How can I lower what I owe the IRS? Is there a way I can reduce my tax debt? These are questions many Americans ask every year, to which they often never receive an answer. Taxpayers having difficulty paying their tax debts may feel like they’re sinking in a deep, dark Internal Revenue Service hole.
The good news is that there’s help out there. Tax relief companies aim to help taxpayers lower their level of debt, provide guidance on audits, and help form payment agreements with the IRS. Such companies may even be able to stop potential penalties such as wage garnishments.
These are just a few of the ways that accredited companies can help. However, tax relief companies are not cheap and the quality of their services varies widely from company to company. The best tax relief companies have tax lawyers and enrolled agents on staff, provide a money-back guarantee and charge competitive rates. While it is always best to pay off all your tax debts on time before the IRS comes knocking, things don’t always work like they would in a perfect world.
In volatile economic times, payments fall through the cracks. If you are a struggling taxpayer, it may be worth it to seek the help of professionals. They are skilled at navigating the maze-like rules of the IRS.
But do tax relief companies really work?
Before diving into the potential benefits of a tax relief company, know that there is peril around many corners when seeking tax relief. Some companies try to scam taxpayers by promising they can lessen or get rid of tax debts. Some require upfront payment that can be as much as thousands of dollars.
The Federal Trade Commission, which receives complaints from scammed taxpayers, says that “in many cases, [the 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. ” (Source)
Making things worse, sometimes the companies will ask for even more money or refuse refunds to taxpayers who thought they were getting a good deal. Thousands of dollars are extorted from unsuspecting citizens every year from scams like this.
When it comes to tax relief companies, make sure to ask if the company has licensed tax attorneys on staff and if it has a money back guarantee. If a company says they can guarantee to solve all your tax problems—run away.
How real tax relief companies work
Tax relief companies can be helpful for the hundreds of American sinking under tax debt who don’t know how to approach the problem.
These companies employ trained tax professionals who know the ins and outs of the tax code and can help walk you through various financial options. They can help you reduce your debt, reduce or waive penalties, or arrange for payments in installments.
In some cases, having a professional act on your behalf now may reduce the possibility of the IRS taking even harsher measures such as seizing your property. Fees for such services can run anywhere from $2,000 to $10,000. The way they lower your debt is by convincing the IRS you absolutely cannot pay your debt and don’t have assets such as property worth seizing.
The IRS instituted the Fresh Start program for struggling taxpayers. Those who qualify can form agreements in which they pay debts back in installments (for debts up to $50,000) or settling for less than they owe (called an offer in compromise) if the IRS believes it can only collect that small amount from the debtor.
However, it’s up to the IRS to decide if it will accept a situation where you pay back less than the full debt you owe. No matter how skilled a tax attorney is, he cannot change your actual conditions.
Yes, tax relief companies really can work
Optima Tax Relief is one of SuperMoney’s top picks for tax relief companies. The Santa Ana, California-based tax relief company was launched in 2011 and employs around 300 people, including IRS-enrolled agents, certified public accountants, and specialized tax attorneys. Clients get a free first consultation to hear their options for the best plan of action in tackling their tax problems.
StopIRSdebt.com is another recommended tax relief company whose website is filled with positive testimonials. The company has been in business for 15 years, as accreditation and licensed professionals on board. The firm promises to, “sit with you and outline your options, making the transition into representation as smooth as possible.
Tax Hardship Center is a tax relief company based in Westlake Village, CA. The company was founded in 2012 and offers tax relief services to individuals and businesses in 50 states (and Washington, DC).
Community Tax LLC is based in Chicago, IL. The company was founded in 2010 by Adam Dayan, Jacob Dayan, Nick Charveron, and Matt DiRaimondo. It offers full-service tax defense services to individuals and businesses in 48 states.
Once you decide to take advantage of our services, collection action will usually stop, and most correspondence and telephone calls are directed through our office.”
How to find the best tax relief company
It can be a scary choice to enlist a tax relief company. There’s a lot of information out there and diverging views on whether or not they are legitimate.
Although there are many scams, knowing the right questions to ask can help you avoid them.
If you aren’t sure which company to hire, click here to get a free consultation with a tax relief expert. You can also check out SuperMoney’s tax relief reviews page to compare all the top companies.
With unbiased information on the number of different tax relief companies out there, you can make an informed decision when you’re serious about relieving the stress of tax debt.
Andrew is the managing editor for SuperMoney and a certified personal finance counselor. He loves to geek out on financial data and translate it into actionable insights everyone can understand. His work is often cited by major publications and institutions, such as Forbes, U.S. News, Fox Business, SFGate, Realtor, Deloitte, and Business Insider.