Do tax debt relief companies really work? Or is it a scam?

August 04, 2020 by Arnold van Dyk, Esq.
Debt Burden Cartoon

The answer to this question really depends upon the company you use for your tax debt relief service. Yes, there are legitimate tax relief companies that can help you reduce your tax debt or get on an affordable payment plan. However, there are many scam companies as well. Do some research before choosing a tax debt relief company to represent you.


What should you look for when choosing a tax debt relief company?


 

Make sure you are speaking to a licensed tax professional.
Some tax relief firms have you speak to an unlicensed employee who acts more like a salesperson trying to get you to sign up for their services. They give these employees official sounding titles such as “Tax Consultant” or “Tax Associate.” But often these employees are not licensed to represent you in front of the IRS and should not be giving you tax advice. Some companies have more salespeople on staff than tax professionals. This business model should be a big red flag that the company is not looking out for your best interest.
 

Instead, make sure you are speaking to a licensed Enrolled Agent (EA), Certified Public Accountant (CPA), and Tax Attorney. Team members with these credentials can represent you in front of the IRS or state and have had extensive training in the tax field. TaxAudit, for example, has over 150 licensed tax professionals on staff. During your consultation, an actual tax professional examines your case and presents you with your tax debt relief options; you will not speak to a salesperson.
 

The prices you are paying should be reasonable.
Some companies charge exorbitant fees for their services. Recently, we had a potential client call in and they were quoted by another company $6,000 to do a Streamlined Installment Agreement. At TaxAudit, we can probably perform that service for $1,000 to $1,500. I also heard from another potential client who was quoted $15,000 for an Offer in Comprise. TaxAudit was able to quote him $3,000 for the same service.
 

If it is too good to be true, it probably is.
Often you will hear advertisements from tax debt relief companies about “pennies on the dollar” settlements. Although this can happen, the IRS has certain requirements as to who can qualify for these programs. Most people do qualify for some type of tax debt relief, but not everyone qualifies for the “pennies on the dollar” relief so often advertised. The company you choose to work with should explain all your options and the chances of the IRS or state accepting the offer.
 

At TaxAudit, we will give you a realistic assessment of your situation and truthful expectations of your case outcome. We strive for the best possible outcome for all our clients and will not make “pennies on the dollar” promises just to get your business.
 

The company should have your privacy and security as a top priority.
When you are working with a tax debt relief company, you will be sharing a lot of personal and financial information. Does the company have policies in place to protect your information from scammers or ID theft criminals? How is the company set up so you can send them documents? Do they have a secure online portal (secure) or are they asking you to send documents via email (unsecure)?
 

When it comes to technology, TaxAudit is a leader in the industry. We know that financial and tax information is highly sensitive. We have proactively implemented security steps to protect your data during entry, transmission, and storage to protect your information. As a TaxAudit client, you will get to use our highly rated secure portal case management system. You will clearly see the status of your case and communicate with your tax professional in an easy and secure manner.


With TaxAudit you will also have the option of using the convenient TaxAudit App. With the TaxAudit App, you can securely upload documents your tax professional needs from your smart phone, send and receive messages with tax professional, and stay apprised of the status of your case.


How can a tax debt relief company help you?

 

Navigating the complex web of tax laws can be time consuming and difficult for a non-tax professional to understand. There are so many requirements, forms to fill out, and paperwork to gather and present to the IRS, it can be overwhelming. A million questions may be running through your mind. Do you qualify for this? Should you try this? Will it work? A good tax debt relief company should give you information and options and help guide you through the process.
 

There are a variety of solutions for tax debt. For some people, an Offer in Comprise might be the right solution, but for others it might be an Installment Agreement. Another person might qualify for Innocent Spouse Relief, a Penalty Abatement, or Levy Relief. For some people, it may even be a combination of solutions. A good tax debt relief company will have a licensed tax professional look at your specific tax debt situation and determine the best solution or combination of solutions to help you get your tax debt paid off.
 

Debt is not fun. Getting out of debt is not fun either. But you can’t ignore tax debt. The IRS has an arsenal of tools to get the money that is owed to them. My colleague Robin Scott-Hutchens, EA wrote an excellent article describing what the IRS can seize when you owe back taxes. If you read it, beware, as knowing what the IRS can seize can be a bit scary and stressful. However, dealing with the IRS and getting out of tax debt doesn’t have to be stressful; you just need a plan. This is where the real value of a tax relief company comes into play. Not only does the company find the best solution for your specific situation, they develop a realistic plan – and they take care of the paperwork and communication with the IRS on your behalf. A good tax debt relief company helps relieve the stress of tax debt.
 

If you are in tax debt, a tax debt relief company can help you navigate the scary waters of dealing with the IRS. Just make sure you choose a good company that truly wants to help you.

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Arnold van Dyk, Esq
Tax Court Practitioner

 

Arnold is a licensed California attorney and received his LLM in Taxation from Chapman University School of Law. Prior to his career at TaxAudit in 2011, Arnold focused on IRS collections, Offshore Voluntary Disclosures and criminal tax defense. As an audit representative at TaxAudit, Arnold continued to build upon his tax knowledge. In his current position as a tax court practitioner, Arnold assesses the complexities of tax law and regulations to determine the best strategies to resolve cases with the IRS Appeals Office. He also successfully runs his own law practice, Law Offices of Arnold van Dyk, focusing on tax resolution and estate planning. 


 

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