The IRS processes have changed significantly over the years, which can make some tax resolution services either inefficient or outright incorrect.
RELATED: 27 Tax Worries You May Have And The Solutions For Each [FAQs]
In this article:
- The Current IRS Tax Resolution Environment
- Blanket Advice: You Should Mistrust Tax Resolution Services
- Why Do Taxpayers Need a Tax Resolution Specialist?
- What Are Possible Tax Resolution Services a Taxpayer Can Tap?
- Tax Resolution Is Still a Need, So Here’s What to Do Instead
- Be a Conscientious Consumer
Can You Trust a Tax Resolution Company to Represent You? Are Tax Resolution Services Legit?
The Current IRS Tax Resolution Environment
A taxpayer undergoing financial hardship may want to employ a tax service advocate due to the complexity of the tax process. In fact, the Internal Revenue Services has quite a number of specialized forms and departments, even some lawyers and advocates may not know how to navigate properly since the IRS can change a process or the assigned department easily.
It’s not uncommon to receive a letter from the IRS informing you that you’ve completed a tax return incorrectly and now owe more money or fees due to the problems with the incorrect or late tax return.
Nor is it uncommon to forget or fail to file for a few years in a row, resulting in a major pileup of money owed to the IRS. The liability from unfiled tax returns can pile up to a 50% increase due to penalties and fees for late filing, which for some busy taxpayers make tax resolution services necessary.
There are a raft of other reasons you might need tax resolution as well, but the bottom line is this: If you have to deal with the IRS, you want help doing it. And if so, you’re probably wondering, “Are tax resolution services legit?”
Unfortunately, there exists an entire industry ready and waiting to take advantage of your need. Many so-called tax resolution services never resolve your tax problem, instead they cost you money and leave you in the same situation with the Internal Revenue Service as you were before.
Or possibly worse, since you waited to deal with it.
The obvious conclusion is that you should find the best possible representation. But how, and are there any tax resolution services you can trust?
Blanket Advice: You Should Mistrust Tax Resolution Services
A tax resolution service works on a fairly basic model: You pay them a fee, and they represent you to the IRS and get your tax liability reduced, eliminated, or put on a manageable payment plan.
That, however, is frequently not how it works. Instead, these companies:
- Take your money, but don’t move forward
- Shuffle you from caseworker to caseworker
- Use advertising dollars to garner false or misleading reviews
- Harass you about your need for their services until you give in
- Use scare tactics
- Cancel your contract abruptly if you don’t provide documents – without a refund
- Focus on lead generation rather than helping current clients
If this sounds like a pretty crummy business model, that’s because it is.
It is not based on helping the consumer, but rather on getting as much money from you as possible before moving on to the next sucker.
Never fear, though: There is a solution.
Why Do Taxpayers Need a Tax Resolution Specialist?
Usually, a delinquent taxpayer who missed sending payments, did not perform due diligence in filling out important IRS forms, and has not replied to the IRS may encounter:
- Wage garnishment to ensure that the IRS collects the appropriate taxes,
- Receipt of a notice to levy or a tax lien, wherein the IRS tells the client that they attached a lien on a property or have already started collecting tax debts by compelling the court to levy property or mark an asset as new collateral to the tax debt.
- Increased chances of an IRS tax audit. A tax audit is a lengthy and expensive process wherein the IRS assigns an officer to have a more in-depth look at your tax issue.
Also, local IRS branches may have their own special peculiarities like scheduling and mailing time. Local specialists for debt relief can help a taxpayer in resolving financial problems with the IRS.
A tax resolution firm can negotiate with the IRS to reach a situation which is agreeable for the delinquent taxpayer and the IRS. Specialists can help a taxpayer in formulating a good offer in compromise or raise defenses against the imposition of fees.
What Are Possible Tax Resolution Services a Taxpayer Can Tap?
Legitimate tax resolution services include:
- Tax abatement, usually in the form of penalty abatement, wherein a tax specialist argues in favor of the client why the IRS should not apply penalties, or at least minimize the fees.
- Drafting tax documents and forms better, like an Offer In Compromise or the request of a Currently Not Collectible Status.
- Accounting, reviewing, filing and documenting tax forms, particularly unfiled returns and advise on how to properly fill out forms to minimize and cancel out any chances of penalties and costly mistakes.
- Face to face negotiations with the IRS revenue officer, in case of an audit or a prolonged tax issue. Sometimes contacting the IRS via phone may take more time and energy compared to simply employing a specialist to do all the legwork and negotiations.
- Dispensing advise on how to minimize your Adjusted Gross Income which affects your tax bracket. Some taxpayers do not need to be under a tax emergency to appreciate a good tax specialist lowering the tax debt and liability legally.
RELATED: 12 Reasons To Speak To A Tax Relief Specialist About Your Back Taxes ASAP
Tax Resolution Is Still a Need, So Here’s What to Do Instead
When you need tax resolution services, see a Certified Public Accountant, lawyer, or Enrolled Agent.
While anyone can represent you to the IRS, people in these roles are trained to represent you. They know which documents are needed, can identify any holes you might have in your case and shore them up, and can predict the outcome most accurately.
While CPAs and Enrolled Agents also ask for fees upfront, they are far less likely to misuse them, because smaller practices have more riding on their honorable behavior.
Plus, they charge you as you go along, usually based on hourly work, which spreads out the cost for you over time.
Lastly, this class of service people is much likelier to have the training needed to get you a good outcome.
If you’re not sure where to turn, the best bet is to Google “CPA” or “Enrolled Agent” in your area rather than “tax resolution services.” Chances are you’ll find someone who can do the job, or who can refer you to a good option.
Be a Conscientious Consumer
IRS scammers call 2 Hendersonville detectives within minutes.
He says they kept him on the phone, pretending to be IRS agents, even giving him reference numbers for authenticity. He says the scam artist offered him a payment plan. Police remind everyone… https://t.co/0repROfXzF
— Peters CPA, LLC (@PetersCPALLC) November 19, 2017
That’s not to say that a regular CPA or tax accountant will necessarily treat you fairly. Theoretically, they can do anything a tax resolution service can do, including giving you bad advice, representing you poorly, canceling a contract short notice, or taking your money and refusing to give it back – which will probably cost you more in legal fees than it’s worth to recoup the loss.
Therefore, you should make a careful decision based on research. Talk to several tax accountants and ask what the timeline is like, what their success rate is, and what factors are involved in your case.
While you can’t expect a full explanation of your options before you’ve hired them, you can get enough of an idea in this conversation to make an informed decision.
The takeaway? You’re much better off working with a dedicated tax accountant or CPA who has an EA and can represent you to the IRS.
You’ll have the opportunity to get to know your representative in the time leading up to the appointment with the IRS, as well as the security of knowing your case won’t be passed off to someone else.
This route is safer, offers more peace of mind, and has a higher chance of working in the end, so it’s probably the one for you.
The tax resolution services niche is a legitimate business area providing crucial services for people who need them the most.
However, some malicious charlatans do operate in the space, which makes financial education and literacy immensely important in preventing scams from occurring.
Have you tried any tax resolution services providers? Share your experiences in the comments section below.
If you owe back taxes, visit taxreliefcenter.org for more information on tax relief options.
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Editor’s Note: This post was originally published on January 11, 2018, and has been updated for quality and relevancy.