Do I Need a Lawyer for the IRS CP2000 Audit?
Everybody has to watch their expenses. Always consider the best (and worst) options.
The “proposed” tax appearing on the CP2000 notice is not permanent. It can be contested. Usually, you only have one opportunity to respond to this CP2000 “proposed tax due” letter.
Unfortunately, your accountant or tax return preparer is not likely to have the knowledge to respond to an IRS Audit effectively. If you are not trained in presenting clear, convincing evidence, the relevant law, and how the law applies to your facts, then perhaps you should hire a tax lawyer to handle this IRS audit.
You also need to act quickly. There is a response date on the notice, and it is in your best interest to respond before the deadline.
It is far more efficient, less risky, and less expensive to hire a tax an experienced tax lawyer to handle the audit response to the CP2000 audit letter, than to lose your audit.
So do you really need a tax lawyer? If the proposed tax is greater than $10,000, then probably, yes.
How Much Does a Lawyer Cost to Handle a CP2000 Audit?
Everybody has to watch their expenses. Lawyers know that.
The fees for a tax attorney to handle an IRS Automated Under Reporter Audit or a U.S. Tax Court case vary. The cost is based on several factors:
- The amount of the proposed tax.
- The types of unreported income.
- Your facts related to the unreported income.
- Your available evidence, which could greatly add to the difficulty level.
- The time remaining to respond before (or after) the given deadline.
- The skills and reputation of the attorney in handling Audits.
The Price Comparison
Everybody has to watch their expenses. Here is how you can decide.
It is likely far more efficient, less risky, and less expensive to hire a tax an experienced tax lawyer to handle the audit response to the CP2000 letter. If you choose to allow a less-qualified person to handle the audit, and you lose, then your costs will increase greatly in the U.S. Tax Court.
- Tax Court. Fees for a competent, qualified tax attorney will begin around $7,000 to $9,000 for the most basic cases. The case could cost more, depending on some of the factors above.
- CP2000 Response. In contrast, the most effective but affordable tax professionals will charge a range of $2,500 to $5,000 for most CP2000 audit cases. Just like in Tax Court, the case could cost more, depending on some of the factors above.
Is It Worth the Cost?
Everybody has to watch their expenses, both the present, and the future expenses.
In the long term, you do not save money by using a cheap solution. Or by hiring no solution. Consider what is at stake. Always hire for the weight of your situation.
Hiring the right tax lawyer helps avoid much greater costs later. If a less-specialized person handles your audit, and you lose, then the IRS will finalize the full amount of that proposed tax. After that, these are the expensive consequences that could have been avoided:
- That amount of tax, interest, and penalty could be substantial, or even life-changing. This amount due could be tens, or even hundreds of thousands of dollars.
- Once the CP2000 audit is finalized, your choices are to either accept the tax; and then pay it; or hire a tax attorney to fight the audit result in the U.S. Tax Court. See “The Price Comparison” (above) about the cost that could have been avoided.
- You may have to pay the debt immediately, or even pay up to 10 years, or sometimes more.
- If you do not pay voluntarily, the IRS will enforce its collection of the tax. The government will levy (garnish) paychecks and payments from customers, and levy (seize) bank accounts.
- If the tax is more than $50,000, the IRS will block your passport.
- The IRS will also file a Federal Tax Lien that attaches to all or your assets. And everyone will see this lien, because it is a public document.
- If your state has an income tax, it will also increase your state tax, based on the IRS increase.
So … is it worth the cost? That depends on what’s at stake. Usually, the answer is yes!