All income-earning U.S. citizens, permanent residents, and businesses must comply with tax laws. Tax laws, however, are complex, layered, and always evolving -- so what is true for one year may not be for the next year. Plus, there are different types of taxes, different rates, different deductions and credits, and different penalties for all the various non-compliance issues. Penalties can be severe, and in some cases, could involve criminal action and subsequent incarceration.
At The Hateley Firm, APC, Donald P. Hateley, who is also a CPA, handles tax matters effectively for each of our firm's clients. Proactive management and compliance with all tax laws and regulations are important, but when a tax dispute arises, prompt action should be taken. Contact us at (949) 438-1040 to schedule a Consultation. We will help you navigate and comply with the complexities of tax law so that tax liabilities are minimized and penalties are avoided.
Tax Laws and Regulations
All residents and U.S. citizens are subject to the federal income tax, pursuant to the Income Tax Act passed in 1913 and the subsequent ratification of the Sixteenth Amendment of the U.S. Constitution. All federal tax laws are codified in the Internal Revenue Code (IRC) and can be found in U.S.C. Title 26. The Internal Revenue Service (IRS) oversees, controls, and, among other things, enforces federal tax law.
Though all income-earning residents and citizens are subject to federal income taxes, not all must file federal tax returns. There are income limits and other special qualifications that may not require filing.
In addition to federal income taxes, most states maintain an income tax system, but the rules and regulations vary. Several states do not have income taxes.
Corporations must also file income tax returns. They are subject to the same federal and state rules that individual taxpayers face. Corporate taxes, however, involve an additional layer of intricate rules and regulations.
Possible Federal Tax Penalties for Non-Compliance
When either an individual or corporation fails to comply with their tax obligations, federal penalties may be applied, and these federal penalties are typically monetary in nature. The specific penalty and corresponding amount will vary depending on the facts and circumstances of the case.
- Failure to File Penalty: This penalty is imposed when a taxpayer fails to file their tax return by the due date or extension date. The penalty is generally 5% of the unpaid taxes for each month or part of a month that the return is late, up to a maximum of 25%.
- Failure to Pay Penalty: This penalty is imposed when a taxpayer fails to pay the taxes owed by the due date of the return. The penalty is generally 0.5% of the unpaid taxes for each month or part of a month that the tax remains unpaid, up to a maximum of 25%.
- Accuracy-Related Penalty: This penalty is imposed when a taxpayer understates their tax liability by a certain percentage or fails to keep adequate records or provide accurate information to the IRS. The penalty is generally 20% of the understatement of tax.
- Civil Fraud Penalty: This penalty is imposed when a taxpayer intentionally understates their tax liability or provides false or fraudulent information to the IRS. The penalty is generally 75% of the understatement of tax.
- Criminal Penalties: In cases of intentional tax evasion or fraud, criminal penalties can be imposed, including fines and imprisonment.
You can request relief from penalties by demonstrating reasonable cause for the failure to comply with tax laws. Our tax attorney will review your case and devise a strategy to help you get that relief.
Tax Lawyer for Individuals in California
Many people do their taxes on their own. There are certain circumstances, however, when they should reach out and obtain professional, legal guidance and representation. Our tax attorney in Los Angeles will handle your tax issue in a way that best meets your goals and minimizes tax liabilities.
If you are being audited by the Internal Revenue Service (IRS) or another tax agency, our tax lawyer will represent you and advise you throughout the audit process. We will review your tax returns, negotiate with the tax authorities, and help you understand your legal rights and obligations.
Our tax lawyer will provide guidance on tax planning strategies to help you minimize your tax liabilities. We can help you structure your business operations, investments, and other financial transactions in a tax-efficient manner.
If you have a dispute with the tax authorities over the amount of taxes owed or another tax-related matter, our tax lawyer will represent you in negotiations or litigation. We will help you resolve the dispute and minimize the potential penalties and fines.
If you are facing criminal charges related to tax fraud, tax evasion, or another tax-related offense, our tax lawyer can provide legal representation and defend you in court.
Our tax lawyer can help you plan your estate and minimize the tax liabilities that you face today or that your heirs may face upon death.
Tax Attorney for Businesses in California
At all phases of the business life cycle, businesses face multiple tax issues. Many of these issues require strict adherence and strategic planning so that the operations of the business are not negatively but neutrally or positively affected. Our tax attorney in Los Angeles will get to know your business and help you plan or act accordingly.
Formation of the Business
Our tax attorney will help you choose the most tax-efficient business structure, such as a partnership, LLC, or corporation. We will advise you on the tax implications of each structure and help you set up your business in a way that minimizes your tax liabilities.
Our tax attorney can help you stay compliant with complex and ever-changing tax laws and regulations. We will assist you in preparing and filing tax returns, ensuring that your business takes advantage of all available deductions and credits and avoids potential penalties and fines.
Our tax attorney will provide guidance on tax planning strategies to help your business minimize its tax liabilities. We will help you structure your business operations, investments, and other financial transactions in a tax-efficient manner.
Mergers and Acquisitions
Our tax attorney can help your business navigate the complex tax implications of mergers and acquisitions, including structuring the deal to minimize tax liabilities and complying with all applicable tax laws and regulations.
If your business is facing a tax audit or dispute with the tax authorities, our tax attorney will represent you in negotiations or litigation. We will help resolve the dispute and minimize potential penalties and fines.
International Tax Issues
If your business operates internationally or has cross-border transactions, our tax attorney will help you navigate the complex international tax laws and regulations and minimize your tax liabilities.
Tax Attorneys Versus Other Tax Professionals
There is often the question of whether a tax professional can do the same thing a tax attorney does. They cannot. Tax attorneys offer more benefits and more thorough representation and guidance than what a certified public accountant (CPA) or an enrolled agent (EA) can provide.
CPAs and EAs provide expertise in accounting and tax preparation. They have training that allows them to prepare taxes and provide financial planning. Tax attorneys do the same but also:
- Have specialized legal expertise – tax attorneys have a deep understanding of tax law and can provide legal advice on complex tax issues
- Protect clients via attorney-client privilege, meaning communications between the attorney and the client cannot be disclosed without the client's consent
- Represent clients in court, if necessary
- Provide a broad range of legal services beyond tax law, like estate planning, business law, and litigation
The main drawback of a tax attorney is the potential for higher costs. Tax attorneys generally charge higher fees than CPAs and EAs due to their specialized legal expertise and experience, which in itself is the critical insight that alone will benefit a client.
On the other hand, the drawbacks of using a CPA or EA in lieu of a tax attorney are many. For example, a CPA or EA will not have the same extensive training in tax legal matters. They also will not be able to provide legal advice on complex tax issues. Further, they are limited in their ability to represent a client if the IRS or another tax entity disputes a tax matter.
In the end, the choice of a tax professional depends on the specific needs of the client. For proactive or complex legal tax matters, a tax attorney may be the best choice.
Contact Us Today
Taxes cannot be avoided. It is best to have a tax plan in place. If an issue arises, an immediate, comprehensive response is preferable. At The Hateley Firm, APC, Donald P. Hateley, Esq., CPA handles a range of tax matters, throughout California and other states, with the aim of ensuring the best possible outcome for our clients. Contact us today by filling out the online form or calling us at (949) 438-1040 to schedule a Consultation.