Over the past decade there has been an increasing rise in the number of national tax resolution services. These firms often advertise heavily on television, radio, or over the Internet and often promise to solve any tax problem for pennies on the dollar or for a low, flat fee. However, not all IRS solutions are created equally and sometimes these firms can aggravate tax problems through non-responsiveness or otherwise sloppy work. Over the past few years, our firm has seen an increasing number of individuals being taken advantage of by these national tax relief firms. We have developed the following list to assist taxpayers when selecting representation in their IRS or state tax matters.
Do your due diligence on who you have representing you
We have found that many individuals will select representation due to an advertisement that they saw either on television or in print. It is dangerous to rely on advertising without knowing the history of the firm that you are dealing with. One of the best ways to examine tax relief services is through the Better Business Bureau (www.bbb.org) or by examining the principal attorney’s credentials and complaint history through your state bar association’s website.
Be sure you know who you are speaking with
Make sure the person you are dealing with is an attorney or someone qualified to offer tax advice or solutions to your tax problems. Many national firms operate under the “supervision” of an attorney or enrolled agent, but they are really controlled by sales people whose only goal is r “making the sale” and getting their client to make a payment.
These individuals, often untrained in tax law, will make promises they are not able to keep or will say just about anything to get your business (almost all operate on commission). Get the person’s name and their position with the firm. Ask to speak to an attorney when discussing your tax problems. Remember only conversations with an attorney, who is providing legal advice and working for a law firm, are protected by the confidentiality of attorney-client privilege. Conversations you may have with an attorney working at a tax relief firm may not be privileged because most tax relief firms are not law firms.
Be extremely wary of flat fees quoted over the phone without gathering more detailed information
The first step in providing someone with quality tax advice in an IRS Collections matter is to analyze their entire tax history with the IRS. Determining whether or not a taxpayer is current, what years they have outstanding liabilities for, and how much they owe in total are important facts that need to be understood. Agencies who fail to ask these questions before quoting a client a flat fee may often overlook critical steps in the collections process. These mistakes will often cost you money or can create unnecessary steps in what may be a fairly simple process. Also be aware that fees tax relief firms are not like retainers law firms collect. Retainers law firms collect must be deposited into special trust accounts and are governed by strict rules. Tax Relief firms can do whatever they want with your money once they take it, regardless of what work they do or do not do.
Do not retain someone for an Offer in Compromise (OIC) without determining if you pre-qualify
One of the more egregious abuses by national tax agencies is submitting Offers in Compromise that have no hope of acceptance by the IRS. Even worse, some of these tax relief firms may not submit Offers in Compromise for taxpayers that qualify because they are more concerned with quick case turn around than spending a few extra months trying to get the best outcome for their clients.
The IRS has gotten extremely rigid in its OIC screening process and applies a very formulaic method to determine if your Offer is valid. Although true that you may be able to settle your outstanding tax liability for pennies on the dollar, the IRS only accepts Offers in Compromise from individuals that meetstrict asset, income, and expense guidelines. Contrary to what many advertisements may claim or suggest, Offers in Compromise are the exception rather than the norm. The IRS is not freely handing out “fresh starts” to people with tax troubles. Responsible tax practitioners will usually screen prospective clients to determine whether they qualify before accepting a retainer or submitting an Offer in Compromise on their behalf. National tax agencies will often take the retainer first without any regard to your chances of acceptance. Even worse, they mislead a client into believing an Offer in Compromise is possible when a client clearly does not qualify.
Another drawback of a National Tax Relief firm is they will probably not meet face to face with IRS Agents in your area. IRS Agents like Revenue Officers frequently make visits to taxpayers’ homes and businesses. They may conduct face to face interviews with taxpayers or even summons taxpayers to appear before them. If you hire a National Tax Relief Firm, you could be forced to meet with an IRS agent face to face, all alone, without representation. If you hire a local attorney, that attorney should be in the room with you for any in person meetings you may have with IRS Agents.
Questions to ask your tax representative:
- Who will be handling my IRS Collections matter on my behalf? How can I get in touch with this person?
- If this person is not an attorney: Who is the supervising attorney? Where are they certified? You should check their bar record and do other research on this individual before hiring the firm.
- How many tax attorneys do they have on staff? How many active cases are they currently handling?
- What is your success rate?
- How do you evaluate Offers in Compromise before they are submitted?
- Do you have all the information that you need for my matter (have they performed an analysis)?
- How does your pricing structure work? What is the rationale behind it?
- What are examples of results you have achieved? Can you give me an example of someone you have helped with a similar asset/income/tax liability profile as mine?
If you have any questions or if we can further assist you, please contact our San Diego, Beverly Hills, or Orange County offices.
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