What Is Tax Law?

Use these links to jump to different sections:

• Is Paying Taxes a Law?
• What Are Tax Revenues Used For?
• Personal Income Tax Rules
• Business Taxes
• Property Taxes
• Tax Filing Deadlines, Extensions, and Penalties
• Tax Audits
• Finding the Right Tax Attorney for Your Needs
• Tax Attorney FAQs

As the saying goes, taxes, like death, are unavoidable, so you must prepare for them. The good news? Taxpayers don’t need to know every facet of the Internal Revenue Code (IRC) to understand the basics of state tax systems or federal tax law.

While tax season is often routine, occasionally, you might have some complicated tax issues or even receive a notice that the IRS is auditing you. In such circumstances, you may need a tax lawyer’s advice. And whatever you do, don’t ignore tax liabilities, which can lead to sanctions for tax evasion or fraud and U.S. tax court.

“If tax problems arise, you really need to tell somebody who knows how the system works,” says Vivian Hoard, a tax attorney at Fox Rothschild in Atlanta, Georgia. “You can’t bury your head in the sand. It just gets worse.”

Is Paying Taxes a Law?

Yes, federal, state, and local governments need revenue to function, and that revenue is paid to governments in the form of taxes.

The Internal Revenue Code (IRC) is the United State’s comprehensive federal tax policy. The U.S. Constitution empowers Congress to enact federal tax legislation, which is then implemented by the Internal Revenue Service (IRS), a federal agency. Tax laws are also enacted at the state level and regulated by state tax agencies.

What Are Tax Revenues Used For?

The money you pay in taxes is used to fund government functioning and services. This includes both federal and local taxes. State income taxes are usually used for roads, parks, and hospitals, while federal income taxes are used to pay for national defense and veterans’ social programs. Cities and counties use property taxes to fund school districts and other local public services.

Personal Income Tax Rules

Whether you’re an individual taxpayer or a business owner, state and federal income taxation is a familiar feature of your yearly expenses and record-keeping.

State and federal income taxes are generally based on how much you earn in a year. Taxable income includes your salary, dividends, rent paid to you, lottery winnings, unemployment, and business earnings. Tipped workers are also subject to special rules about when they need to report their tips as income.

The income taxing system is pay-as-you-go, which means you pay a little bit from each paycheck. If you have paid more than you owe at the end of the year, you will get the excess back as a tax return. Alternatively, if you didn’t pay enough to the state or federal government during the year, you will be responsible for covering the difference.

Business Taxes

Individuals aren’t the only ones on the hook for taxes every year. Businesses also have tax obligations, including employee taxes, sales taxes, and taxes on commercial real estate holdings. Home-based small business owners can also benefit from tax deductions for business uses of their home. There are many tax pitfalls for business owners to be aware of and avoid, which a tax law professional can help navigate.

Property Taxes

As implied in the name, property taxes vary widely depending on where your property is located. Generally, a county assessor will determine your property value, and the local taxing authority sets the tax rate. Combining these two values will create the property tax amount you owe.

If you believe the county assessor valued your property incorrectly, you can dispute the assessment, though you only have a small window during which you can challenge the assessment. Generally, you will need to meet with the assessor and state your case for a lower value. You may be asked to attend other hearings and produce proof that the assessor was wrong, such as a sales contract showing you paid more than your house is worth or descriptions of similar properties with lower values.

Tax Filing Deadlines, Extensions, and Penalties

Federal income taxes must be filed with the IRS by April 15 each year to avoid penalties (extensions are available for U.S. citizens working or living abroad). If you incur a penalty for filing your taxes after the deadline or for another reason, such as a dishonored check, you might qualify for tax penalty relief. You also have the option to challenge a notice of penalty.

Whatever you do, don’t ignore unresolved tax obligations—the financial and legal problems will only worsen. Penalties for late filing are more severe than penalties for late payments. The IRS offers payment plans and other options for resolving back taxes and tax debts so you can get back on your financial footing.

Tax Audits

If you received notice of a tax audit, that means that the IRS is looking more closely at your tax returns to ensure they are correct and free of fraud. There are four kinds of audits:

1. Random Audits

The IRS will occasionally select random returns and review them more closely. If your returns are being randomly audited, it doesn’t necessarily mean there was a red flag.

2. Correspondence Audits

These types of audits are sometimes called mail audits. If the IRS has questions about your return or needs documentation to explain an out-of-the-ordinary deduction, you will get a letter. This type of audit is the least serious because you can respond with the requested information, and the problem is typically quickly resolved.

3. Office Audits

Office audits are more serious than correspondence audits. If you receive notice of an office audit, you will be required to go to a local IRS office and speak with an audit officer. Your audit notice will include information about the documentation you will need to provide, and you are entitled to have a lawyer with you.

“An office audit may be more in-depth,” says Hoard. “The IRS agent will tell you to come prepared with the information they want you to produce regarding the issue they’re targetting in the audit.”

4. Field Audits

These are the more severe audits, as they are typically broader than the others and are about more than some unusual deductions. During a field audit, the IRS will send an agent to your home or office to review your entire return. You have the right to have an attorney present at this meeting.

After an audit, the IRS might change your return or leave it as is. If they leave it the way it is, or you agree with the changes, then the process is finished. If, however, you disagree with the changes, you have the right to appeal the determination. A lawyer will help you evaluate the IRS’ decision and understand the appeals process.

Finding the Right Tax Attorney for Your Needs

The tax code is complicated and hard to navigate—especially if you have a unique situation that online filing programs don’t account for. If you have questions about this area of law or have made a mistake and are being audited, it’s vital to get advice from someone who understands the law.

A tax lawyer will know how to answer your questions and address your problems, and they will know about nuances in the law that can affect your situation. A lawyer will further anticipate potential problems with your case and advise you on how to approach them. They may even be able to help you avoid potential problems altogether. Your lawyer will also keep track of deadlines and file all the paperwork with the necessary courts and agencies, giving you one less thing to worry about.

Visit the Super Lawyers directory to find an experienced tax lawyer in your area.

Tax Attorney FAQs

Below are some common questions you might want to consider asking when meeting with an attorney for the first time:

Am I in trouble if I get an IRS audit notice?

An IRS audit doesn’t necessarily mean you’re in trouble. In a tax audit, the IRS wants to verify or supplement the information on your tax return. There are different types of audits, and many are resolved quickly. It’s important to respond to the IRS promptly and provide the requested documentation. You can also follow best practices to reduce the likelihood of getting audited in the first place.

Can I appeal an IRS determination?

Yes, if you disagree with the IRS’s findings, you can appeal its determination in your tax dispute. The IRS offers a formal appeals process, and a tax lawyer can help you navigate it to potentially resolve the issue in your favor.

Can I get a tax deduction for child support?

Child support payments are neither taxable income nor deductible. However, the custodial parent in a child custody agreement may claim the child as a dependent on their tax return.

Does the IRS offer payment plans for tax debts or back taxes?

Yes, the IRS offers payment plans and other arrangements for taxpayers who are having trouble paying their tax debts. These plans let you pay your tax debt over time in installments or settle the debt for less than you owe.

Do I need to pay estate taxes on the money I inherited?

Perhaps. In general, the estate pays any estate taxes before distribution to beneficiaries, so you may not have to pay taxes on inherited assets. However, other taxes may apply.

How do tax lawyers charge attorney’s fees?

No one answer will apply to every tax lawyer. Many tax lawyers charge by the hour, but some may offer flat fees for specific services, such as legal document review. The total cost of legal services can vary based on factors such as the complexity of your case, the lawyer’s experience, the law firm’s size, and your location.