlement is better than losing against the IRS. You could lessen your tax burden. Lastly, if the IRS disregards your records and evidence entirely, you can file a motion to have your attorney fees reimbursed.

If you still think the IRS is in the wrong, it’s time to get someone on your side and hire a tax attorney. Sign up for a free consultation today.

Managing Partner of Silver Tax Group, author of the book “Stop the IRS”. Practicing a variety of tax issues, regulations, laws and rights. Specializing exclusively on tax matters involving IRS audits, negotiation, settlements & compromises.

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