What Does a Real Estate Tax Lawyer Do?
Real estate taxes are levied by the governing entities to which the property is closest (i.e., county, state etc.). Each year they will send you a form showing how this amount is calculated. Depending on the provisions of your mortgage, it might be added into the payment. Either way it is your responsibility as a property owner to keep track of what you owe the government in regards to your real estate taxes. It might not seem like much but failing to pay your property taxes can quickly escalate and become burdensome on you and your family. Most of the time unpaid property taxes can be handled by working with the local tax collector. These officers collect the necessary information and either provide guidance on how to rectify the situation or tell you who you need to contact. However , there are some times where real estate tax situations are more difficult to remedy than others and you may want to consider hiring a real estate tax attorney. A real estate tax attorney has all of the skills necessary to assist you in overcoming delinquent property taxes. The real estate attorney understands the tax codes and laws set forth by the IRS and can help you with any paperwork that you may not understand. They will operate and function like any other attorney in the sense that they will represent you before the Board of Equalization, County Assessor, local taxing authorities or the Federal Government if needed. Preventing a foreclosure is just as important as stopping one that has already started and using a real estate tax attorney will make it that much easier for you to reclaim your home once you are able to pay off what you owe.
Advantages of Hiring a Real Estate Tax Lawyer
A knowledgeable real estate tax attorney can provide valuable legal representation and advocacy when needed by those who are dealing with property tax issues and concerns. There are many reasons why hiring an experienced tax attorney should be considered for real estate owners and investors. For example, individuals who are facing an audit by the IRS, state taxing authority or other taxing agencies may need the expertise that a tax attorney can provide. Most will prefer not to deal with a highly stressful audit situation without the assistance of an experienced tax lawyer.
Another example may be that those who are buying or selling a property can benefit greatly from having a tax attorney at their side to assist with the closing process. In addition to negotiating the terms and conditions of sale for the real estate transaction, an attorney can ensure that the transaction is completed in full compliance with federal, state and local laws.
Real estate investors as well as owners should strongly consider consulting with a tax attorney before signing any real estate contracts. In addition to ensuring that buyers and sellers are aware of their legal rights and the ramifications of the contract, an attorney will help to avoid any unintentional infractions of the law. Sometimes the penalties for not following the law related to property transfers can be severe, so it’s best to use caution and to have a good real estate tax attorney on your side.
Typical Tax Problems Addressed by Real Estate Tax Lawyers
A real estate tax attorney can handle a variety of tax issues relating to real estate, including property tax appeals, tax lien removal, and state property tax compliance. Property tax appeals – In all states, both residential and commercial property is taxed, and tax rates and methods for determining property value vary among states and are affected by local economic conditions. If you feel your residential or commercial property has been unfairly assessed, a real estate tax attorney can assist you in filing an appeal with the appropriate state or local authority. If your appeal is denied, your attorney can assist you in taking your case to court should you choose to do so. Tax lien removal – A tax lien is a notice of a legal claim on a property, and is typically a result of unpaid property tax, personal income tax, federal tax, or other tax assessments. Tax liens are commonly enforced even if the owner has entered bankruptcy, although they may be lifted in certain circumstances. The process for lifting a tax lien, which varies among states and at the federal level, can be a complex and confusing process. A real estate tax attorney is familiar with the law in this area and can help you navigate the process. Compliance with state tax law – Many states have complicated rules regarding state tax compliance, with which individuals and business owners must be familiar in order to avoid costly mistakes. A real estate tax attorney is well-versed in these rules and can help you avoid mistakes and take advantage of any exemptions from property tax to which you might be entitled.
Selecting a Real Estate Tax Lawyer
Once you have determined that you need the counsel of a real estate tax attorney, you will have to find the right person for the job. This can be a daunting task, as there are many different types of attorneys with varying levels of experience and many different specialties to choose from. To make this task easier, keep the following factors in mind:
Experience
Like any other profession, an attorney benefits from experience. While there is no such thing as a "common" case, a real estate tax attorney who has been practicing for some time will have at least seen your type of issue or a similar one. This puts him or her a step ahead of the game , so look for an attorney with at least a handful of years’ experience.
Reputation
No one wants a lawyer with a bad reputation. Reputation is very important in the legal profession. Check the attorney’s status with the state bar association, and also conduct an online search for reviews. Find out what the attorney’s previous clients have said about them and whether or not they tend to leave favorable reviews.
Specialization
There are many different fields of law, and most attorneys can specialize in several of them. You want to choose a real estate tax attorney who specializes in taxation, especially when it comes to real property.
Costs Involved in Engaging a Real Estate Tax Lawyer
In most cases, real estate tax attorneys will bill their services on an hourly basis. While there are some exceptions (namely representation in tax court), the fee structure of real estate tax attorneys is similar to that of any attorney. The client pays the attorney for the number of hours the attorney spends working on the case, which can be a significant amount if the case is complex. For example, a client may be charged $300 per hour. An attorney who bills 20 hours for a given tax issue would be billing the client $6000.
However, some tax attorneys offer different pay structures, notably contingency fees. Contingency fees can be especially helpful since many clients may not be aware that there are limits to how much property can be assessed, and that their property might be over assessed. A tax attorney who finds that a substantial amount of property is over-assessed can be of great assistance to a client. For instance, a property valued at $250,000 would add about $3750 per year when calculated by a current 1.5% assessment ratio.
The cost of not hiring a tax attorney and losing the money at appeal is an important consideration. However, clients should be very clear that the tax attorney isn’t going to offer a blanket refund policy for all cases that lose. The attorney will offer to take the case on a "no win, no fee" basis, which means that only when the property has been returned to a value less than fair market value (as calculated by a strict government ratio for the property type) will the client have to pay for the attorney’s services.
Real-Life Examples of Successful Resolutions in Real Estate Tax Cases
John, a Pennsylvania based real estate investor, encountered a significant hiccup in his property management. During an audit, the Pennsylvania Department of Revenue discovered that John’s property manager had failed to collect and remit the appropriate local earned income taxes for his rental properties. The department determined that John owed a substantial amount in back taxes, penalties, and interest. John had previously tried to resolve the issue on his own, but his efforts were unsuccessful. Without a resolution, his investment portfolio was at risk, subjecting him to collection actions, passing-through liabilities to his business, and further impacting his credit score.
Fortunately, we were able to open negotiations with the department and ultimately achieve a reduction in the assessed tax liability. Pennsylvanian cloud scribe taxation states that any business operating in Pennsylvania must obtain an employer identification number (EIN) from the Pennsylvania Department of Revenue. The EIN is essentially a social security number for the business and is used by the Department of Revenue to collate all the tax payments made by the business. This would likely include the corporate net tax, employee withholding tax, local earned income tax, etc. Like an individual, a business cannot or should not operate without an EIN.
More importantly if a business is filing more than one type of tax, the Department of Revenue should keep the payments separate. We determined that the revenue department had lumped together all of John’s payment. We proved that John had not owed money for corporate tax and that money was erroneously applied to corporate net tax from funds made by his property manager for John’s employee withholdings. Our inquiry resulted in a successful result for John and an immediate release of his bank accounts encumbered by tax garnishments by the Department of Revenue.
Sue was a client with ten residential properties in York County , Pennsylvania. Like most real estate investors, she was operating everything under one company. Sue’s properties were also managed by a single property management company. Due to the rapid increase in rental prices in the area, Sue’s representative started charging separate rental rates for his ten properties rather than employing a flat rate approach. Unfortunately, because Sue did not implement any diversification measures within her own company, Sue’s representative was treating all of her properties under a single roof. As a result, the department claimed all of her properties as a single rental unit and assessed her a Local Business Income Tax on each individual property. We disagreed with the department’s assessment and successfully negotiated an unaggregated tax assessment, saving Sue several thousand dollars annually in taxes.
Mark, a retirement age investor, fell behind on his taxes after the income from his rental properties began to dry up. Mark’s circumstances worsened when it was revealed that his tenant on a substantial portion of his real estate portfolio had filed for bankruptcy without paying the rent. Unable to pay his taxes and remaining income, the Department of Revenue seized Mark’s home and other assets – including his retirement accounts. His financial advisor contacted us for assistance in persuading the department to release the leveling liens against his retirement account so that he could afford to pay his other liabilities. With our intervention, the department agreed to release the liabilities against Mark’s retirement account, allowing him to withdraw enough money to pay the levies so that he could keep his house and other assets to manage his finances going forward.