Taxes affect every financial decision you make, from running a business to planning for retirement. A Pittsburgh tax attorney provides legal guidance on tax matters, helping individuals and businesses minimize their tax burden while staying compliant with federal and state laws. Unlike accountants who focus primarily on preparation and filing, tax attorneys address the legal side of taxation, including disputes with the IRS, tax court representation, and structuring transactions to achieve tax efficiency.
What a Tax Attorney Does
Tax attorneys are lawyers who have specialized knowledge of tax law. They advise clients on how to structure their affairs to reduce tax liability legally. This includes planning for major transactions like business sales, real estate purchases, and estate transfers. They also represent clients in disputes with tax authorities and can negotiate settlements or payment plans for those who owe back taxes.
In Pittsburgh, tax attorneys work with individuals, small businesses, and larger corporations. The city’s economy includes healthcare, technology, manufacturing, and energy sectors, each with its own tax considerations. A local attorney understands both Pennsylvania’s tax laws and the specific issues that affect businesses operating in these industries.
Tax Planning Strategies
Business Entity Selection
The type of business entity you choose affects how much tax you pay. Sole proprietorships, partnerships, LLCs, S corporations, and C corporations are all taxed differently. A tax attorney can analyze your situation and recommend the structure that minimizes your overall tax burden. This decision should be made when starting a business and revisited as the business grows or circumstances change.
Estate & Gift Tax Planning
Federal estate taxes apply to estates exceeding a certain threshold, which changes periodically based on legislation. Pennsylvania also imposes an inheritance tax on transfers to beneficiaries. A tax attorney can structure your estate plan to minimize these taxes through trusts, lifetime gifts, and other strategies. Proper planning can save your heirs significant amounts while ensuring your wishes are carried out.
Real Estate Transactions
Buying, selling, or exchanging real estate has tax consequences. Capital gains taxes apply when you sell property for more than you paid. However, strategies like 1031 exchanges allow you to defer these taxes by reinvesting in similar property. A tax attorney can guide you through these transactions to maximize tax benefits and avoid costly mistakes.
Resolving Tax Disputes
When the IRS or Pennsylvania Department of Revenue questions your tax return or assesses additional taxes, a tax attorney can represent you. This representation includes responding to audit notices, negotiating with tax authorities, and if necessary, litigating in tax court.
Tax disputes can arise from many causes. Disagreements over deductions, unreported income, valuation of assets, and classification of workers as employees versus independent contractors are common issues. Having an attorney involved early in a dispute often leads to better outcomes than waiting until the matter escalates.
IRS Audits
If you receive notice of an IRS audit, a tax attorney can represent you throughout the process. They handle communications with the IRS, gather and present documentation supporting your position, and negotiate any proposed adjustments. Attorney client privilege also protects your communications, which can be important in sensitive situations.
Offers in Compromise
If you owe back taxes you cannot afford to pay, an offer in compromise may allow you to settle your debt for less than the full amount. The IRS accepts offers in compromise when collecting the full amount is unlikely. A tax attorney can evaluate your eligibility, prepare the necessary documentation, and negotiate with the IRS on your behalf.
When to Hire a Tax Attorney
Not every tax situation requires an attorney. For straightforward tax preparation, a CPA or enrolled agent may be sufficient. However, certain situations call for legal expertise. Consider hiring a tax attorney when you are starting or selling a business, facing an audit or tax dispute, planning your estate, engaging in transactions with significant tax implications, or dealing with tax crimes or fraud allegations.
A tax attorney can also work alongside your accountant. While the accountant handles day to day tax preparation and compliance, the attorney provides strategic advice on larger decisions and represents you in disputes.
Choosing a Pittsburgh Tax Attorney
When selecting a tax attorney, look for someone with experience in the specific area you need help with. Tax law is broad, and attorneys often focus on particular niches like estate tax, business tax, or controversy work. Ask about their background, including their education, years of practice, and types of cases they typically handle.
Local knowledge matters in tax law. A Pittsburgh tax attorney understands Pennsylvania’s tax system, including its flat income tax rate, local earned income taxes, and business privilege taxes that vary by municipality. They also have relationships with local IRS offices and state tax officials that can facilitate negotiations.
Tax planning is an ongoing process, not a one time event. Laws change, your circumstances evolve, and strategies that worked in the past may need adjustment. Working with a tax attorney who takes a long term view of your situation can provide lasting benefits and help you avoid surprises when tax season arrives.