Dealing with taxes can be stressful, especially when you get a notice from the IRS or a state taxing agency advising you that there’s a problem with your tax return. This situation often gives rise to a “tax controversy.” It occurs when there’s a dispute between the taxpayer and the tax authorities about the proper treatment of an item on the tax return and possibly the applicability of penalties asserted concerning that item.
Tax controversies can involve many types of taxes, such as income, payroll, sales, or even specific excise taxes for certain industries, like cannabis businesses. Resolving these disputes most effectively and efficiently requires a tax lawyer’s professional help.
Types of Tax Controversies
The Tax Workout Group (TWG) handles all types of tax controversies – preferably through an administrative proceeding, but when necessary, as a federal or state civil tax litigation matter. We craft innovative and tailored solutions with one goal in mind – resolving tax disputes most cost-effectively.
Here’s a look at the different types of tax controversies TWG can assist with:
Audits and Administrative Appeals
Most tax controversies arise in connection with an audit. The IRS or a state tax agency examines the tax return during the audit. It reviews a business or individual’s books, accounts, and financial records to ensure that the information reflected on the tax return is reported correctly under the tax laws and to verify that the reported amount of tax is correct. A tax controversy exists if the taxpayer disagrees with the changes proposed by the examining agent.
- Income Tax Audits: These audits check that the reported income, deductions, and credits are accurate. During an income tax audit, the taxing authority may request additional documentation or clarification on specific items. For example, suppose you had claimed a high amount of business expenses. In that case, the IRS might want to review substantiation for the claimed expenses, such as invoices, canceled checks, and receipts, to ensure those expenses are legitimate.
- Administrative Appeals: If you disagree with the outcome of an income tax audit, you can appeal the result and file a Protest to obtain an administrative review by the IRS Appeals Division. This process allows you to present your case and attempt to resolve the dispute by settling the disputed adjustments without going to court to resolve the tax controversy. This is often critical in resolving tax disputes without costly litigation and court intervention.
- Payroll Tax Audits: These audits focus on a business’s reporting obligations concerning employee wages and withholding taxes for Social Security and Medicare. The IRS wants to confirm that all payroll taxes are correctly reported and paid. In addition, these audits will review workers treated as independent contractors. In these reclassification audits, the taxing authority claims that payments made to independent contractors should have been treated as payment of employee wages and then seek to impose a payroll tax obligation on the business.
- Administrative Appeals: If a business disagrees with the results of a payroll tax audit, it can appeal the decision, just like with income tax audits. This administrative appeal provides an opportunity to resolve the issue through negotiation, potentially reducing the penalties and taxes owed.
- Sales Tax Audits: State tax agencies conduct these audits to check if a business collects and pays sales taxes correctly. The sales tax auditor will examine sales records, invoices, and tax returns. Due to the volume of transactions, these audits can quickly become overwhelming; therefore, the state will seek to utilize various sampling methods. Working with a tax attorney can ensure that the state tax auditor uses the correct sampling method and that the sample selected accurately represents similar transactions for the entire audit period.
- Administrative Appeals: If discrepancies are found during a sales tax audit, businesses can challenge these findings administratively through the state taxing agency appeal process to challenge the determination and seek a reduction of penalties asserted.
Penalty & Enforced Collection Defense
A tax controversy can also arise when the taxing agency asserts penalties or pursues enforced collection measures. An experienced tax attorney providing enforced collection defense representation can resolve collection matters and determine the best avenue for relief to resolve the outstanding tax claim.
- Penalty abatement means reducing or eliminating penalties that the IRS has asserted due to filing your tax return late or not paying taxes on time. You might qualify for penalty abatement if you have reasonable cause for missing deadlines, such as a severe illness or relying on incorrect advice.
- TWG are experts seeking penalty abatement by preparing a compelling case to reduce or eliminate these burdensome additions to the tax.
- The Trust Fund Recovery Penalty (TFRP) can be asserted against individuals who are responsible for collecting and paying withheld taxes (like payroll taxes) but fail to do so. In the case of payroll taxes, this penalty is equal to 100 percent of the taxes withheld or that should have been withheld and results in personal liability when the business cannot satisfy the unpaid tax claim.
- TWG provides an aggressive Trust Fund Recovery penalty defense. Our tax attorneys are experts in demonstrating that the targeted responsible person lacked financial control by utilizing company business records, e-mails, affidavits from third parties, and other evidence. Even if determined to be a “responsible person,” we can often establish that our client did not possess the requisite knowledge that the taxes were not paid, did not have the authority to decide the priority of payments to creditors, or were otherwise not willful for the nonpayment of the employment taxes.
- If you’re facing aggressive, enforced tax collection actions, such as wage garnishments or bank levies, TWG can help. Our expertise in tax collection defense spans the entire collection process.
- Our tax collection defense lawyers respond to delinquent tax notices, analyze Collection Statute Expiration (CSED) dates, and prevent the recordation of tax liens, notices of levy, seizures, and the sale of assets. They can also provide summons defense measures, negotiate installment agreements and offers-in-compromise, and, when necessary, seek judicial relief from improper collection tactics and eliminate tax claims in bankruptcy.
- The Innocent Spouse Defense can help protect a spouse from being responsible for tax debts caused by their partner’s misconduct or fraud if it can be proven they were unaware of these actions.
- If we determine that you may be innocent of the actions taken by your spouse, TWG IRS attorneys obtain qualifying administrative “innocent spouse relief” on the basis that joint and several liability is inequitable under one of three separate forms of relief.
Tax Litigation Representation
Tax disputes may escalate to litigation when the administrative process does not yield a good result. In such cases, having experienced legal tax representation is essential.
- Tax litigation involves going to court to resolve a tax dispute.
- The TWG team of tax litigators can help you achieve the best results. In every case, we strive to provide the highest quality legal representation by combining proven advocacy skills with in-depth knowledge of federal and state tax laws. Our tax litigation team has substantial experience litigating all types of tax matters in tax deficiency, tax refund, and tax collection cases before the United States Tax Court, the United States District Court, and the United States Court of Federal Claims. This combination of technical tax expertise and advocacy skills uniquely qualifies us to resolve your tax disputes successfully.
- Tax debts often represent significant claims when people or businesses file bankruptcy. Taxpayers considering bankruptcy with tax claims should hire a tax-bankruptcy attorney to advise them regarding the dischargeability of their tax claims and, if not dischargeable, to dispute and litigate the tax claims whenever possible. This complex area of the law involves the interrelationship of the Internal Revenue Code and the US Bankruptcy Code. A tax-motivated bankruptcy case can effectively eliminate IRS and state tax claims, along with medical bills, credit card bills, and most other debt.
- Our Tax-Bankruptcy practice group is comprised of bankruptcy attorneys who are also tax attorneys. They have expertise in IRS practice and procedure (including tax collection procedures) and the interrelationship between the federal and state tax laws and the U.S. Bankruptcy Code.
Specialized Tax Law
Specific industries and taxpayers face unique tax challenges that require in-depth specialized tax knowledge and experience.
- The IRS Large Business and International (LBI) Group investigates taxpayers’ finances with extensive wealth assets and complex financial situations. These audits can be complex and invasive, aimed at examining the more complicated tax returns of wealthy individuals and their related entities. Expertise in international tax law, transfer pricing, and complex financial instruments is required to navigate these examinations, which focus on all aspects of the taxpayer’s wealth structure and involve substantial document and information gathering.
- TWG provides expert representation during these specialized audits, helping clients navigate complex financial and tax issues.
- Cannabis Tax Law Matters:
- Businesses in the marijuana industry face unique tax challenges due to conflicting state and federal laws. For instance, while a cannabis business might be legal in its state, it still faces challenges under federal tax law, such as IRC Section 280E, which limits deductions for companies involved in controlled substances. This can lead to substantial tax liabilities for cannabis businesses despite their legality at the state level.
- Our cannabis tax expertise can help minimize current tax liabilities by counseling clients with tax planning, accounting, restructuring, and preparing intercompany agreements to reduce exposure to transfer pricing challenges by the IRS.
Count on TWG for Tax Representation
Facing a tax controversy can be overwhelming and scary. The process can be daunting no matter which type of tax controversy you face, whether you’re being audited, challenging the assertion of penalties, or preparing for a court battle. It’s crucial to have experienced tax controversy attorneys by your side. At Tax Workout Group (TWG), we specialize in all types of tax controversies and disputes. Our expert tax attorneys and professionals have the experience and knowledge to protect your rights and fight for a favorable outcome. We are a modern tax law firm comprised of aggressive attorneys dedicated to delivering client satisfaction through innovative and strategic results. Contact TWG today for a consultation, and let us resolve your tax dispute. Let’s work together to achieve a great outcome!
