HOW TO DETERMINE WHEN A TAXPAYER NEEDS PROFESSIONAL HELP
Can the taxpayer handle their own case?
A Taxpayer may always represent themselves before the IRS. However, many taxpayers find dealing with the IRS frustrating, time-consuming, intimidating or all of the above.
The disadvantages of a taxpayer representing themselves are many:
- The taxpayer does not have the professional’s expertise or know what the options are or how to get the lowest settlement allowed by law.
- 4 out of 5 Offers In Compromise (OIC’s) submitted by the taxpayer are rejected by the IRS.
- Many taxpayer-negotiated OICs offer the IRS much more than is required by law.
- The taxpayer may be too frightened, frustrated or intimidated by the IRS to effectively or comfortably to negotiate a settlement.
- Most taxpayers are far happier to keep their distance from the IRS and prefer to leave the sparring to their advisors. Still, dealing with the IRS is not always as painful as you may imagine. In fact, most IRS officers are reasonable and helpful, particularly when they see you are making an honest effort to resolve your tax problems.
- The taxpayer may slip up and inadvertently make statements that can make the problem worse- perhaps triggering an audit or even criminal prosecution
- Professionals know where to draw the line. The taxpayer may make statements that can create tax liability for their spouse or business associate.
- The taxpayer takes valuable time away from their work and family to wrestle with their own case. Doctors, dentists, lawyers, executives, successful business owners, and other high-income taxpayers will do appreciably better paying a tax professional while they more profitably ply their own occupations.
How to select the best tax consulting firm
When choosing a firm who will represent the taxpayer before the IRS, it’s important that the taxpayer knows that they are dealing with a professional who is well versed in tax law and IRS procedures.
IRS representation is a complicated field with many different laws to interpret. While any Attorney, CPA or Enrolled Agent can represent clients before the IRS, few are truly qualified to provide the knowledge, experience and negotiating skills needed to successfully represent a taxpayer before the IRS.
As a rule, the firm’s ‘Track Record’ is the best objective indicator of how that firm will manage your case. Below are some questions to be addressed:
- How many years has the firm been in business?
- Has the firm been designated as a Certified Tax Resolution Specialist?
- Does the firm discuss all options available to the taxpayer to resolve their tax problem?
- How many Offers in Compromise has the firm successfully settled?
- What is the firm’s success rate – total dollars negotiated in settlements divided by total dollars in tax, interest and penalties owed?
- What is the firm’s rating with the Better Business Bureau?
- What is the firm’s Credit and Financial rating with Dun and Bradstreet?
Areas of concern:
- Beware of organizations and telemarketers that are paid on an incentive basis for bringing your business to their firm. Be especially aware of unrealistic promises or improbable results. You want to be sure that you receive top quality work and that you get the services that you pay for.
- Beware of firms that charge you a fee exclusively based on the amount of money that you owe the IRS. Usually, the same procedural steps are required to solve both large and small tax obligations.
- Ask the tax resolution firm direct questions about your case. If the firm is evasive or their answers seem intentionally complex, it is possible that they are trying to disguise direct answers to your questions. You deserve straightforward answers.
- Be sure that you seek the assistance of a firm which is a Certified Tax Resolution Specialist (CTRS) and only handles IRS disputes. A CTRS must pass a comprehensive examination and continuously take professional development courses which are directly related to the field of tax mediation and negotiation. Only 1% of all CPAs are qualified tax resolution specialists. The CTRS designation gives the public a means to distinguish amongst firms which provide solutions to tax problems.
Do not make emotional decisions. When you decide to hire a tax resolution specialist firm, you are seeking peace of mind that your problem will be handled. Regardless of which firm you hire, you should feel that you are being properly taken care of and that your tax problem will be solved for the lowest amount allowed by law.
Attorneys, Accountants, CPAs, Enrolled Agents and former IRS employees may be valuable tax professionals for tax accounting work, but may not have the necessary expertise and experience to permanently solve your IRS matter. Solving an IRS dispute involves day-to-day administrative dealings and requires the know-how to manage the maze of IRS protocols as well as ‘top notch’ negotiating skills
How to save on professional fees
The one advantage of the taxpayer representing themselves is that they will save professional fees. And for most taxpayers this is no small matter. However the amount of fees saved may be dwarfed by the actual tax settlement. In this case, the taxpayer must look at the total financial picture to determine how much money they may be leaving on the table if they do not have expert representation. In this case, the age old adage, ‘Penny wise and pound foolish’ should be top of mind.
Tax professional’s fees can range from $25 per hour for an enrolled agent or new accountant in a rural area, to $300 or more per hour for an expert tax resolution specialist in a major city. Many tax consultants won’t agree to fixed fee to handle your OIC. As they are not able to anticipate how many hours will be required to effectively manage the case- due to a multitude of unforeseen contingencies, including reluctance on the part of the IRS to negotiate a final settlement.
Regardless of the fee arrangement, there’s much the taxpayer can do to keep fees to a minimum:
- Request monthly statements. This will alert you to overcharges or extensive fees you cannot afford before they accumulate.
- Delegate only the critical parts of the case that you cannot handle yourself.
- Cooperate. Get your financial information together quickly and in an orderly fashion. Don’t make your professional chase you for information.
- Keep communication with your professional to a minimum. Call sparingly, get to the point and hang up!
Tax professionals to consider
You can choose among three types of tax professionals to represent you on your OIC;
- Certified Public Accountants (CPA)
- Enrolled Agents
An attorney in good standing in a state bar may represent taxpayers on IRS matters. This doesn’t mean all lawyers are qualified to handle an OIC. Obviously, you need an attorney who is not only experienced, but who has an exceptional track record. A lawyer inexperienced with OIC’s or who has a poor rating or no rating with the Better Business Bureau will likely provide little value because they have yet to develop the “feel” of what the IRS will accept and are unfamiliar with the OIC procedure.
Most tax problems are not solved in the court room, but are resolved in an administrative forum. Since it is likely your tax matter will be settled out-of-court, an attorney’s hourly fees and miscellaneous charges often will be the most expensive representation alternative. However, you will want a tax lawyer if the IRS suspects fraud, is threatening criminal prosecution, or if an appeal to tax court is likely.
Ultimately, the firm’s track record is the best indicator of how the taxpayer’s case will be settled.
Certified Public Accountants
Less than 1% of all CPA’s are qualified to practice in this arena- and most have had little exposure to OICs. As with attorneys, any CPA is permitted to handle OIC cases. However, that by itself is no assurance of their competence. Call your state association of Certified Public Accountants or better still the American Society of IRS Problem Solvers for a referral. A CPA inexperienced with OICs or who has a poor rating or no rating with the Better Business Bureau will likely provide little value because they have yet to develop the “feel” of what the IRS will accept and are unfamiliar with the OIC procedure.
Again, the firm’s track record will be the best indicator of how the taxpayer’s case will be settled.
Enrolled agents (EAs) are neither attorneys nor accountants. They are usually former IRS officers or examiners who are now in practice for themselves and are permitted to represent taxpayers before the IRS. However, in and of itself, this is little assurance of the EA’s competence. To negotiate a settlement requires knowledge of the tax law, IRS procedures and expert negotiating skills. Call your state association of Enrolled Agents or better still the American Society of IRS Problem Solvers for a referral. An EA inexperienced with OIC’s or who has a poor rating or no rating with the Better Business Bureau will likely provide little value because they have yet to develop the “feel” of what the IRS will accept and are unfamiliar with the OIC procedure.
Remember, the firm’s track record is the best indicator of how the taxpayer’s case will be settled.
Full-service Tax Resolution Specialists
There are a number of highly reputable firms that specialize in OIC’s. These firms either employ attorneys, CPA’s or EA’s. Due to their high volume of cases, these firms are often more economical, and because they handle only OICs and related cases, they offer considerable expertise.
Call the American Society of IRS Problem Solvers for a referral. Like other types of professionals, A Full-service specialist inexperienced with OIC’s or who has a poor rating or no rating with the Better Business Bureau will likely provide little value because they have yet to develop the “feel” of what the IRS will accept and are unfamiliar with the OIC procedure.
The firm’s track record will be the best indicator of how the taxpayer’s case will be settled.
How to find a tax professional
- Ask your professional advisors.Your accountant or attorney may not excel in OICs, but may refer you to another professional who does.
- Personal referrals- do you have a friend or acquaintance who has gone through an OIC with good results? His or her advisor may do equally well for you.
- Professional associations. Your local bar or accounting association may have a referral panel, but their referral does not necessarily insure competence as they may loosely categorize their specialists, such as under “taxation.”
- Advertising. Internet, yellow pages and newspapers feature tax professionals. However few advertise as OIC specialists. Screen these specialists to ensure that they have the requisite experience with OICs.
Finally, consider the “chemistry” between you and your prospect. You need a professional who can offer more than technical capability. You may need empathy and emotional support from your advisor. When you battle the IRS, you need a strong ally in every sense of the word!
More Tax Help, IRS News and Tax Relief Tips:
- Retire Your IRS Back Taxes Forever: How Tax Resolution Services Helped Save a Taxpayer $130,000
- Tax Problem FAQ: How Do I Resolve a Problem with the IRS?
- IRS Offer in Compromise Helps Taxpayer in Monroe, WA Save More Than $200,000
- Delinquent and Unfiled Tax Returns? 8 Steps to Resolving Them
- IRS Bankruptcy-Five Tax Relief Options for Back Taxes