The Average Cost Of Tax Relief Companies
The fees youll be charged vary widely by tax relief provider. To make sure youre getting the best deal, always consider at least a few options. You should also ask for a full breakdown of fees so you can accurately compare each company.
Each tax relief company has a unique process for providing tax relief services. Still, youll generally start with an initial free consultation that helps the company determine whether you are eligible for their services.
Heres what the process usually looks like, at a high level:
Youll receive word when your problem has been resolved and instructions on what you should do moving forward.
What Does Tax Relief Include
The tax relief process usually begins with a free consultation, during which a case manager will review your current tax debt and present you with a quote for continued service. Once youve accepted, the case manager will begin an in-depth investigation into your taxes and come up with the best plan of action. Finally, theyll negotiate with the IRS to get the best possible outcome for you.
Select A Payment Option
Your initial payment will vary based on your offer and the payment option you choose:
- Lump Sum Cash: Submit an initial payment of 20 percent of the total offer amount with your application. If your offer is accepted, you will receive written confirmation. Any remaining balance due on the offer is paid in five or fewer payments.
- Periodic Payment: Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If accepted, continue to pay monthly until it is paid in full.
If you meet the Low Income Certification guidelines, you do not have to send the application fee or the initial payment and you will not need to make monthly installments during the evaluation of your offer. See your application package for details.
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Community Tax Features To Know
Fees: The company says it offers a free consultation, which can help you decide whether theyre for you, and theres no time limit or topic limit. After that, youll pay for the company to diagnose the size and nature of your tax issue, and then more for the company to try to resolve the issue.
Who does the work: Community Tax assigns you a case advocate, and every case has a licensed practitioner as well as a tax preparer if needed. The company says it requires employees to have a law license, CPA or EA designation in order to negotiate with the IRS on your behalf. The company also says you can work with them via phone, e-mail or chat, or by mail.
Refunds: Given that most people can get on a payment plan with the IRS , its unlikely that this or any other tax relief company will say theres nothing they can do for you. But if it comes to that, Community Tax says that if it’s unable to recommend a resolution or made a material mistake, it may offer a refund.
How Do You Avoid Tax Relief Scams
As in any industry where customers are desperate for answers and fearful about the future, the tax debt relief industry is filled with scam artists and less-than-reputable firms.
So, its important to be skeptical of any company that asks for a large upfront fee or refuses to provide a free consultation. Review the companys history, too. Does the company show longevity? Is it accredited by the Better Business Bureau?
If the company has changed its name multiple times or has only been around for a short timeor if the company name does not match its domain namethis could be a sign of a scam.
Most importantly, be aware of companies that make big promises. Its likely the company will not be able to have IRS penalties, fees, and interest charges waived. In fact, the company may not be able to help reduce your tax debt at all.
Keeping in mind that the IRS only accepts 40% of offers-in-compromise, be wary of companies that promise to erase your tax bill or have your tax debt reduced dramatically.
A tax debt relief firm can handle the stressful process of negotiating with the IRS on your behalf. But you should not trust a company that makes promises that seem too good to be trueespecially if they have not reviewed your financial records before making those promises.
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Alg Tax Solutions: Best For High
We chose ALG Tax Solutions as the best company to hire if your tax debt is $25,000 or more. Since 2011, the Michigan-based company has provided its clients with access to a staff of tax professionals trained to negotiate directly with the IRS. By law, only certain legal specialists can represent your case before the IRS, and ALG Tax Solutions has all three on hand: tax attorneys, enrolled agents, and certified public accountants .
Sound Too Good To Be True
Some tax relief companies may guarantee to lower your tax obligaÂtions. Others might tell you that they have âinsider tipsâ or special expertise to get a favorable result with the tax authorities. Remember: if a promise sounds too good to be true â it is. Donât do business with a firm that does not give you the biography of the attorney, certified public accountant, or tax agent who will actually work on your case.
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Should I Hire A Tax Relief Company
Tax relief companies typically offer to help taxpayers in distress. Some of them can be helpful if youre confused about the process or need help filling out forms. But remember:
The IRS rejects most applications for offers in compromise.
If a tax relief company loses or delays your application, youre still on the hook for your tax debt, interest and penalties with the IRS.
You may have to pay an upfront fee to the tax relief company, and it may be a percentage of the tax you owe. That fee may be higher than what you end up saving on your tax bill if the IRS accepts your offer in compromise .
Tread carefully, the Federal Trade Commission warns there are some bad actors out there. “The truth is that most taxpayers don’t qualify for the programs these fraudsters hawk, their companies don’t settle the tax debt, and in many cases don’t even send the necessary paperwork to the IRS requesting participation in the programs that were mentioned. Adding insult to injury, some of these companies don’t provide refunds, and leave people even further in debt,” it says.
Some tax relief companies will charge you a fee to determine how much you owe the IRS, set up a payment plan or see if you qualify for an offer in compromise. But these and other things you can do yourself for free:
Tips For A Wise Tax Relief Buyer
Tax relief is a broad term encompassing IRS programs designed to allow taxpayers to settle tax debts by decreasing the amount of taxes owed or dividing the debt into affordable payments. If you find youre one of over 20% of U.S. citizens who under-withheld federal income tax, and you cant pay the difference before the annual tax deadline, a tax relief company can work with the IRS to make your debt manageable.
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Best For Customer Service: Precision Tax
Precision Tax Relief
Pricing not available online
No audit representation
Founded in 1967 and headquartered in Coeur dAlene, ID, Precision Tax services clients who need assistance with several types of tax relief including IRS tax settlements , back tax returns, wage garnishments, and tax liens. They have helped clients in 48 states settle their debts, with 700 clients resolving their debts through OIC since 2013.
With Precision Tax, clients can use the company website to request a free consultation with a tax professional or call their toll-free number. During the evaluation, a representative will go over your options, pricing, and advice on how to proceed with tax relief. The company claims it will contact the IRS within 24 hours of you becoming a client and full payment is not required up front.
In addition to flat-fee, flexible payment terms, the website offers a robust library of tax relief terms and the company offers a 30-day money-back guarantee along with a service guarantee. Precision Tax also offers convenient customer service options via phone, text message, email, and live chat. Company hours are also customer friendly, operating Monday – Friday from 6:30 am – 6:00 pm PT. Clients in the Coeur dAlene area may also meet with representatives in person.
Will You Go To Jail For Not Paying Taxes
The IRS wont put you in jail if you fall behind on paying back taxes, but if you purposely evade paying taxes it will try. Some of the offenses that can land you behind bars for up to five years include failing to file a tax return, helping someone else avoid filing tax returns, and any other actions that enable you to avoid paying taxes including filing a fake claim.
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How To Find Out If A Tax Debt Relief Service Is A Scam
There are plenty of legitimate services trying to help individuals and small businesses alleviate their tax debt problems. Yet when there’s vulnerability and money involved, there’s very likely to be some sort of scam around the corner. Being in debt with the IRS can make you nervous and desperate, so scammers will use that fear to push you into bad decisions.
The problem has become so pervasive that the Federal Trade Commission is warning people about the risks. According to the FTC, the following indicators should serve as red flags:
- Demanding that you pay before even starting the process
- Promising absolute debt resolution or major reductions
- Saying they will get penalties forgiven
- Not properly looking into your company’s finances
- Delaying your tax debt relief case
- Saying you don’t qualify for tax debt relief after you’ve been paying for their service for a long time
- Claiming they can slash your debt to “pennies on the dollar”
If you owe back taxes, the FTC suggests that you carefully read your IRS and state tax notices before asking for debt collection options. The FTC also warns against using any business that promises any kind of solution, as only the IRS can make that determination.
Preventing Tax Identity Theft
In addition to taking care of your outstanding tax obligations, it’s also important that you be on alert for any signs of tax-related identity theft. If you’ve ever lost your wallet, had your mail stolen, or had personal information compromised in a data breach, you may be at risk.
To help protect your identity at tax time, here are a few best practices to follow:
- Keep your Social Security card and any documents containing your Social Security number in a safe place.
- Don’t give out your personal information, such as Social Security number, date of birth and so on, over the phone or online unless you initiated the contact and you know you’re communicating with a reputable organization.
- Consider requesting an Identity Protection PIN from the IRS, if you’re eligible.
For more information, see “Protecting Yourself From Tax Time Identity Theft.” And, if you think you might be a victim of tax identity fraud, see “What to Do if You’re a Victim of Tax Identity Theft.”
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Does The Irs Forgive Tax Debt After 10 Years
The IRS may not want the general public to realize this, but the agency has 10 years to collect on any debts it’s owed. Known as the Collection Statute Expiration Date , this mandate requires the IRS to expunge any tax debt after a decade. While that may seem clear cut, the IRS won’t sit idly by if you try to wait it out for 10 years. Over time, the agency’s debt collection efforts will become increasingly aggressive, with wage garnishments, tax liens, and other tactics firmly on the table. Additionally, your CSED can change, since there are provisions to let the IRS pause and restart the process if necessary.
Best Guarantee: Anthem Tax Services
Anthem Tax Services
Anthem Tax Services money-back guarantee is the only one of its kind in the tax relief industry. The guarantee has no time limit and promises to return your fees should the company fail to make any change to your IRS tax debt repayment schedule.
Offers a money-back guarantee with no time limit
Payment plans available
Accredited by NATP and NAEA
Money-back guarantee doesnt ensure reduced total payment amount
Mixed customer reviews
No consumer education focus
Many tax relief companies dont offer a money-back guarantee at all. Others offer a full refund for the first 14 or even 30 days. Anthem Tax Services, however, offers a unique, no-time-limit guarantee. If the IRS refuses to reduce either your total debt or your monthly payment amount, the company will refund any fees paid for its services.
One important note here: Anthem Tax Services money-back guarantee doesnt constitute a promise to reduce your total tax liability to the IRS. Its entirely possible that the company will only be able to reduce your current monthly payment, meaning youll still have the same amount of debt, it will just be paid back in smaller amounts over a longer period of time. This may reduce the immediate financial burden but wont save you any money in the long term.
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Is Tax Relief Worth It
As you can see, tax relief services can come with potentially costly fees. If youre considering seeking assistance, youll want to be sure the reward outweighs the cost. Have a good handle on how much your tax debt is, and make sure youre clear on the total costs youll pay to settle the debt. This calculation can help you determine if the help is worth it. .
If tax relief services are too pricey, you can always work directly with the IRS to settle your debt. Check out the Federal Trade Commissions instructions on filing CNC status, setting up an installment plan, and other options, or use the IRS Taxpayer Advocate Service for more help. The National Association of State Auditors, Comptrollers, and Treasurers is also available to help with state tax issues.
Remember, everyones financial situation is different. While a tax relief company may be able to reduce someone elses tax liability, it may not be able to do the same for you. Gather as much information from the company as you can before paying any fees to ensure this is the right approach for you.
Find A Tax Relief Company That’s Best For You
We’ve weighed the pros and cons of some major players in the space.
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Tax Defense Partners: Best For Low
Tax Defense Partners works to help individuals and companies with their outstanding tax debt. Regardless of whether the problem is at the state or federal level, Tax Defense Partners’ team of tax professionals and range of services make this company our best pick for businesses facing low-debt situations.
How Much Will I Pay A Tax Relief Company For Its Services
Most tax debt relief companies charge an upfront fee. Each of our best picks charge a flat fee, but prices vary based on your situation and its complexity. If your case is complicated, it will take more hours and thus cost more.
Based on business.com’s research, the cheapest tax debt relief service we found cost $1,500, while the most expensive was $4,250.
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However Not All Tax Relief Firms Provide The Same Quality Of Work
Many tax relief firms assign your case to an unlicensed case manager who performs the vast majority of the work with very little involvement from a licensed tax professional. Only three types of licensed professionals have unlimited authorization to practice before the IRS: attorneys, CPAs, and enrolled agents. Firms who utilize unlicensed case managers typically have a small number of licensed professionals on staff who sign off on certain documents, and do the minimum to convince the IRS or state that a licensed professional is, in fact, handling the case. It is not uncommon for firms who use this model to have several hundred clients or more per licensed professional. The result is that the licensed professionalwho is supposedly in charge each casehas little or no idea about what is going on with each case.
Further, regardless of whether the tax relief firm uses a case manager or licensed professional, the case manager and licensed professional almost always obtained authority to practice before the IRS as an enrolled agent something easily obtained .
The going hourly rate for an enrolled agent averages about $130$150. However, many tax relief firms bill out their enrolled agents at a much higher hourly rate, such as $250/hr. This allows them to charge their clients a relatively high fee, while paying their enrolled agents a relatively small amount. The result is often a high profit margin for the tax relief company, but poor value for their clients.