Update on Individual (1040) Lien Leads

For those of you that specialize in assisting individual taxpayers instead of businesses, you may have noticed some recent upsets in the leads world. Due to increasing regulation and pressure from the Federal Trade Commission, it’s getting harder and harder to access individual taxpayers through the telephone. One of the largest list brokers in the country recently quit offering tax liens at all due to these issues.

Here at Tax Liens HQ, we are still offering 1040 tax lien leads, but we recently made the decision to no longer offer phone numbers on those leads, and I’d like to explain why that is and what your options are instead.

If you are calling individual consumers at all, the FTC requires that you have what is called a SAN number. This is a subscription number to the national Do Not Call list registry. Even if you purchase phone numbers from a list broker, you are still required to have your own SAN number and remove numbers from your list that are on the Do Not Call List, even if the list broker says they do it for you.

Subscribing to the Do Not Call list is not inconsequential. A SAN number that covers the entire United States costs around $15,000. However, this is nothing compared to the FTC fines for telemarketing to consumers without a SAN number. The fines can be as high as $11,000 PER PHONE CALL.

So what does this have to do with us no longer offering phone numbers? The FTC has recently begun to hold list brokers accountable for the actions of their customers. There is pending civil litigation around this issue, since depending on who you ask, the law doesn’t allow for this, but the FTC is doing it anyway. Since we are a fairly small “mom and pop” business, we simply cannot afford the liability exposure if the FTC were to make an issue with us providing phone numbers to our customers and our customers failed to obtain SAN numbers and comply with the Do Not Call List rules and the Telemarketing Sales Rule. So, long story short, our attorney told us to stop.

So where does this leave you for obtaining phone numbers? Check out various phone append services that exist online, and pick one that meets your needs.

Alternatively, have you considered direct mail? For the cost of a SAN number for the entire United States, you could Continue reading

Can Tax Debtors Actually Afford Your Tax Services?

This is probably the most common question I get from CPA’s in particular. The key is collecting your retainer up front. If I know that a situation is going to take, say, $3,000 to resolve, then I tell the client that up front. I’ll let them pay on a retainer basis like a lawyer does in installments, but I insist on an up-front minimum of either 1/3 of what I expect the total to be, or $1,000, whichever is greater.

The next question that usually follows is this: These people and businesses owe back taxes, which implies they’re broke, so how do they pay you?

This comes down to selecting those businesses and individuals with a high cash flow, so they CAN pay you. There’s a little trick for selecting the best leads to start with, actually.

Here’s the secret: The average 1040 tax debtor owes for 3 or 4 years worth, and the average business lien will cover a median of 4 quarters worth of 941 taxes. Knowing that, and knowing the tax rates, you can work backwards from the tax debt amount, make an assumption regarding the ratio of penalties/interest to tax, and arrive at roughly how much their AGI or quarterly payroll is.

Based on what you’re comfortable with, you can then set a criteria for whom to work with. If you are comfortable bringing on clients with a $40,000 per year income, then you can find the tax liens to mail to and call that have that income level, based on their tax debt amount. If you’d rather work with clients that have a minimum six figure income,
and therefore are more likely to be able to afford your services, then you select the appropriate tax debt minimum. A lot of $100k to $150k earners with insufficient withholding or estimated tax payments will accrue roughly $10k to $15k per year, plus maxing out penalties, then multiply by 3 years, gives you a minimum lien amount of about $40,000 if you want six figure earners.

Do note, however, that these tend to be more sophisticated consumers, and therefore require better marketing systems to get them to come on board clients.

The same applies to payroll tax debtors. The higher their payroll, obviously the greater the business cash flow. I have found 8 to 10 percent to be a good number to use as a rough average for withholding across employees, plus of … Continue reading