Hire Tax Lawyer to prevent Irs audit
Q.My husband and I hired a tax lawyer because this year we made the horrible discovery that we needed to be filing a foreign bank account disclosure (FBAR) with the IRS for the past several years and hadn't (husband has an account resulting from the sale of his mother's house after her death, before he immigrated to the US). The penalties for not filing this FBAR are insane and should be considered cruel and unusual punishment, as the fine is $10k/year with 6 year statute of limitations for a *non-willful* civil penalty. Criminal for willful violation is $100k/year not filed and prison time. We were justifiably scared, but apparently we should have been far more scared of the lawyer than the IRS. We go for the initial consultation for the tax lawyer, and I express some concern about the total cost of the case, saying I'm not comfortable going much above our original retainer ($5k) for handling this case (we'd try to figure it out ourselves otherwise). The lawyer tells us that $5k is her initial estimate and it shouldn't go much over this. Only verbal of course (lies..lies..LIES). The retainer agreement itself has statements saying that any estimates provided are only estimates etc. to fully cover their asses, and only gives an hourly rate ($400/hr). Over the next two months, we receive little word about what has actually been done besides invoices demanding more money for what appears to be research and review. We're afraid to even ask the lawyer about progress because each email costs something ridiculous like $400 of her time. After uncomfortably coughing up over $7500, we thought the end was near. It's impossible to tell from the invoice descriptions what was actually done, which are concatenated lists of miscellaneous things, reviewing letters, repeated research/review of the same topics over and over again but worded differently each time, half an hour here, 1 hour there. At what we thought was very nearly the end, we received a letter with her advice and some sample filled out forms. The advice was barely more information than we had received in the initial consultation meeting. In fact, the only useful thing we really got out of any of this was knowing the precise statute of limitations and what years we actually needed to re-file for sure. Well, we just received another invoice for **$8200**, bringing the total to just under **$18000**. We thought that the research had ALREADY been done but apparently it wasn't nearly done yet. We were also under the assumption that they would not go THAT FAR over an emptied retainer trust. Are we out of our minds for expecting that a $400 hourly fee would buy us some kind of expertise and above a third grade reading level for research on a relatively routine case? We are not tax professionals and it took us all of 5 hours to entirely redo 3 years of tax amendments to submit to them. Is our total of $18000 in costs not ludicrous considering that our most likely IRS penalty would have been nothing, and at most $20000? (And of course we're still subject to the IRS penalties). We'd like to dispute these charges but it looks like we don't have much leverage other than showing the mediocre quality of the advice and solid evidence of work we received versus the cost and number of hours spent. For example, a few thousand dollars were spent over several instances "reviewing U.S.-[foreign country] tax treaties", where this was obviously not even of much use to us knowing the small sums of money involved in double taxation between the two countries (we're talking well under $2k in double- taxed money here). Is there any chance in hell of being able to dispute this? Would we be subject to being sued for the lawyer's time in the case of an unsuccessful arbitration? We are cutting off the case *now* and would like further explanations of fees but don't want to be charged for them to even give us this explanation (yes, we are being billed for BILLING). What happens if you just don't pay - would they bother trying to sue, or would they just sell this to a collections agency?
A.You recently hired a lawyer to assist you with a tax problem. The problem is that you had money in an overseas bank and failed to list this in your tax forms for many years. You signed an agreement with the attorney and paid a retainer. It was your understanding that the retainer "should" cover most of your bill. This was not the case. The retainer only covered about 25% of the bill. You also object to the usual and customary charges of lawyers. You describe the lawyer that you hired as a "tax" lawyer. Was he the most knowledgeable of the tax lawyers that you interviewed? Did he have special experience with your particular problem? Why did you hire him? You also complain about the lawyer's practice of charging you for the time he takes to explain your bill. This is an easy one. Remember that nothing is free in a lawyer's office, it's like the rest of the world. If the lawyer did not charge you he would have to build this free answering into his fee structure with the result that he would be charging you for his "free" answers. Your State's bar association will have a process to consider and perhaps arbitrate fees. You may want to take your complaint to them. But first take a deep breath. Try and get over your anger. Right now you sound more mad than rational. We only visited this one lawyer. Surprisingly, in this entire 4 million+ metro area, there are only a handful of tax lawyers in the phone book, most of them too far away. She seemed know what she was talking about, based on what we read about the law ourselves. We were also under a major time crunch because naturally we found out about this filing requirement while we were researching how to do our taxes that year, in early April. The initial consultation was $500 - she sounded knowledgable, like she had done these sort of cases before - how can you know that the $500 is actually going to be only the tiniest percentage of what you end up owing, and that you should have paid that many more times over to find someone actually good? How can you ever know? She did her job, but I was far from impressed with the work quality.
Other Questions :
Question re: IRS Tax Levies and LLCs
Our family formed a 4-partner LLC to administer my grandmother's house after she died. One of the partners has had an IRS tax levy placed against him. The LLC was formed a couple of years before the levy was placed. Does the IRS have the a...
Estimated Tax _ Irs Form erro r ?
I am attempting to calculate my estimated Self Employment tax for last quarter (I'm a little late:) and I am not comfortable with this worksheet. I think it is wrong. Column one (1/1 to 3/31) of the worksheet looks like this: 27. Net earn...
2006 TaxAct Irs Schedule - Problem
I've used TaxAct Deluxe for several years with no negative issues. In 2006, we sold a second home and incurred a $6,000 loss. TaxAct offers guided input for sale of a "main" home, not of a 2nd home - I tried inputting as if it was a main ho...
Some advices about Audit By Irs
On a field examination, there was a audit by IRS is examining 2002 for a S Corp. IRS is also requesting copies of the 2001 tax return and the 2003 tax return. They are also requesting copies of the 2002 (1040) tax return for the single shareh...
Irs Tax Refunds_how long
I mailed both my federal and state tax returns on April 15th. I received my federal refund at least 5 weeks ago but still no sign of my Mass refund. How long has the turn around time been for people receiving their IRS state tax refunds?... esp...