How Much Does Tax Resolution Cost?
There are two prevailing methods of pricing tax resolution services: hourly fees and flat fees.
The hourly fee depends on the type of tax professional that will be doing the work, the skill level and experience of the professional, and the geographic location of the professional (e.g. you can expect an attorney in New York City to charge a much higher hourly rate than an equally skilled/experienced attorney in Topeka, KS). There are three types of professionals who have unlimited authorization to practice before the IRS and states: Enrolled Agents (“EA”), Certified Public Accountants (“CPA”), and Attorneys. Though hourly fees can vary, typical EA hourly rates range from $100-$200/hr, typical CPA hourly rates range from $180-$300/hr, and hourly rates for attorneys usually fall between $200 and $1,000/hr.
Keep in mind that the total fees charged for tax resolution services is equal to the total of the number of hours spent multiplied by the hourly rate. Consequently, a more experienced or efficient professional with a higher hourly rate might charge lower total fees than a slower or less efficient professional who charges a lower hourly rate. In other words, a lower hourly rate does not necessarily mean lower total fees.
Many tax resolution service providers, including Fortress Tax Relief, offer a flat fee for a specific tax resolution service (e.g. abate your penalties, set up an installment agreement, settle your tax liability, etc.). These flat fees are based upon an estimate of how many hours it will likely take to provide a specific tax resolution service based on past experience handling similar cases multiplied by the hourly rates of the personnel who will be providing the service. Generally speaking, in order for the flat fee to be binding, the client must disclose the facts and circumstances accurately at the onset, and the client must uphold a few basic obligations (e.g. cooperate, follow instructions, comply with the tax laws, etc.).
As with just about anything, it is generally true that you get what you pay for. However, it is also true that some tax professionals and tax relief companies offer better value than others.
The worst of the worst tax resolution companies spend a grossly disproportionate amount of money on marketing and paying exorbitant commissions to their salespeople, while spending a very small amount on actually servicing their clients. These companies often provide atrocious customer service once you’ve signed on the dotted line. We encourage anyone considering engaging the services of a tax relief company to do some basic homework by checking the tax relief company out with the Better Business Bureau and online client reviews. If you find significant evidence of poor customer service, you might be wasting your money no matter how low the fee is.
The other critical thing to consider when determining the value of a tax resolution service provider is exactly who will be providing the tax resolution services. No matter how good a tax relief company might sound, the bottom line is that the quality of the service you receive as well as the results they procure boils down to the tax professional who is assigned to your case. Experience and technical knowledge matter. Brains matter. Tactfulness matters. The type of professional—EA, CPA or attorney—matters. For most cases, negotiation skills and persuasive skills are of paramount importance and can mean the difference between a stellar result and disaster. It may be worth paying a significantly higher fee for a tax attorney with 10+ years of experience than an EA with a few years on the job. If your choice is between an EA and an attorney, and the fee for each is similar, you are probably getting much more value by going with the attorney.
Flat fees for tax resolution services generally start at around $1,500, and can go much higher depending upon the appropriate resolution strategy, the size of the liability or liabilities, the complexity of the case, and the quality of the service. Many tax resolution services “pay for themselves” in that the amount of tax reduction/relief exceeds the fees paid. However, it is a short-sighted and flawed analysis to hire a tax relief professional solely on the basis that the amount likely to be saved exceeds the fees. The IRS and state taxing authorities can levy bank accounts, seize assets, garnish wages, force companies out of business, and put individuals into situations where it is exceptionally difficult or impossible to keep roofs over their heads and food on their tables. Good tax resolution service providers can dramatically reduce or eliminate the chances of these horrors, and the value of that can often dwarf the value of reduction in tax debt.
Do tax settlement companies really work?
Unless you hire a disreputable tax resolution service provider, you will likely come out better off by going with a tax relief company than you would have had you went with the do-it-yourself method. How much better off depends on the quality of the tax resolution service provider you choose. You might compare resolving tax liabilities to playing professional Australian rules football. Unless you happen to be a professional Australian rules football player, you likely have never played the game, haven’t trained for it, lack the necessary type of athleticism, and don’t even know the rules. You can either put yourself in the game and pray for the best or go with someone with many years of experience, who plays the game exceptionally well, and who knows the rules of the game inside and out.
Can a tax attorney negotiate with IRS?
Yes. Tax attorneys have unlimited authorization to represent taxpayers who are in collections with the IRS or a state taxing authority. Whereas attorneys are generally better negotiators than CPAs and enrolled agents (the other types of professionals who may represent taxpayers in collections), they are often better suited to resolving tax liabilities.
Does the IRS ever forgive tax debt?
Yes. With some exceptions, the IRS has 10 years to collect a tax debt. If they fail to collect it within that 10-year time period, it is “forgiven.”
In the broader sense of the word “forgiven,” there are several different methods whereby taxpayers can repay significantly less than the total amount owed without having to wait out the 10-year collection period.
An Offer in Compromise is a tax settlement whereby the IRS (or state) agrees to settle for less than the amount owed—sometimes for a small fraction of the total amount owed.
It is also possible to reduce or eliminate penalties by way of a Penalty Abatement depending upon the circumstances.
A Partial Payment Installment Agreement can result in repaying a portion of a tax debt until the 10-year collection period expires. What remains unpaid at the end of the 10-year period is “forgiven.”
Finally, some taxpayers qualify for Currently Not Collectible Status (“CNC”). Taxpayers in CNC are not required to make any payments towards their tax liability. The IRS will not enforce against a taxpayer in Currently Not Collectible Status, and some taxpayers are able to remain in CNC for the entire 10-year collection period. It is, thus, possible to pay nothing and have a tax debt “forgiven.”
Can I settle with the IRS myself?
The IRS allows, and even encourages, taxpayers to represent themselves. This should come as no surprise. After all, if you were a tax collector, wouldn’t it be a whole lot easier to have your way with a taxpayer who lacks professional representation? If you were an attorney, wouldn’t life be easier if the opposing party had no counsel?
The truth is that some people do, in fact, negotiate decent settlements on behalf of themselves. However, for each successful do-it-yourselfer, there are probably 10 others that would have been far better off with the help of a good tax resolution professional. The IRS rejects or returns the vast majority of settlement (Offer in Compromise) proposals. A good pro will dramatically increase the chances of acceptance. Alternatively, a good pro will save you from wasting time—up to an entire year in many cases (penalties and interest keep piling up during this time)—by filing a settlement proposal that has no chance of acceptance.
Also, if you think the IRS wants to approve sweetheart settlement deals, think again. They want the absolute most they can squeeze out of you. A good tax relief pro knows when and how to stand up and fight, and can easily make the difference between a $2,500 settlement and a $25,000 settlement—or no settlement at all.
Do you have questions about back taxes? Our experts focus on nothing else but resolving your tax liabilities.