Top 10 things to consider when choosing a tax resolution company
If you owe taxes to the Internal Revenue Service (IRS) and a federal tax link has been filed, you are likely to be inundated with calls from telemarketers and tax resolution firms offering their services. My advice is to proceed with caution when choosing a tax resolution company to handle your tax debt. It is your finances and livelihoods that are at stake, not theirs!
The following information will help guide you when considering a tax resolution company.
1. Do your homework: Research the credibility of the company. Check their BBB rating, how long they have been in business, consumer complaints, etc. Much of this research can be done online. While 1 or 2 online complaints may not be indicative of poor service, numerous complaints can establish a pattern of poor customer service. Ask for references so you can speak with training clients.
2. Do you work with a licensed professional ?: Only a licensed attorney, certified public accountant, or registered agent can do business with the IRS on your behalf. Many firms have clients who work with unlicensed professionals and it can be difficult to correspond with the tax professional in your case.
3. Identify All Fees – Ask what the fees will be to resolve your case. Many companies start with an initial fee, claiming that no other fees will be required, only to charge additional fees to complete the job. Often times, companies use a “bait and switch” method, using a flat rate up front and then telling customers that they have “billed” through the advance, charging an hourly rate. Ask if the company uses an hourly billing rate. If so, this is an indication that you may encounter this scenario. This is not a permitted method of charging clients under IRS Circular 230 or state bar associations. Make sure any agreement is as specific as possible to ensure that you are protected from future requests for additional fees. Don’t be left with the job half finished and have no alternative but to pay additional fees to have your case completed. Also, don’t be afraid to split the fee over several months. Many companies will push for 100% of the fee up front. If the company does not reasonably divide the fee, it may be an indicator of future problems. Most cases take several months, so there is no reason why you cannot pay the company for several months while the work is done.
4. What is expected of you ?: Find out exactly what your obligations will be. Often times, you will need to provide financial documentation or other information to seek a resolution in your case. Many companies will ask you for additional fees if you do not provide this information on time. Make sure you know what is expected of you and that you are prepared to participate in the process. Otherwise, you may be wasting your money, thinking that the company is handling your case, when in reality the company is waiting for information from you and nothing is being accomplished.
5. Will the company file the missing tax returns ?: Make sure you are clear about whether or not the company will prepare your tax returns for the agreed fee. Many companies do not prepare tax returns, leaving you with the responsibility of filing missing tax returns or hiring an accountant. If you have unfiled tax returns, this is usually the first step in resolving your tax obligations. If you have limited funds, you may want to pay an accountant first to prepare your returns, so you know what is owed, before hiring a tax resolution company.
6. Keep the lines of communication open: determine who will be your main point of contact in the company and how you will communicate (by email, phone, etc.). Make sure you can reach your representative and receive a response. Don’t settle for unreturned phone calls or an unqualified assistant. Establish that you will be able to work directly with your representative and get your questions answered. After all, what is at stake is your money and your livelihood.
7. Ask to speak to a real representative: Many companies often use telemarketers to call people and sell the company’s services. Many of these telemarketers are unlicensed and / or unqualified, with no real experience working with the IRS or managing a client’s case. Imagine, these telemarketers are selling you on a payment plan or arrangement, and they have no hands-on tax resolution experience! Ask to speak with an attorney, certified public accountant, or registered agent to sufficiently answer your questions and discuss your case strategy.
8. Have a Plan – At your free consultation, you will be sold a strategy for addressing your responsibilities. However, it is very difficult to focus on a particular strategy without knowing all the different factors involved in your case. Many companies will sell it on a payment plan, only to later sell it on an offer in compromise agreement and charge an additional fee. Make sure you have a definitive plan that is effective in solving your taxes.
9. Hidden Fees: Coming back to fees, I can’t stress enough to identify all the fees that will be required. Most employees of tax resolution firms work on a sales commission basis, including attorneys, certified public accountants, or registered agents. This means that the more money employees make, the more they get paid. Ask for the specific reasons that additional fees will be charged and request that these reasons be put in writing. Protect yourself from hidden fees and charges.
10. Don’t be fooled by guaranteed results: There are no guarantees in life. Remember it. No company can guarantee results, even remotely. The IRS makes decisions, not your tax representative. Many companies will tell you that they can settle your debt for a percentage of what is owed or that they can get a penalty waiver. It is possible to settle for “pennies on the dollar”, but no company can guarantee this result for a particular case. Each case is different depending on the circumstances. Ask for references from former clients, so you can talk to them and learn about their experience. However, remember that referrals are a small percentage of a company’s clients, often with the best results. So take the references with a grain of salt, not all cases go so well or have favorable results.