Tax debt is extremely common today and many Americans are behind on their taxes. Tax delinquency can have severe consequences, such as wage garnishment and tax liens. Many people turn to tax relief services when they owe a significant amount to the IRS.
There are some bad players in the industry who make false promises and charge high fees but there are also reputable companies with a good record of success. Choosing the right company can save you a considerable amount of money. Here are some questions to ask that may help you in your selection.
What fee structure does the tax relief service use?
Tax relief can come at a price, especially if you have a large tax debt. Fortress Tax Relief quotes you based on the estimated number of hours required to work on your case. This is uncommon as many tax relief services will calculate fees based on a percentage of your overall tax debt to the IRS.
This can add up to an exorbitant amount that does not truly reflect the number of hours spent on the case. For example, a tax debt of $40,000 probably won’t take twice the amount of work hours to resolve as a tax debt of $20,000.
An hourly-based free structure usually means you will pay less than with a percentage-based fee structure.
What value does a tax relief service provide?
The amount of tax savings may exceed the amount of fees a client pays to a tax relief service. However, it can be short-sighted to hire a company based solely on this basis. The consequences of failing to pay back taxes should be enough incentive.
The IRS has various means of getting the back taxes out of taxpayers, such as the levying of bank accounts and accounts receivable. This can mean there is not enough money to pay rent or put food on the table.
Businesses may not have money for necessary expenses and even be forced out of business. A tax relief service can significantly reduce the chances of this happening.
Who will handle my case?
There are tax relief firms that assign cases to unlicensed managers who perform most of the work and then get a licensed professional on staff to sign off on it. The types of professionals the IRS recognizes are attorneys, CPAs, and enrolled agents.
When a few licensed professionals on staff sign off on documents for several hundred clients, they do not really know what is going on with each case. Companies may also bill out enrolled agents at a high hourly rate which means they can charge clients a high fee but the agents may receive only a small part of this. As they aren’t paid much, they don’t have the incentive to serve clients well.
What is the right tax relief strategy for me?
You could end up repaying thousands of dollars more than you would have paid if you select and implement the wrong back tax relief strategy. It is important to take your unique circumstances into account when deciding on a strategy.
The best tax relief services offer advice on which strategy is most appropriate for you and will custom tailor an approach taking your circumstances into account.
For example, you may be able to resolve your tax liability by way of an installment agreement or an Offer in Compromise (OIC). An OIC means you may be able to settle your outstanding tax amount for less than what you owe and save a significant amount of money. It is a time-consuming, difficult process and using a tax relief service offers you more chance of success.