What Do IRS Tax Debt Resolution Companies Do? Are They Worth the Cost? How Can I Pick The Best One?
Are you struggling to file or pay off IRS back taxes? Do you need help resolving your problems with the IRS?
Fortunately in 2020, IRS Tax Resolution Services are widely available, but how can you be sure that you’ve chosen the right service from the right company? Should you be using the IRS’s Fresh Start Program, or filing an Offer in Compromise Letter?
Do you even actually need to pay for assistance, or can you deal with your IRS problems entirely on your own?
This page will walk you through the process of resolving your IRS tax issues, and offer advice on how to minimize your debt, deal with the issue quickly, and ensure that any company you’re working with is actually worth the cost.
What Are Tax Resolution Services?
Many companies now offer IRS Tax Resolution Services, but what does that actually mean?
Tax resolution services promise to help reduce your IRS tax debt (or wipe it out entirely) by disputing your tax liabilities, reducing your tax penalties, fees or other charges, getting you a better repayment plan with a longer repayment term, lower interest rate, or some other improvement, and essentially help you dig your way out of your IRS debt.
There are hundreds of companies across the United States who claim to be able to resolve your tax problems, but it can be difficult to determine which one to go with, as the industry itself has a terrible track record for actually helping people reduce their debt.
In fact, Forbes reported that tax resolution services were nothing more than a scam way back in 2010, with an article written by Stephen J. Dunn claiming that “tax resolution firms are a misnomer. They exact high fees from unassuming consumers and seldom resolve anything… they are becoming a serious problem for consumers in our country.”
But is Mr. Dunn really onto something, or is there a benefit to paying an outside entity to deal with your tax problems and negotiate a settlement with the IRS on your behalf?
The rest of this page investigates this topic in detail, giving you my opinion on whether or not it’s worth paying someone else to handle your tax problems for you.
How Does Tax Resolution Work?
The goal of tax resolution is to reduce your outstanding debt and get you back in good standing with the IRS (or with a state tax authority), allowing you to get rid of things like wage garnishments, property liens, and negative marks on your credit report.
If you don’t think fighting the IRS is a big deal, then you’re probably one of the lucky people who hasn’t received a 90-day letter (IRS Form CP3219N), had the IRS file a substitute tax return on your behalf, or experienced any of the potential IRS collections and enforcement actions.
If you have experienced any of these things, then you’re fully aware of now difficult it can be to deal with the IRS, who is perhaps the most unforgiving, unemotional and least sympathetic organizations on the planet.
Many people think they can cheat just a little on their tax returns without getting into trouble, and some people think they can get away with ignoring the IRS altogether, but anyone who’s been through the ringer with them can tell you that it’s not a good idea to do anything in any way other than by the book, because the downside potential is huge.
Once the IRS has decided to come after you, you’re going to be in for a world of hurt, and the only way to deal with the problems that emerge from their investigation and collection process is to pony up the cash that they’re demanding, or negotiate a new deal with them that reduces your tax liabilities.
That’s where the tax resolution process comes in; it’s a way to reduce your outstanding IRS debt, get back in good standing with the IRS and your back taxes, and ensure that you won’t face further penalties, fines or fees.
What Specific Problems Does Tax Resolution Solve?
Most of the time, people don’t turn to a tax resolution company for help until they’ve gotten themselves into a truly terrible jam with the IRS.
Typically, you won’t even think about looking into tax resolution companies until you’ve at least received the 90-day letter (the letter threatening coming after you assets for failing to file your taxes prperly), but many times, people don’t start looking into solutions until they’ve been hit with actual enforcement actions.
The types of problems that tax resolution services can clear up for you include:
- Unpaid Tax Bills (AKA “Back Taxes”)
- Unaffordable IRS Payment Plans
- Incomplete or Improper Tax Returns
- Late Tax Returns
- Payroll Tax Problems
- IRS Tax Audits
- IRS Wage Garnishments
- IRS Liens on Assets
- Illegal Offshore Bank Accounts
- Innocent Spouses Facing Tax-Related Penalties, Fees or Fines
If you’re facing any of the problems listed above, or anything else related to issues with your Federal or State taxes, then it’s worth considering speaking to a tax resolution agency and finding out what it would cost to get them to help.
What Do Tax Resolution Companies Actually Do?
To help you deal with the tax problems listed above, tax resolution services contact the IRS and attempt to negotiate or mediate a better deal for you.
But what does the tax resolution expert actually do for you? That’s where things get tricky, because it’ll depend on your unique financial situation.
Most of the time, tax resolution involves providing the IRS with an explanation of why you don’t actually owe as much as they’re claiming you do,, and there are several ways the people you hire can approach that process.
First, they may make complicated legal arguments challenging the validity of the IRS claims regarding your outstanding tax liabilities.
Second, they may need to correct wrong information from your previous tax returns, or add supplemental information to them (like additional write-offs, tax credits or other details that’ll reduce your debt).
Third, they will most likely look for loopholes in the tax code that they can exploit on your behalf, like finding ways to reduce the amount you owe, or increase the amount you’re able to deduct.
Fourth, most of these firms are essentially nothing more than professional negotiators, who have experience battling the IRS and whittling down their demands.
Firms that focus on the negotiation element will simply push for a better repayment plan on your behalf, which could include documentating that you literally cannot afford what the IRS is demanding, pushing out the repayment due dates to give you a longer time to come up with the money, requesting that some of your fines, fees and appicable penalties be removed because they aren’t legitimate, or some combination of these things and everything else I mentioned above.
Handling Tax Resolution Yourself
If you feel comfortable enough with the process, then it’s entirely possible to deal with your tax problems on your own.
Instead of paying hundreds or thousands of dollars for assistance from someone else, you may be able to deal with the IRS directly, negotiate a good tax settlement, and simply move on with your life.
If you do choose to go it alone, here are some tips for ensuring that you’ll get the best possible deal:
- Purchase a book, ebook, or guide to Tax Resolution, like Steven V. Melnik’s “Tax Relief and Resolution”, or Gary Lundgren’s “Slash IRS Back Taxes” from Amazon.
- Download Tax Resolution software, like the program created by Canopy, which consolidates allt he complicated IRS tax codes into a single source, letting you quickly and easily figure out a resolution strategy
- Become a Certified Tax Resolution Specialist yourself, by studying up on the same material the ASTPS’s official “Uniform Examiniation” for Tax Resolution Specialists suggests studying; the Practitioners Publishing Company “Dealing with the IRS” 2-Volume Set.
These strategies may take more time than simply paying someone else to take care of your tax problems for you, but if you’re the type of person with plenty of time, but little money, they may be a better solution than outsourcing the work to an expert.
Why Should You Hire An Expert?
To tell you the truth, I always advocate for handling your debt-related issues on your own, as long as you’ve got the time and incination to deal with it successfully.
What does it take to be successful at negotiating for a better deal with the IRS? Time, research, determination and good arguing or debating skills.
If you have time to spend hours researching every little part of the tax code, reading briefs from attorneys who’ve successfully beaten the IRS in court, looking for tips, strategies and advice from tax experts (or Google), and you can speak or write well enough to argue with professional negotiators, then you can take care of everything that needs to be done without paying a single cent to anyone else.
Just like resolving student loan debt, medical debt, or credit card debt, tax debt can be dealt with entirely on your own, as long as you’re willing to allocate the time and effort required to win.
The downsides to dealing with IRS-related problems yourself are that it’ll be time-consuming, stressful, and complicated, and that your eventuall settlement may not be quite as good as one of the tax resolution companies would be able to achieve on your behalf.
Remember, people tend to be good at what they do often, (“practice makes perfect”), and those people who spend 40 hours a week fighting the IRS are likely to generate better results than someone who’s never attempted to do battle with them before.
However, some tax resolution companies still haven’t quite figured it out that people are able to look this information up on their own, come up with a strategy, and deal with their tax bills effectively, so they’re still trying to charge thousands or even tens of thousands of dollars for handling their client’s concerns.
If you do choose to outsource the effort, then I’d advise you to be extremely careful about determining who to work with.
How to Pick a Tax Resolution Company
Since tax resolution services aren’t cheap, it’s important to do some research when selecting who you’ll pay to represent you against the IRS.
While a Google search for “Tax Resolution Company” (or any similar phrase), returns no shortage of potential partners, you’re going to need to dig a little deeper than just reading what they’ve posted on their websites before you can determine who you should use.
What sorts of questions should you be asking anyone who is trying to pitch their tax resolution services?
First, Find Out What They Charge
Most of the tax resolution firms do the same sorts of things when trying to reduce your IRS debt, so be sure that you’re not choosing an agency who charges 10 or 20 times more than the others.
Unless you’re some kind of high-profile bigshot, it won’t make that much of a difference if you work with the industry’s best negotiator, or someone who’s a bit of a journeyman and middle-of-the-road on their knowledge.
In reality, what you’re paying these people to do is gather up details, perform research, and come up with some negotiation strategies on your behalf.
It’s definitely not rocket science, and anyone who handles tax resolution on a daily basis is going to figure out some tricks of the trade within a few months of starting the job
Most of the processes and procedures involved in negotiating with the IRS are pretty-much set in stone, and there’s no magic bullet to reducing tax debt, so it won’t matter if you’ve got the absolute best expert in the industry advocating on your behalf.
Like you’d do when getting work done on your house, request proposals from 3-4 potential companies, throw the most expensive and least expensive offers out right off the bat, and pick one of the companies who has priced themselves in the middle of the pack.
Second, Request Sample Case Studies
Make sure that whoever you’re considering paying to deal with your IRS problems has handled situations comparable to yours in the past; ideally, recently.
Ask the companies you speak to for some sample case studies of previous work they completed, and be sure to request that they provide details about the client’s situation, including how much they were charged, and how much they ended up saving.
Try to get 2-3 case studies from each potential tax advisory firm you speak to, then read through their case studies to make sure that some of their examples came from people who were in similar situations to your own.
While the process itself isn’t all that complicated, you do want to make sure that whoever you’re paying to handle it for you has handled a situation like yours in the recent past, otherwise you could risk them making basic mistakes.
The whole point to paying someone else to deal with your IRS debt for you is that you want to avoid making stupid, careless mistakes, so don’t hire somebody who’s never dealt with a situation like yours.
Third, Read Reviews of Their Service
Keep in mind that the most likely person to leave a review for any debt settlement service is the one who had a bad experience, so make sure you’re qualifying each company’s ratings by delving into what people are actually saying about them.
Read the reviews left for each company that you’re thinking about hiring, and see if the negative reviews are actually deserved.
Oftentimes, debt settlement firms will rack up terrible reviews from people who’ve they’ve simply told they weren’t able to help.
Remember that people are emotional beings, and many struggling with debt end up taking things personally and lashing out at the companies who tried, but weren’t able to help them, oftentimes through no fault of their own.
Read reviews left on Yelp, Social Media sites, and anywhere else that you can find them, but be sure to pay attention to whether or not the people writing those reviews seem reasonable before deciding to put any stock in their thoughts.
Fourth, Ask For An Anticipated Return on Investment
Tax resolution experts live for financial matters, so they should have a great handle on ROI calculations, and be able to tell you whether or not their service is actually going to be worth the investment.
Try to avoid any open-ended contracts (they’re why lawyers have such a bad reputation), that are billed based on hours spent advocating on your behalf, because these sorts of arrangements are often structured to milk you for all you’ve got, waste time, and run up the bill without resolving your problems.
Do your best to find a provider who will offer you a flat-rate fee for handling your problems, and who is willing to give you at least a range of what that would cost up-front.
It is not hard for a seasoned tax resolution professional to determine how much time they’ll need to spend on your particular situation and to price it out for you accordingly.
If they truly have handled situations like yours in the past, then they’re going to know about how much time it will take for them to resolve your issues, and they should be able to give you a solid quote on what it will cost.
Fifth, Go With Your Gut
At the end of the day, whoever you hire will need to be in near-constant contact with you throughout the entire resolution process, so be sure to choose someone that you think you can work with.
I can’t tell you how many times I’ve received feedback from people who hired the top reviewed company, cheapest company, or slickest salesperson, only to find out that they can’t stand the guy (or girl) when it comes to actually working through the process.
Before agreeing to sign any contracts, ask whoever you’re talking to whether or not they are the actual person who will be helping you, or if you’re going to get passed off to someone else.
Many firms in the tax settlement space will use a bait and switch tactic, letting you talk to someone extremely smart, personable, funny, witty, or obviously intelligent when you’re being pitched the service, only to swap them out for some low-life moron after you’ve signed the dotted line.
Before you agree to make any payments, make sure you know and like whoever will be handling your situation for you, because it could end up taking a while to negotiate your resolution, and you’re likely to get the best results from someone who you actually enjoy working with.
Who Do I Recommend?
Honestly, there’s only one company I trust to refer my readers to, and that’s the IRS Tax Debt Relief Helpline.
What do I like about the Helpline? Just think – how many times have you successfully Negotiated an IRS Settlement? How much do you know about the IRS Fresh Start Program, or about IRS Tax Debt Forgiveness opportunities? Do you know How to Stop an IRS Wage Garnishment?
The Helpline’s Experts spend over 40 hours a week focusing on these things; they know the ins and outs of the IRS Tax Code, and they can review your case, determine what you need to do, and then negotiate with the IRS on your behalf to reach the best possible settlement.
To get rid of your IRS debt as quickly and affordably as possible, you need to call the Tax Debt Relief Helpline now at 1-888-692-7108.
Where Can I Go For Other Questions?
To get help figuring out how to achieve effective IRS Tax Debt Relief, make sure to visit the other pages of my site, where I cover all sorts of IRS problems in complete detail.
You’ll certainly want to visit my Guides on Tax Penalties, Back Taxes, Tax Debt Forgiveness, Tax Debt Settlements, Tax Resolution Services, the IRS Collections Process, and the IRS Fresh Start Program, as these will give you a great idea about how to handle your IRS problems.
You’ll probably also want to look at the IRS’s Taxpayer Bill of Rights, which details exactly what the IRS and their private debt collectors can (and cannot!) do to you in an attempt to get you to pay them back.
And if you still have any other questions about the IRS or any of the processes mentioned here, please ask them in the Comments section below and I’ll respond as quickly as possible.
Most of the time I can get you a reply within 24 hours, and I’m happy to help, so please feel free to ask away!
Disclaimer: Information obtained from Forget Tax Debt is for educational purposes only. You should consult a licensed financial professional before making any financial decisions. This site receives some compensation through affiliate relationships. This site is not endorsed or affiliated with the U.S. Department of the Treasury, the IRS or any other Government Organization.
I’ve been getting widows disability for nine years since my husband passed away. I haven’t worked due to my disability for all of my marriage (20 yrs) and still cannot work. I live on a SS check and have depleted any retirement we had. Paid thousands in taxes and fees from that. Now I owe back taxes 11,000 and upcoming taxes for 2018 prob about the same. I cannot afford at all to pay anything . I can’t make ends meet now. What do I do to get it all waived considering it’s against the law to go after me for it if I can prove it’s impossible to be paid. I’m disabled and haven’t worked in almost three decades. Now I’m dealing with more mental illness due to my son committing suicide recently, I am now fighting for my sanity
You may be able to qualify for a Total and Permanent Disability Discharge, so I would look into that program and see if it can help.
loved the read and all the info provided by you here,my husband has just recently has a IRS lien filed against him and i have questions i was hoping you can answer for me, please.
What questions did you have Mary?
LOVE your page. i have some questions?. i owe 30k with pen,to IRS<. i live in a home where i'm on the deed as l/e trustee which is equity is $ 0. IRS put a LIEN on it, NO LIEN . I have a business at that address for 3 years no income yet. LIEN. My daughter home is paid for value at $66k. which i'm on the deed with her, NO LIEN ,I can't afford to pay; work pier Diem. IRS asked me to file out 433f. i offer $100 they refused. . Tax year 2015, and ,2016.. W/O my daughter house i qualified for OIC. with the IRS national standard i'm $0 . 2017 i filed OIC w/o daughter house, didn't get any answer made offer; 1 year went bye; IRS stated they didn't received the paperwork which i faxed twice.(frustrated & quit). should i offer OIC again r tax penalty abortement HELP PLEASE.
Thanks for the kind words!
I would try to pursue the OIC again. That’s strange that they’re saying they didn’t get your paperwork previously. Can you provide them with proof that you faxed it to them? Don’t give up though, if you ignore this problem, it’ll only get worse.