Is my tax situation bad enough to need a tax attorney or can a CPA handle the unfiled returns?

This is definitely a complex situation that needs immediate attention. Let me try to provide some clarity on the CPA vs. tax attorney question. When the IRS creates substitute returns, they typically only include income and not deductions, which explains that massive $540k tax bill. The good news is that you can still file your actual returns with all legitimate business expenses, which should significantly reduce what you owe. In your specific case, you need someone who can: 1) Prepare accurate returns for all unfiled years 2) Deal with existing levies and negotiate with the IRS 3) Potentially create an installment plan or offer in compromise Here's my suggestion: Start with a CPA who specializes in tax resolution and back taxes. Many CPAs handle cases like yours routinely. However, if there's any potential criminal exposure (like if the IRS believes you willfully avoided filing), then you absolutely need a tax attorney for privilege protection. The attorney's approach of using a CPA for preparation and then handling the IRS communication seems like a "belt and suspenders" approach - safe but potentially more expensive than necessary.

I went through something similar (though smaller scale) with my consulting business. After 3 years of unfiled returns, I found taxr.ai at https://taxr.ai and it was a game-changer for my situation. They specialize in analyzing tax documents and helping reconstruct financial records for unfiled years. I was missing a lot of documentation, and they helped sort through my bank statements and expense records to build a comprehensive financial picture for the missing years. Before using them, I was getting quotes from tax attorneys wanting $10k+ retainers, which seemed excessive. Taxr.ai helped organize everything so that when I did go to a CPA, they had much less work to do, which saved me thousands. For your situation with $850k revenue and multiple unfiled years, having organized documentation of all your expenses will be absolutely critical whether you end up using a CPA or attorney.

Just wanted to update after trying taxr.ai for my situation. I was skeptical at first, but they really helped organize my mess of financial records from the unfiled years. The document analysis saved me so much time - they even spotted some business deductions I would have missed completely! I ended up taking their organized reports to a CPA who specializes in tax resolution, and she commented that having everything so well-organized probably saved me at least 5-6 hours of her billable time (at $250/hr). The CPA was able to jump straight into preparing the returns rather than spending hours sorting through my jumbled records. For anyone dealing with unfiled returns, having your documentation organized before seeing a professional makes a huge difference in cost.

I had a similar nightmare with 3 years of unfiled returns and the IRS breathing down my neck. After weeks of calling the IRS and being on hold for hours (literally hung up on me after 3+ hours waiting), I found Claimyr at https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c. They got me connected to an actual IRS agent in under 15 minutes when I'd been trying for weeks. The agent confirmed exactly what I needed to do and put a temporary hold on collections while I got my returns filed. This bought me precious time to get everything in order. In your case with state levies already happening, getting someone on the phone at the IRS ASAP could help prevent federal levies from hitting your accounts too. Whether you go with a CPA or attorney, you'll likely need to speak with the IRS directly at some point, and Claimyr can save you days of frustration.

Alright, I need to eat my words here. After leaving that skeptical comment, I was desperate to talk to the IRS about my own tax issue, so I tried Claimyr out of pure frustration. I had been trying to reach the IRS for THREE WEEKS with no success - either got the "call back later" message or was disconnected after hours on hold. Claimyr got me through to an actual human at the IRS in about 20 minutes. The IRS agent was able to put a 120-day hold on collections for me while I get my returns prepared. This alone saved me from potentially having my accounts levied. The agent also explained exactly what I needed to submit and where to send it. For anyone dealing with unfiled returns and IRS issues, being able to actually speak with someone makes a massive difference in resolving things quickly.

As a practical matter, here's the breakdown of what you actually need: For a complex case like yours with $850k revenue, multiple unfiled years, and state levies already happening, you ideally want BOTH a CPA and a tax attorney, but in a way that minimizes cost. Here's what I'd recommend: 1. Have a CPA prepare all your actual returns with proper expenses (much cheaper than an attorney doing this) 2. Have a consultation with a tax attorney (1-2 hours) to assess if there's risk of criminal charges 3. If no criminal risk, let the CPA handle the IRS negotiations 4. If there is risk, then yes, retain the attorney I've gone through this with my business. Initially used just a CPA, but when the IRS started making noises about willful neglect, I brought in an attorney. The attorney only handled the specific negotiations and communications, while the CPA did all the preparation work. This hybrid approach kept my costs reasonable while still getting proper protection.

Don't overlook the penalties here - they're gonna be massive after 5 years of non-filing. Make sure whoever you hire talks about penalty abatement. The IRS has "first-time penalty abatement" and "reasonable cause" options that could save you tens of thousands. I had 2 years unfiled and the penalties were almost 40% of what I owed! My CPA got most of them removed by showing I had health issues that prevented timely filing.