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Important Things to Know Before Choosing a Tax Relief Company

The burden of tax debt is often too difficult to carry alone, especially when tax collectors are already after you because you owe back taxes or have unfiled tax returns.

After all, how can the Internal Revenue Service (IRS) expect the average taxpayer to efficiently navigate the complexities of tax laws, forms, and the number of avenues to take when in trouble with the IRS? How are you supposed to dig yourself out of the gaping hole of tax debt when the IRS is pressuring you at the same time?

The truth is, there are a number of tax relief solutions that an make the whole situation much simpler — you only have to be familiar with IRS tax law.

Tax debt is different from other kinds of debt. Debt settlement companies and debt consolidation companies do not specialize in tax debt, so its important to work with a tax relief company that's familiar with federal, state, and local tax laws.

That's where a tax relief company comes in. If you have been pushed by tax debt to the brink of financial and emotional ruin, a tax relief company can go a long way to not only curb the threat of IRS retribution but also help you get your life back in order. A tax debt relief company will ensure the IRS adheres to its own Taxpayer Bill of Rights and follows fair tax practices. These tax relief services help protect the taxpayer as they determine a way to pay their tax debt.

Types of tax professionals

The almost inhuman lack of sympathy for your financial situation from some IRS officials is contrasted by the quality of care you'll get from tax professionals with a good tax relief company.

The first attribute you should look for in a tax relief company is qualified tax experts and caring tax professionals. Enrolled agents are federally licensed tax professionals who hold the highest credential awarded by the IRS. They may represent any taxpayer on any matter before the IRS.

Whether it's an enrolled agent, certified public accountant (CPA) or a tax attorney, a tax professional will also be authorized to represent clients before the IRS; however, both are regulated on the state level. CPAs cover a wide range of accounting needs while a tax attorney specializes in tax law and can represent clients in tax court. Enrolled agents also offer tax representation to individuals before the IRS but not in tax court.

Types of tax problems

Potential tax relief customers should research what type of tax liability and IRS problems each company resolves. Many companies represent clients during tax audits (thorough examinations of tax returns), while others specialize in different tax resolution services.

Because each taxpayer or debtor has a unique tax problem, your tax company should be uniquely qualified to represent you and resolve your specific tax issues. Most tax relief programs offer assistance with all tax issues, though some may have more specialized experience with certain situations. These are some of the most prevalent tax issues that tax relief companies work with:

  • Back taxes—which have likely accrued penalties over the course of time since their due date. These taxes involve the most common form of tax debt because oftentimes the taxpayer does not currently have the money to pay their tax obligations.
  • Tax liens—A tax lien involves a public notice declaring the IRS' right to claim earnings before other creditors when a when a piece of property is sold. To get rid of a federal tax lien, taxpayers must qualify for penalty abatement. Tax relief companies can navigate the process to remove liens for clients.
  • Tax levy—The IRS' legal right to seize property for unpaid taxes. Tax levies represent a more drastic measure than tax liens.
  • Wage garnishment—The IRS collects owed taxes directly from a taxpayer's paycheck.
  • Tax audit—An IRS tax audit involves the IRS' decision to look more closely at your tax return in order to discover discrepancies and inaccuracies.
  • Other issues—Most tax relief companies may also assist with innocent spouse relief, bookkeeping, and business taxes.

None of these tax issues is fun to deal with, especially wage garnishments. Working directly with the IRS or with a tax relief company can help you resolve these issues, pay your tax debt, and move on with your life.

Types of tax solutions

Tax relief companies should have multiple solutions to possible IRS problems. Because of the complexity of tax law, tax code, and regulations, most taxpayers are unfamiliar with possible solutions to the most common tax debt issues. The IRS has a Fresh Start program for debt forgiveness. It offers options for federal tax relief, like stopping penalties, settling debt, and paying your tax debt over time.

  • Offer in compromise—An offer in compromise is debt settlement for taxes. It allows taxpayers to settle with the IRS for less than they owe. It is only granted when the taxpayer is unable to pay the full amount and can prove inability to pay. An offer in compromise are sometimes referred to as an OIC program.
  • Installment agreement—This allows the taxpayer to set up a payment plan through which they pay their owed taxes in monthly payments over an extended period of time. This can take the form of a streamline, partial pay, or traditional installment agreement. Installment agreements are more common because it is easier to negotiate a monthly payment plan.
  • Penalty abatement—You can reduce or remove penalties if you qualify for a penalty abatement. If you believe that you have been unfairly penalized by the IRS, you must also prove that you had reasonable cause (for filing late or for not filing at all) in order to qualify. Under special circumstances—in which first-time debtors may request the reduction of some or all tax penalties—a taxpayer may apply for a first-time abatement (FTA) for a single tax period. Other possible reasons for abatement requests include IRS errors and bad oral or written advice from the IRS.
  • Currently not collectible status—When both you and the IRS agree that you owe taxes and that you cannot pay the full amount of taxes owed, you have the option to have your account classified as Currently Not Collectible or CNC. To qualify for CNC status, customers will need to provide various documents including pay stubs of their current or recent job, statements from all monthly income sources, real estate bills, recent mortgage/lease statements with your monthly rent/mortgage amount, utility bill details, recent statements for all credit cards, personal property tax bill for all vehicles owned (including mileage and payment details), proof of assets, and proof expenses.
  • Innocent spouse relief—If your current or past spouse filled out a tax return incorrectly, you may be penalized alongside your spouse unless you qualify for Innocent Spouse Relief. If you do not qualify for Innocent Spouse Relief, the IRS can collect the owed tax debt from both you and your spouse (or one or the other).
  • IRS appeals—If the taxpayer does not agree with certain IRS findings or penalties, he/she can file an appeal with IRS Appeals Office.
  • Audit defense—When the IRS suspects discrepancies in your tax return, they perform an audit (by mail, in office, or in field/home). You have the legal option to add Audit Defense to the IRS auditing process; this means that you can have a licensed tax professional represent you against the audit.

For many of these solutions, individual taxpayers must demonstrate financial hardship to the IRS. Additionally, there are strict requirements for penalty abatement, so some taxpayers may not be eligible. The tax experts at a relief agency can help you navigate this process successfully. Most tax relief companies focus on helping people resolve tax debts. Because each case is different, the cost of relief services varies.

Good tax relief companies offer free consultations to review the case and explain fees. Average fees range between $2,500 and $5,000. However, the fees are based on the extent of services required by the client's tax situation.

Potential clients should take advantage of a free consultation with a tax resolution company or tax resolution firm to learn more specific information about the cost and how the relief agency will settle your tax debt to make it something you can afford to pay.

Some tax relief companies also offer support and programs to help clients stay out of tax debt, like account monitoring and audit protection. Other companies also offer tax preparation services in addition to their relief services. These services can help ensure than you pay your taxes in full, receive your tax refund, and avoid future tax problems. If you are interested in tax preparation services, make sure the tax relief agency you choose has a tax preparer or certified public accountants (CPAs) on staff.

Accreditations

Years of experience in the industry and accreditations should be considered when choosing a tax law firm or tax relief company. Are the company's tax professionals currently involved with important accreditation organizations?

The National Association of Enrolled Agents (NAEA) provides enrolled agents with training and opportunities to excel.

The American Society of Tax Problem Solvers (ASTPS) offers certification for highly qualified CPAs, enrolled agents, and tax attorneys who have expertise, experience, and good ethics. The National Association of Tax Professionals (NATP) promotes on-going tax education. This is important because the tax law and case law can change.

Tax relief customers who have the benefit of a dedicated enrolled agent with membership in the NAEA are ensured that the enrolled agent is held to high professional standards.

Several other national organizations also provide training and regulate industry standards, including the National Association of Tax Professionals (NATP) and the American Society of Tax Problem Solvers (ASTPS), alongside other professional tax organizations.

Tax attorneys receive their certification by passing the state bar exam. Effective attorneys can help you resolve your problems because of their knowledge and experience with tax laws.

Because each state has different tax laws and standards, it is also imperative that tax relief companies understand the state tax laws that affect your current tax debt situation. State-specific organizations provide tax law training to enrolled agents (and other tax professionals).

For example, the Washington Association of Accounting and Tax Professionals (WAATP) provides professional development to those in Washington. Such state-specific tax organizations only strengthen a company's ability to serve the unique needs of each taxpayer. Be sure that the tax relief service you choose hires well-trained experts and attorneys.

Another good indicator of a tax resolution firm's performance are tax relief reviews. Customer reviews will give you insight into how professional the company is and how effective it was at resolving client tax problems, like unpaid taxes, liens, and wage garnishment.

What is the best tax relief company?

The top two tax relief companies are rated so closely that both deserve mention here. Optima Tax Relief and Tax Defense Network have earned the top spots on our list because of their high quality services and positive customer reviews. Both companies offer services throughout the United States.

Optima Tax Relief has a $10,000 minimum tax debt requirement. Tax Defense Network has a lower minimum debt requirement: $5,000.

View other top tax relief companies.

What is tax relief?

Tax relief is offered by the IRS when taxpayers have more tax debt than they can pay when they file taxes.

The most common resolution options are an Installment Agreement and an Offer in Compromise. An Installment Agreement sets up a payment plan to pay the full balance due. An Offer in Compromise is a negotiated settlement with the IRS for less than the owed tax liability.

For those experiencing penalties from unpaid taxes, there are options for penalty abatement. These include demonstrating financial hardship and innocent spouse relief.

How do I know if I qualify for tax relief?

There are different levels of tax relief for which you may qualify depending on your level of tax debt. The purpose of the free tax relief consultation that most companies offer is to verify your possible qualifications. If you'd like to know quickly if you qualify for tax relief, try giving a good tax debt relief company a call and schedule a consultation.

How does tax relief work?

First, your preferred tax resolution company will likely offer you a free consultation (either by phone or in person) to see what can be done about your tax issues. Tax professionals will do a quick assessment of your situation and present a general game plan before you commit to anything. Once you decide to work with a tax relief company, you will be assigned a representative who will examine your tax documents and be able to plead your case before the IRS.

Your rep will contact the IRS to discover the extent of your tax debt and, once all information has been analyzed, will prepare a report for you as a plan of action (there are multiple avenues to take in tax relief; a tax professional will know which is best for your situation). Because enrolled agents have full legal authority to represent you before the IRS, they can handle the situation in your stead.

How much do tax relief companies charge?

The few tax relief companies that are upfront with such information report that an average price range for comprehensive tax relief service is about $2,500-$5,000. But it is not unheard of to find a tax relief company that charges as low as $500 for its services. Unfortunately, most tax relief companies do not disclose prices upfront, so the accuracy of these ranges may vary.

Can companies help me with state and federal taxes?

The majority of tax relief companies will be able to help with federal taxes, but only some may offer state tax relief depending on where you live. Check with each individual company to see whether they are members of your state's tax accreditations and whether they provide state tax services for your state.

Will the company represent me before the IRS?

Yes. There are representative regulations on the different types of tax professionals, but enrolled agents do have full legal authority to represent you before the IRS. Other types of tax professionals (like CPAs, tax attorneys, or AFSPs) may have limited authority to represent you before the IRS. If a tax company does not hire enrolled agents or at least CPAs, it's likely a sign that it isn't a very good tax relief company.

Can tax relief companies really save me thousands of dollars?

Yes. Many tax relief companies hire licensed tax professionals who have either worked with or for the IRS in the past. These professionals can at most eliminate debts and at least reduce them to manageable amounts. Perhaps the most redeeming quality of a tax relief company is its ability to eliminate or lower the interest and penalties you are paying. A free consultation with a tax relief representative will give you a greater understanding of exactly how much you can save.

How do I know if a tax relief company is legitimate?

There are two things you should do to see if a tax relief company is legitimate: check past customer reviews (both negative and positive) and check the company/employee accreditations. If a tax relief company employs members of the NAEA, NATP, ASTPS, or any other number of reputable tax relief accreditations, you are assured of quality tax relief experts. Additionally, verify that the company employs tax professionals such as attorneys, CPAs, and enrolled agents.

Can I represent myself before the IRS?

Yes, this is essentially what a taxpayer is doing when he or she does not hire a tax relief company. However, the advantages of hiring a tax relief company far outweigh those of representing yourself. In cases where the taxpayer will always lose, licensed tax professionals can still reduce or eliminate some of the debt owed.

When do I need to work with a tax relief company instead of doing it myself?

As soon as you realize that you are in over your head (this is usually when the IRS begins to make moves against you), you should consider hiring a tax relief company. Though your reason for seeking tax relief might be different from other people, a tax relief company is designed to handle a wide variety of tax issues.