Dan Henn CPA
Dan Henn CPA

Hey Tax Pro! You are Leaving Money on the Table by NOT Offering IRS Collections in Your Practice

Listen up, tax pros. You’re missing out on a goldmine sitting right under your nose. I’m talking about IRS Collections, also known as Tax Resolution. If you’re not offering this service to your clients, you’re practically handing money to your competitors. Let me hit you with some cold, hard facts about why you need to add this to your practice ASAP:

  1. Massive Market Opportunity
    In Fiscal Year 2023, the IRS collected over $104.1 billion in unpaid assessments. That’s BILLION with a B. There’s an ocean of taxpayers out there drowning in IRS debt, desperately seeking a lifeline. Why aren’t you throwing it to them?
  2. High-Value Cases
    According to the Tax Resolution Academy®, the average fee for a tax resolution case is $3,500. That’s not chump change, folks. One solid collections case could be worth 10 or more basic tax returns.
  3. Year-Round Revenue
    Tax season comes and goes, but IRS collections work is a 365-day money machine. No more feast-or-famine cycles in your practice. Keep that cash flowing all year long.
  4. Differentiate Your Practice
    The NAEA reports that not all tax preparation professionals handle IRS collections cases. By offering tax resolution services, you’ll stand out from the crowd of basic tax preparers and attract higher-quality clients.
  5. Leverage Your Existing Skills
    You already understand the tax code. IRS collections work is a natural extension of your expertise. Don’t let that knowledge go to waste! It is not uncommon for a prospect to come in with a balance due to the IRS, but have a need to file at least 1 or 2 old tax returns.
  6. Recession-Proof Service
    When the economy tanks, tax problems skyrocket. By offering collections work, you’re insulating your practice against economic downturns. So, when some people turn to be a DIY with their tax return, you can fill in the gaps with additional collections cases.
  7. Repeat Business and Referrals
    Solve a client’s IRS nightmare, and you’ve got a loyal customer for life. They’ll sing your praises to everyone they know who’s in tax trouble. Oh, and yes, occasionally you get a boomerang client that screwed up and needs your help again.
  8. Higher Perceived Value
    Tax resolution is a specialized skill. Clients will view you as an expert and be willing to pay premium rates for your services. Much more than they pay for the commodity tax return. It is not hard to get $250-750/hr on many of these cases.
  9. Personal
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Cost of Client Procrastination on your Tax Practice!

We are now in what I affectionately call the Second Tax Season. While it is not usually as base as the first one of the year, it can get pretty hairy. If you are like I used to be, you would pick up your hours as the extension deadlines approach. In some cases, working 60-70 hours a week (or possibly more). 

So, the question becomes, why do we do this? The simple answer is we love our clients. We love them so much, we take their abuse. Yes, I said abuse. Seems like a strong word, but follow this with me for a few minutes.

You work really hard from January to mid-April. You take a little bit of rest, but then it is back to work on the extended returns for the information you had most of their info. Then there is that final 10-20% of returns you have in your office to do, but you can’t. Why not? Because you are missing 50-80% of the information you need to prepare the return.

So, what do you do? You start sending emails to these clients to request that missing info. As time moves on, and their excuses keep piling in on why they cannot produce that info, you start having your staff calling them to get the info into your office.

Days turn into weeks, weeks into months, and now the deadline is upon us. This is when you send the final email about two weeks before the final deadline. You tell them that if it is not filed on time they will incur late filing penalties which can be very expensive.

Well, that lit the fire under their butts and they finally get the information to you with 10 days (or less) for you to get the return done. What do you do?

Well, if you are like most tax professionals, you just grin and bear it. You hunker down and get the return done. You get it done on time, bill them the same amount you did last year and we all move on.

BUT WHY?!! Why do we do that?

We take this abuse! You don’t have to, nor should you take this abuse from anyone! It doesn’t matter if they have been a client 15 years, or their your mother or brother. There is no excuse for them making their emergency your emergency.

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Client Communication and how to avoid the “You didn’t tell me” plus How to Get Friggin’ Paid!

Today, we embark on a mission—a mission to fortify your practice, protect your interests, and ensure you receive the compensation you deserve. As General Patton once inspired his troops in WWII, I am here to galvanize you, the valiant tax professionals, to stand firm in the face of challenges and emerge victorious in your IRS representation cases.

The Battle Plan: Document Everything

In the trenches of tax representation, one of the most formidable adversaries we face is the dreaded “But you didn’t tell me that” client. These clients, whether through selective memory or genuine misunderstanding, can pose a significant threat to your practice. The solution? Documentation.

  • Reduce to Writing: After every significant discussion, reduce it to writing. Send an email summarizing the main points, decisions, and actions required. This not only serves as a reminder to the client but also as a protective shield for you.
  • Certified Mail: For critical communications, send letters via certified mail. Even if the client doesn’t claim the certified mail, the regular mail will reach them. Keep the returned certified mail unopened as evidence.
  • Client Acknowledgment: Always request a reply from the client acknowledging receipt of your communication. This can be an email, a signed letter, or a duplicate copy of the letter they sign and date.

Strategic Communication: Clarity and Precision

To prevent misunderstandings, clarity and precision in communication are paramount. When advising clients on actions like making payments to the IRS while you wait for returns to be prepared, a Form 433-A to be compiled, or Appeals to respond, be explicit. Explain the consequences of changes in their financial situation, such as winning the lottery or receiving a raise, and how these could affect their resolution status such as dropping out of Currently Not Collectible or adding a new liability can kill their Installment Agreement or Offer-in-Compromise.

The Art of Getting Paid: Ensuring Fair Compensation

In this battle, your time and expertise are your greatest assets. Ensure you are compensated fairly for your services.

  • Engagement Letters and Retainers: Always use engagement letters and require retainers up front before starting any work. This applies to any type of professional work you do for a client. For tax return preparation, a retainer of at least 50% is advisable. For IRS representation cases, secure a retainer of $3,000 to $5,000 for exams.
  • Value-Based Flat Fees: For collections cases, consider a value-based flat fee structure. Collect 100%
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