The idea of hiring a tax attorney sounds scary. In reality, though, tax attorneys invest most of their effort into steering their clients clear of bad things. You have to hire one at the right time, however, to be sure you'll avoid trouble. Here are five legal situations where it's best to seek a professional's tax advice.
A windfall can radically alter your tax situation. If you receive a large amount of money in a single year, that's a windfall. For example, winning a huge lotto jackpot has major tax implications even if you take the prize in a multi-year distribution. Similarly, inheritances and investing gains may lead to windfalls. It's wise to know early on what you'll face both legally and in terms of your tax bill.
Starting, Selling, or Ending a Business
When you start a business, how you incorporate it will affect your tax treatment. Failing to organize the business correctly can expose you to a larger tax bill, so discuss your plans with a tax attorney.
Similarly, there may be tax issues when you close or sell a business. You'll want to retire existing tax bills to ensure nothing creeps up years down the road. The IRS has a long memory, and it's best to settle up with the agency as soon as possible.
Marriage or Divorce
Changes in your marital arrangements can have positive or adverse tax influences. You may be eligible for new tax credits if you wed. Likewise, you'll lose them if you and your former partner part ways. Also, there are issues about whether you count as married or single in the year of a divorce. Regardless, your situation is going to change a lot, so contact a tax attorney.
Accessing Tax-Deferred Money
Especially if you're accessing money from tax-deferred accounts early, you need to think hard about the implications. Notably, a tax attorney may be able to identify an allowed emergency that may provide penalty-free access to the money. When possible, you want to minimize the hit from these kinds of withdrawals.
The government rarely comes right at someone with a tax case, even if they're sure the person did something wrong. If you receive a notice, you'll have the opportunity to respond. A tax attorney can review the notice and help you fashion a response. If the issue is legitimate, they can help you navigate the system to minimize the damage. If it is in error, they can craft an appropriate letter telling the government why it should close the case without further bothering you.
Contact tax attorneys in your area to learn more.