Evaluating Your Tax Debt Relief Options

When it comes to resolving your tax debt, you have a number of possible routes you could take. In this article, I’ll go into some of the pros and cons of each option so that you have the information you need to make the best decision for yourself.

Do It Yourself Tax Resolution

Probably the route most people take, doing it yourself seems like the obvious or only choice for most people and small businesses. Simple tax debt problems that only cover a year or two, especially cases where the tax debt is under $10,000 (or under $50,000 if it’s only income taxes) are fairly easy to resolve with only a few phone calls (one phone call, in some cases).

If you can follow written instructions, are good with forms and paperwork, and have your personal financial paperwork in good order, then representing yourself is neither difficult nor time consuming. You need to be able to read and understand IRS notices and publications and forms, and keep good financial records for yourself.

Here’s a quick test: If you file your own tax return every year and have no problem doing so, then you can probably represent yourself. If you struggle with doing your tax return, even if you use step-by-step software, then you might want to consider getting help with the situation. If you have tax debts other than personal income tax liabilities, you should also hire a licensed tax professional to represent you.

Hire a Licensed Tax Professional

If your tax situation is complex, consists of multiple different types of taxes over multiple tax periods, involves any sort of business taxes, or exceeds $50,000 in income tax debt, you should seriously consider hiring professional representation.

I want to stress the word licensed. In my article about 5 Reasons To Use Professional Representation To Resolve Your IRS Tax Debt I gave some warnings about some companies that only do tax resolution work. You want to make sure that the person doing the actual work is licensed. Some of the less reputable companies in this industry have assistants do all the work, and a licensed person is just there to sign the Power of Attorney (POA). Some of these POA signers have literally thousands of POA’s that they are signed onto at any one time. Don’t for a second think that they even know who you are. Always ask to speak to an actual licensed person before signing up with one of these companies — don’t just talk to a sales person. If the sales rep refuses to let you speak with a licensed person, then run away — quickly!

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There are, in general, three kinds of licensed tax professionals that can legally assist you: a CPA, attorney, or Enrolled Agent.

While a license to practice means one thing, obtaining competent representation from a licensed practitioner is another. CPA’s are licensed by the state in which they practice, and most CPA’s are not experienced with tax resolution work. The vast majority of CPA’s do just accounting or just tax preparation. The same thing goes for the majority of Enrolled Agents, who are licensed directly by the IRS to represent taxpayers. Less than 2% of all Enrolled Agents have any experience at all doing tax resolution work.

Attorneys, while often much more skilled at and experienced in the world of negotiation than CPAs and EAs, usually don’t have much in the way of accounting skills, and may have a hard time with the numbers side of your situation. It should also be noted that you want an attorney that specializes in tax law, not just a garden variety lawyer.

Personally, I believe that you should only hire a CPA, EA, or tax attorney that is heavily experienced in doing IRS Collections work. Most cities in the United States will have several local professionals that specialize just in this type of work. Search our tax firm directory to locate a licensed professional near you that specializes in this unique area of practice.

As with anything involving your finances, always do your homework on any practitioner or firm before hiring them. Get comparison quotes, and make sure you know what services you are being quoted for so that you can compare apples with apples. Check out BBB reports, and do Google searches using the name of the company combined with phrases such as “scam”, “rip off”, and “complaints”, especially if you are considering hiring a large, out of state, national tax resolution company. Conduct this due diligence before signing any contract or paying any money.