If you owe the IRS taxes and a federal tax lien has been filed, chances are that you are being inundated with calls from telemarketers and tax resolution firms offering their services. You would be wise to proceed cautiously when choosing a tax resolution firm to handle your tax debt.
The following information will help guide you when considering a tax resolution firm.
1. Research the credibility of the firm. Check their Better Business Bureau (BBB) rating, how long have they been in business, consumer complaints and reviews, etc. Ask for references so you can speak to former clients.
2. Only a licensed Attorney, CPA or Enrolled Agent can negotiate with the IRS on your behalf.
3. Ask about their fees. Many firms start with an up-front fee, claiming that no other fees will be required, only to charge additional fees to complete the work. Often firms promise the use of a flat fee up front, and then telling clients that they’ve “billed” through the retainer, by charging an hourly fee. Ask if an hourly billing rate is used by the firm. If so, this is an indication that you may encounter this scenario. This is not an allowable method of charging clients under either IRS Circular 230 or State Bar associations. Make sure to have any agreement and be as specific as possible to ensure that you are protected from future requests for additional fees.
4. Find out what your obligations will be. You will need to provide financial documentation or other information to pursue a resolution on your case. Be sure you know what is expected of you, and that you are prepared to participate in the process. If not, you may be wasting your money, thinking that the firm is taking care of your case, when actually the firm is waiting on information from you and nothing is being accomplished.
5. Many firms do not prepare tax returns, leaving you with the responsibility of filing the missing tax returns or hiring an accountant. If you have unfiled tax returns, find out if the firm can assist you with these first. You may want to pay an accountant first to prepare your returns, so you know what is owed, before hiring a tax resolution firm.
6. Find out who will be your main point of contact at the firm and how you will communicate (via email, phone, meetings etc.) You must be able to contact your representative and receive a timely response at all times. Don’t settle for unreturned phone calls or dealing with an unqualified assistant. After all, it’s your money and livelihood at stake.
7. Firms sometimes use telemarketers to contact prospective clients and sell the firm’s services. Remember telemarketers are unlicensed and/or unqualified! Ask to speak to an actual attorney, CPA or enrolled agent to sufficiently answer your questions and discuss your case strategy.
8. Many firms will sell you on a payment plan, only to then sell you on an Offer in Compromise settlement, and charge an additional fee. Make sure you have you have a definitive plan that will be effective to resolve your taxes.
9. No firm can guarantee you results! The IRS makes decisions, not your tax representative. Settling for “pennies on the dollar” is possible, but no firm can guarantee this result for a particular case. Ask for references from former clients, so you can speak with them to hear about their experience. Remember though, to also take references with a grain of salt, not all cases go so smoothly or have favorable results.

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