A Complete Guide to Tax Relief
You might be surprised to learn that tax debt is more common than you think. Millions of Americans fall behind on their taxes every year with delinquencies averaging $10K per person. Tax delinquency can lead to aggressive collection tactics by the IRS, including wage garnishment and asset seizure.
If you are facing serious tax problems and need tax relief, you're not alone. Every year, millions of taxpayers discover they owe more in taxes than they can afford to pay. Many have no idea how they will ever repay their back taxes, especially when they're already struggling to pay this year’s taxes. But there's good news. The Internal Revenue Service (IRS) realizes what a financial hardship tax debt can be. To help taxpayers get back on your feet, the IRS has created tax relief programs that offer a path to a debt-free future.
What is tax relief?
Tax relief refers to any program that reduces the taxes people owe, or develops a repayment plan they can afford.
The IRS estimates that $458 billion in taxes go unpaid every year. This is what the IRS calls the tax gap, the difference between what taxpayers owe and what they pay. Unfortunately, the U.S. government is in no shape to turn a blind eye.
To solve this “cash flow” problem, the IRS uses a carrot-and-stick approach. The "stick" includes IRS audits, fines, liens and levies, garnishments, public auctions, and interest payments for taxpayers who pay late or don’t file their tax returns. Tax relief is the carrot.
IRS Fresh Start
One of the most popular tax relief programs offered by the IRS is the Fresh Start program. The program is designed to help taxpayers who are struggling to pay their tax debts by providing them with more flexible options for repayment. One of the key features of the Fresh Start program is the expanded installment agreement option, which allows taxpayers to pay off their tax debts in monthly installments over a longer period of time.
Another feature of the Fresh Start program is the Offer in Compromise option, which allows taxpayers to settle their tax debts for less than the full amount owed. To qualify for this option, taxpayers must demonstrate that they are unable to pay their tax debts in full.
How do tax relief services work?
Tax relief can allow you to break down your debt into payments or reduce the amount of tax you pay to the government. In some cases, your tax debt could be forgiven.This is how it usually works. A team of tax experts meet and investigate your tax situation to determine what major tax issues you're facing and which solutions provide the best chances of success. Common strategies include requesting an offer in compromise, an installment agreement, penalty abatement, innocent spouse relief, or claiming currently not collectible status. Once they choose a strategy, they negotiate with the IRS or your state revenue department until there is a resolution.
How to compare and what to look for in a tax relief company?
You have a lot of options when shopping for a tax relief company. Not all companies have the expertise or resources to represent you effectively before the IRS. Finding the best firm for your case can be a challenge. This guide describes the methodology SuperMoney used to pick the best tax relief firms.
Here’s a summary of the questions you should ask when considering a tax relief company.
- Does the tax relief company have licensed tax attorneys on staff?
- Do they have sufficient support staff?
- Does the tax relief company have a money-back guarantee?
- What type of tax relief services does the company offer?
- Does the tax firm have the right accreditations?
- What payment options does the tax relief firm offer?
- Does the company make unrealistic promises?
Let's go more in detail:
Does the tax relief company have licensed tax attorneys on staff?
Don’t compromise on this one. Only hire serious tax relief companies that employ licensed tax attorneys to represent their customers. Don’t just take their word for it either. Check their claims. Some tax relief companies claim to have tax attorneys as consultants or to be linked to a law firm purely as a marketing ploy. Look for tax relief firms that have tax attorneys who are licensed to practice in all 50 states.
Here is a step-by-step guide on how to review and tax relief company:
- Call or check the company’s website and find out how many tax attorneys they have on staff. For example, Optima Tax Relief's website publishes the names and resumes of eight of their attorneys.
- Get their names and ask which Bar associations they have joined. To illustrate, if you visited Optima’s website you could see one of their attorneys is Michael Wenkart.
- Visit their Bar association’s website, and check their credentials and standing with the association. Do they work for the tax relief company that claims them? Are there any misconduct inquiries on their file? Have they received any disciplinary or administrative actions?
In this case, all the tax relief company’s claims checked out, and the lawyer had no disciplinary or administrative actions. However, if you were researching Roni Deutch’s tax relief website and looked up the founder’s profile with the State Bar of California
, the results would be much more interesting.
Does the tax relief company have sufficient support staff?
Top tax relief companies also employ enrolled agents and tax preparers to assist their tax attorneys. Enrolled agents are federally licensed tax practitioners who specialize in taxation and are qualified to represent you before the IRS.
What is the status of their enrolled agents?
Ask whether any enrolled agents will be working on your case. If so, ask for their full names and enrolled agent numbers. Email the IRS at firstname.lastname@example.org and request verification of their status. You should receive a reply within three days.
Does the tax relief firm have a money-back guarantee?
Although most tax relief companies offer a free initial consultation, only a few provide a money-back guarantee if you are not satisfied with the service they provide. Notice these guarantees will typically only last for one or two weeks and apply exclusively to the fees incurred during the investigating phase of your case. However, even a short money-back guarantee period provides significant advantages.
First, it gives you the peace of mind of working with a firm that is confident about the quality of its customer service. Second, it gives you the time you need to get to find out who will be working on your case, so you can check their credentials and licensing status.
What type of tax relief services does the company offer?
Some companies specialize in just a few tax relief services. This is either because they don’t have the necessary training or because they choose to focus on faster tax relief strategies with broader profit margins.
These are some of the tax relief services a self-respecting company should provide.
- Offer in Compromise: A negotiated settlement for less than the full amount owed to the IRS.
- Administrative Appeals: You are entitled to a review of your tax liability if you don’t agree with the IRS’ assessment.
- Collection Appeal: The IRS’ collection appeals program allows you to question a tax assessment without having to go to tax court.
- Installment Agreements: If you can’t afford to pay your tax debt in full, you can request a payment plan. However, there are penalties associated, and interest continues to accrue until paid in full.
- Partial Pay Installment Agreement: This is a special type of installment agreement that allows you to pay less than the full amount owed to the IRS.
- Wage Garnishment Release: The IRS can collect payments directly from your employer. The wage garnishments will continue until the debt is paid or the IRS accepts a wage garnishment release.
- Payroll tax negotiation: The IRS imposes particularly severe penalties on companies that withhold taxes from their employees but don’t pay them to the IRS. Tax relief companies can help negotiate affordable repayment plans.
- Tax Lien Withdrawal: If the IRS places liens on the property of tax, you won’t be able to sell it or use it as collateral in a loan. Tax relief companies can help remove liens by negotiating a repayment plan.
- Penalty Abatement: Penalties for not following IRS tax laws can add up quickly. In some cases, they represent more than half the tax debt owed.
- Bank Levy Release: The IRS can take money directly from your bank if you’re late on your tax payments. However, you can appeal and ask the IRS to release the levy.
- Innocent Spouse Relief: Taxpayers who feel their tax debt is due to a mistake made by their spouses (current or former) can request relief from the tax liability and any related penalties.
- IRS audit defense: The best tax relief companies provide expert advice when clients are being audited by the IRS. Remember that, unlike accountants and enrolled agents, tax lawyers enjoy attorney-client privilege when assisting clients with tax problems.
- State and Federal taxes: Top tax relief companies will provide help for both state and federal tax problems.
- Statute of Limitations: Typically, the IRS has three years to assess a taxpayer’s tax liability and 10 years to collect payment.
- Currently Not Collectible: In some cases, the financial situation of taxpayers is so bad they cannot afford to make monthly payments. If your request for currently not collectible status is successful, the IRS will stop any collection activities.
Companies that offer IRS audit defense and can deal with both state and federal taxes are rare. Treat those services as indicators of tax relief companies that can deal with more complex cases.
If you own a company, make sure the tax relief company you choose has experience dealing with payroll tax and is familiar with business tax relief strategies. Look for firms with CPAs and tax attorneys with a background in business
What accreditation does the tax relief firm have?
As with most industries, the tax relief business has trade associations that set best-industry-practices and help members with education and training. Therefore, serious tax relief companies join trade associations and play a leading role in setting business standards. Top firms also invest in third-party accreditation and endorsements.
Look for tax relief firms that:
- Are IRS approved continuing education providers.The IRS authorizes these companies to offer official educational programs to tax professionals.
- Are members of the National Association of Tax Professionals.The NATP sets industry best practice standards and offers members tax research and education services.
- Have good consumer ratings. Check their user reviews on SuperMoney. Although it’s not a guarantee of excellence, a company’s user reviews will give you an idea of how many complaints a company receives.
- Have enrolled agents who are certified by the National Association of Enrolled Agents.The NAEA provides education, training programs, and other services to enrolled agents.
What payment options does the tax relief firm offer?
Accredited tax relief companies that employ tax attorneys and enrolled agents will charge between $2,000 to $10,000 depending on the complexity of your tax problems. However, you may not have that kind of cash lying around. Choose a tax relief company
that offers the options of flexible payments without charging interest or any other financing fees.
Accredited tax relief companies that employ tax attorneys and enrolled agents will charge between $2,000 to $10,000 depending on the complexity of your tax problems.
Does the tax firm make unrealistic promises?
If a tax relief firm promises it can make your tax problems disappear or if it guarantees you will pay pennies on the dollar of your tax debt, run. No tax relief firm can guarantee what the outcome of your case will be. Tax firms can reduce your debt drastically, help you waive penalties, and arrange for affordable installment programs. However, a lot depends on your personal financial circumstances and the IRS's determination to pursue your case.
Skilled tax professionals will help you present your case in the best way possible and apply for the best tax relief programs available. But they can’t change the facts of your case. Avoid companies that guarantee they can solve your tax problems or reduce your tax debt. Be particularly careful with companies that make outrageous claims and require upfront payments before they start working on your case.
What types of tax relief are there?
Tax relief programs assist taxpayers who owe money to the IRS but can’t pay it as a lump sum. There are four main ways you can obtain tax relief from the IRS:
- Payment plans. Installment plans help individuals and businesses that cannot afford to pay their tax debt right away, but can afford monthly payments. This helps the IRS to get all the money they're owed, and helps taxpayers to chip away at their debt at a scale they can afford.
- Offers in compromise. An offer in compromise is available to taxpayers who cannot pay their entire tax debt or make monthly payments without it causing severe financial hardship. In such cases, if the taxpayer shows a willingness to cooperate, the IRS may either accept a smaller amount or cancel the debt entirely.
- Penalty relief. Penalty abatement is an administrative procedure the IRS uses to remove or forgive penalties or fees charged to taxpayers who didn't follow IRS rules.
- Tax representation. Tax representation is a right included in the Taxpayer Bill of Rights. If you are being audited, or you feel the IRS has made an error in your tax assessment, you can hire an authorized tax representative to help you negotiate. Tax representatives must be attorneys, certified public accountants, or enrolled agents. You can also employ an un-enrolled tax preparer if it was the person who helped prepare your taxes. These representatives use their expertise to ensure that the IRS treats you fairly, and that you receive the tax relief option that you deserve.
Let's dig deeper into each of these programs.
How do offers in compromise work?
An offer in compromise
is an agreement between you and the IRS to pay less than the full liability. If you think it sounds too good to be true, think again. The IRS has a 40% acceptance rate
. Those figures include taxpayers who filed for themselves without tax representation. Among people who hired a tax professional, the rate is even higher.
Who qualifies for an offer in compromise?
There are three main reasons the IRS will agree to accept less than the full amount you owe in back taxes:
- Doubt as to collectibility: You don't have the income or assets to pay your tax debt in full.
- Effective tax administration: You have the income to pay in full, but it would create a severe economic hardship.
- Doubt as to liability: The IRS has doubts about whether you actually owe the full amount of tax. As you probably guessed, this last reason is extremely rare.
Before you can qualify for an offer in compromise, you must satisfy the following requirements:
- File all the tax returns you are legally required to file.
- Receive a bill for at least one tax debt included in your offer in compromise.
- Be current with your estimated tax payments, if required to make estimated tax payments.
- If you are a business with employees, you must have made all required federal tax deposits up to the current quarter.
- Not currently filing for bankruptcy.
What are the pros and cons of an offer in compromise?
How do installment agreements work?
Payment plans let taxpayers pay off their debt through installment payments over a period of time. This helps taxpayers who can't afford to pay their debt to minimize late payment penalties and interest.
This is the most widely used tax relief option. If your tax debt is below $50,000 ($25,000 for businesses), you can set up a monthly payment plan online, without ever having to deal directly with the IRS.
Another advantage of an installment agreement is you are not generally required to provide detailed financial statements or go through a thorough verification process.
But be warned: installment plans will not stop the IRS from charging you interest and late payment penalties. As of June 2016, the IRS underpayment interest rate is 4% and late payment penalties are 0.5% a month, up to a maximum of 25%.
What are the pros and cons of installment agreements?
What is the Currently Not Collectible status (CNC)?
Taxpayers who can barely afford to pay for basic living expenses may request the IRS to place their account as Currently Not Collectible. As long as your tax account is categorized as CNC, the IRS will stop trying to collect your tax debt. For example, the IRS will not levy your assets or garnish your wages while you have this status.
But there's a catch. While filed as Not Collectible, the IRS will continue to charge interest and penalties to your account. This option will also extend the statute of limitations (the 10 years the IRS has to attempt to collect taxes on a tax return) for the time your account is suspended.
However, the IRS will usually cancel the debt of taxpayers who are repeatedly granted CNC status if their situation is unlikely to change.
What are the pros and cons of filing for CNC status?
What is penalty abatement?
Penalty abatements are IRS procedures that waive certain penalties charged by the IRS for not following tax laws or IRS regulations. Penalties can add up quickly. In some cases, the penalty and interest amounts are more than 50% of the initial liability. Penalty abatements can be requested for many reasons. You can ask the IRS to waive a penalty because:
- An IRS agent gave you bad advice (either in writing or orally.
- A tax adviser gave you bad advice.
- You suffered a major disaster or emergency, such as a fire, hurricane, or earthquake, which affected a significant number of taxpayers in your area.
- It is the first time you ever received a penalty.
Qualifying for penalty abatement is not easy. You must meet very specific requirements. For instance, only taxpayers who have no penalties in the three previous tax years filed all required tax returns, and paid off any due taxes are eligible for first-time penalty abatements.
What are the pros and cons of penalty abatement?
What is a tax liens withdrawal?
A federal tax lien
is the IRS's legal claim to all your property until you pay your tax debt. The IRS won't take your property, but you will not be able to sell it, refinance it or use it as collateral for a loan.
Tax liens kick in automatically if you fail to pay the taxes the IRS claims you owe within 10 days of receiving your first notice. In some cases, the IRS will also file a "Notice of Federal Tax Lien" in the public record. This lets all your creditors know you owe money and the government has first dibs on your property. If this happens, the lien may appear on your credit report. This could damage your credit score for up to seven years, even after you pay off your debt.
Taxpayers can appeal a lien by requesting a judicial review within 30 days. They can also ask the IRS to withdraw the tax lien. This tactic is preferable because a lien withdrawal will also remove the lien from your credit report.
But tax lien withdrawals are not easy to get. Consider hiring an experienced tax relief company like Optima Tax Relief
to help you fight a tax lien.
What are the pros and cons of filing for a tax lien withdrawal?
What is a levy appeal?
are what happens when you're unable to resolve your lien. Levies don't just "make a legal claim to your property," they actually take that property away. The IRS uses levies as a way to get your attention when you do not respond to notices. Some levies are a one-time move, in which the IRS seizes a specific asset, such as a bank account. Other levies are ongoing, such as a permanent garnishment of a portion of your paycheck until you repay your debt or the levy is released. Taxpayers can request the release of a levy by:
- Proposing an alternative payment method.
- Filing for bankruptcy.
- Claiming the levy creates serious economic hardship and you are unable to meet basic living expenses.
- Entering an installment agreement.
- Claiming the value of the property is much higher than the tax owed.
As you would expect, the IRS is not in a rush to return the property to delinquent taxpayers. Hiring a qualified tax professional is a smart move when trying to release a levy.
What are the pros and cons of a levy appeal?
Can you discharge IRS debt in bankruptcy?
Yes, it is possible to reduce your tax debt through bankruptcy. However, it is not as simple as some would have you believe. Most tax debt can't be wiped out in bankruptcy. In most cases, you will continue to owe the tax debt at the end of a Chapter 7 bankruptcy or you will have to pay them in ful as part of your Chapter 13 bankruptcy repayment plan.
To can only wipe out your tax debt in a Chapter 7 bankruptcy
if you meet all of these conditions:
- You owe income taxes. Other types of taxes, such as payroll taxes cannot be discharged.
- Your debt is at least three years old.
- You filed a tax return for the debt a minimum of two years ago.
- The IRS must have assessed the debt a minimum of 240 days before you file for bankruptcy.
However, filing for bankruptcy also provides an automatic stay that temporarily stops all creditors, including the IRS.
So what are the downsides? Filing for bankruptcy extends the IRS’ statute of limitations for whatever time your accounts are frozen, plus an additional 180 days. You also must complete mandatory credit counseling with a government-approved agency for your bankruptcy to be approved. Then there is the fact that bankruptcies are a matter of public record and will remain on your credit report for 10 years.
The rules governing bankruptcy and tax relief are complex. Although bankruptcy is a powerful tax relief strategy, don’t try to do it by yourself. Always consult with a tax attorney. Not all taxes can be removed. For instance, payroll taxes and fraud penalties aren't affected by bankruptcies.
What are the pros and cons of filing for bankruptcy?
What is innocent spouse relief?
Innocent spouse relief is a powerful tax relief tool for those who are liable for their spouse's IRS debt. To qualify, a spouse must prove that:
- Their spouse caused the tax understatement.
- They didn’t know about the understatement.
- It would be unfair to hold them responsible for it.
As with most tax relief options, the innocent spouse relief is governed by complex rules that vary from state to state. For instance, community property states like as Arizona, California, Idaho, and Louisiana, also require spouses to not have filed a joint income tax return and that all the understated income belonged to the guilty spouse.
What are the pros and cons of filing for innocent spouse relief?
How can tax preparation help with your IRS debts?
Although tax preparation is not a tax relief method in itself, it is a requirement for all tax relief programs. If you haven't filed all the required tax returns, the IRS will not consider your applications for tax relief.
Whether the IRS estimated your taxable income or you made a mistake in your own tax forms, filing an amended return (IRS Form 1040X) can reduce your tax debt. However, filing past returns can be tricky. You may no longer have the records and receipts you need. Always consult with a tax professional before amending a tax return.
How to settle tax debt?
The first and most important step is to take action. Most tax relief programs work best when you are proactive as soon as possible. Remember, you want to look like a model taxpayer who is eager to resolve his or her tax debt but cannot afford to pay in full.
- File any missing tax returns. If you're missing one or more tax returns, file them as soon as you can. The statute of limitations only starts to count when a tax return is filed. Waiting will just increase the penalties and interest you have to pay.
- Find out how much you owe. Check what the IRS says you owe in back taxes. If you don’t understand something, ask. You have the right to a clear explanation of your tax assessment. If you’re not an accountant or tax attorney, you may want to talk to a tax relief professional at this stage.
- Calculate how much you can afford to pay. Figure out how much you can pay without it being a major financial hardship. List what assets and income you have available. Deduct your monthly expenses. Don’t forget to consider other debts you need to pay, like your mortgage, auto loans, and credit card debt.
- Talk to a tax relief professional. Although it is possible to negotiate directly with the IRS, it's a good idea to consult with a tax professional first. You can still do it yourself after a tax expert gives you a rundown of your options.
Why is the IRS willing to offer tax relief?
Tax relief is not charity. It's a way to maximize the collection of tax revenue from taxpayers facing overwhelming debt.
The longer a tax account is delinquent, the less likely it is to collect anything at all. Giving some slack to taxpayers who are in financial difficulties is the IRS's best shot at getting at least some of what they're owed.
This softer approach started in 1998, when the Senate enacted the IRS Restructuring and Reform Act (RRA 98). Lawmakers wanted the IRS to adopt a “liberal acceptance policy for offers to provide an incentive for taxpayers to continue to pay their taxes.” (Source
) The purpose of the law was to give a fresh start to taxpayers who are sincerely trying to meet their obligations and remain in the tax system.
How much will the IRS settle for?
The IRS will settle for the maximum amount you can afford to pay and is usually optimistic in its assessment of what you can afford. Sadly, this forces many otherwise productive taxpayers into bankruptcy. If the IRS thinks you can afford to pay the taxes in a lump sum, get a loan to repay it, or pay in installments, it will not settle. But the less money and fewer assets you have, the more likely you are to receive a tax settlement. The IRS considers four factors when assessing a tax settlement:
- Ability to pay (how much cash you have).
- Income (what monthly payments you can afford).
- Living expenses (how much you need to cover basic living expenses).
- Asset equity (what you can sell or use as leverage to borrow money).
If your income and asset equity after paying for basic living expenses is not enough to pay your tax debt, the IRS will consider a settlement.
There are plenty of gray areas when calculating your income, asset equity, and living expenses. A qualified tax relief professional can help you maximize your chances of getting approval without raising red flags with the IRS.
But be cautious: any information you provide the IRS to substantiate your request for an offer in compromise can be used against you. Consult with a tax professional before sharing financial information with the IRS.
How do you negotiate with the IRS?
The IRS is like any other lender or creditor. All creditors want one thing: to collect as much as they can from debtors, as soon as they can.
The IRS knows some taxpayers will never be able to pay all they owe before the 10-year statute of limitations on the collection of taxes. That means the IRS is willing to negotiate a settlement with taxpayers who can’t afford to pay their back taxes.
Tax laws are complex and every case is different, so there is no foolproof recipe to negotiating with the IRS. That is why the right to retain an experienced tax professional is so valuable. However, these general guidelines will improve your chances.
Guidelines for negotiating with the IRS
- Examine every piece of correspondence you receive from the IRS. Write out your tax problems. Is it just tax debt you're struggling with? Or does the IRS want to further audit your tax account? You can only negotiate effectively with the IRS if you know exactly what you are facing.
- Respond to IRS requests before the deadline. If the IRS requires a response by a specific date, respond early even if you don’t provide all the required information. You want to show your eagerness to resolve your tax problems. Responding in time will also help minimize additional interest and penalty charges, and will preserve your right to appeal if you don’t agree with the IRS’s decision.
- Determine your tax liability. Recalculate past tax returns, particularly returns the IRS filed on your behalf. Hire a tax professional to help you find tax deductions you didn’t claim. If you reduce your tax liability, you can use that to offset the taxes you owe.
- File past due tax returns. Being up-to-date with your tax returns is a requirement for all tax relief programs. If you missed filing your tax returns for past years, do them now.
- Calculate what your basic living expenses are. Obtain receipts and other documents that substantiate your claims. The IRS will use your living expenses and income to determine eligibility for tax relief programs and to calculate what offer in compromise it will accept. Again, it is smart to have a tax relief professional help you prepare a budget that maximizes IRS allowances for living expenses.
- Hire a tax relief company. If you haven’t already, call a tax relief company to represent you before the IRS.
Should I hire a tax relief company?
You are never obligated to hire an attorney or accountant for any financial matter. Many people attempt to resolve their tax problems on their own, and many are successful. Most prefer the peace of mind and improved outcome that hiring a professional brings.
Facing the IRS alone can be a daunting task, particularly when you have substantial tax debt or your records are not in good order. Hiring a tax relief company can be helpful in bringing your tax problem to its best resolution. The right to hire a tax representative is part of the Taxpayers Bill of Rights for a reason. Here are a few of the benefits a tax relief company can provide:
- Tax professionals bring the hard-earned knowledge, strategy advice, and experience of dealing with the IRS for years.
- For the majority of tax debtors, an offer in compromise is not the best solution. Tax professionals can develop a plan that is best suited to your unique case.
- IRS auditors and collectors respect experienced tax professionals and are less likely to question their claims. They prefer dealing with them because it makes their jobs easier.
- Tax professionals can take care of most interactions with the IRS, which will save you time. It will also neutralize the intimidation factor an IRS agent may otherwise hold over you.
- Tax relief professionals know what deals can be made with the IRS and how to maneuver around the IRS bureaucracy.
- Tax professionals can protect you from disclosing too much information to the IRS.
How to choose the right tax relief company
It's essential that you choose a reputable tax relief company. As with every industry, some are better than others. These guidelines will help you discern the serious offers from the scams:
- Expertise. Choose tax relief companies that has tax attorneys and enrolled agents on staff. Find out whether the IRS approved the company as a continuing education provider. Continuing education providers are certified by the IRS to train tax professionals.
- Professional accreditation. Find out if the company is accredited by professional associations, such as the National Association of Tax Professionals.
- Experience. How long has the company been in business? How many years' experience do their tax attorneys, CPAs and enrolled agents have?
- Power of attorney. Confirm the IRS licensed your tax relief company to act as a power of attorney in your state.
- Customer satisfaction. Read user reviews on the company before you hire its services. Avoid companies with multiple unresolved complaints.
- Payment options. Many tax relief companies offer payment plans for their fees. Look for a tax relief company that provides flexible payment options.
- Free consultation. Start with companies that offer a free initial consultation. Ask to speak to the person who will be handling your case.
- Ask about fees. Avoid surprises by requesting an estimate for the services you will receive.
- Services. What services does the tax relief provide? Can the company handle bankruptcies? Will it help with tax preparation? What about state taxes?
- In-house representation. Some “tax relief companies” are just a marketing front for other tax relief companies. Confirm that your case will be handled by the company you hire and not outsourced to a third party.
- Avoid firms that offer unrealistic guarantees. Be skeptical of companies that promise to get rid of your tax debt without knowing the particulars of your case.
- Get help if you need it. SuperMoney can help you find a tax relief company qualified to help with your tax problems. We review tax relief companies based on the criteria listed.
Common Questions About Tax Relief Companies
What is the best tax relief company?
A lot depends on how much you owe and your unique tax situation. Check our list above for the best-rated tax relief firms based on our algorithms and current community ratings. When looking for a tax relief firm, choose companies with proven experience that hire tax attorneys, CPAs, and enrolled agents. Make sure they offer a wide selection of tax relief services and have a solid reputation. The most recommended tax relief companies typically provide a free initial consultation and a money-back guarantee.
Scheduling a free consultation with one of the firms above is an excellent way to get the best tax relief quotes. Asking these questions
will help you choose the right tax relief company for your unique tax debt situation.
Can you negotiate directly with the IRS?
Yes, it is possible to negotiate directly with the IRS and state revenue agencies. If you owe less than $10,000 or your case is straightforward, you may be better off dealing directly with the IRS. However, unless you have considerable experience with tax law, you can benefit from hiring a tax relief company. Tax relief experts, such as tax attorneys and enrolled agents, can help you save time and improve your chances of negotiating generous terms on your tax debt settlement.
Are tax relief firms scams?
No, there are reputable tax relief firms that provide valuable services to taxpayers who are struggling with tax debt. However, as with any industry, there are some fraudulent companies that give the rest a bad name. Beware of companies that guarantee they can resolve your tax debt. You should also be skeptical of companies that don't provide the names and credentials of the tax specialists that work for them or don't publish a real address. They may be a scam.
What assets can the IRS seize?
The IRS can seize almost any of your assets. This includes real estate property, salary and wages, bank accounts, retirement accounts, pension plans, and social security, and more. However, they cannot take child support or unemployment benefits.
Does tax relief hurt your credit?
Agreeing to pay a tax bill by an installment agreement with the IRS doesn't affect your credit since installment agreements are not reported to the credit reporting agencies.
How long does tax relief take?
It varies depending on the complexity of your case. Simple cases, such as tax penalty abatement or installment agreements on small amounts, can take just a few months to fix. However, more complex cases with larger balances can take years to resolve.
How do you qualify for tax relief?
Eligibility requirements vary depending on the tax relief program you apply for. However, tax relief firms can't guarantee you will qualify for a tax relief program. Only the IRS or a state comptroller can make that decision. If a firm claims they can guarantee a certain outcome, they are probably a scam. Reputable companies usually offer potential clients a free initial consultation where they discuss options and determine which tax relief programs they may qualify for. Typically, taxpayers who owe more than they can afford to the IRS may qualify for a tex relief program if they are up-to-date with filing their tax returns. Some tax relief companies will help you with filing missing tax returns.
Does tax relief hurt your credit?
Agreeing to pay a tax bill by an installment agreement with the IRS doesn't affect your credit since installment agreements are not reported to the credit reporting agencies.
What is the IRS Fresh Start Program?
The IRS Fresh Start Program is a program that is designed to allow taxpayers to pay off substantial tax debts affordably over the course of six years. Each month, taxpayers make payments that are based on their current income and the value of their liquid assets.
Does the IRS forgive tax debt after 10 years?
In general, the Internal Revenue Service (IRS) has 10 years to collect unpaid taxes. After that, the debt is wiped clean from its books and the IRS writes it off. This is called the 10 Year Statute of Limitations.
How can you select the best tax relief company?
Selecting the best tax resolution company firm to hire can be a challenge, but it doesn’t have to be. The key is to know the tell-tale signs of reputable and competent tax relief companies. When shopping for the best tax relief services, look for firms that have tax lawyers on staff, have been in business for several years, and have competitive fees.
This tax relief comparison tool
will help you see what rates, features, and terms each company offers. You will also be able to read unbiased consumer reviews so you can check what others have to say about their customer service.