Tax resolution is dead

This is something that I’ve been thinking about for quite a while. Several years in fact.

Some people may think it’s just a matter of semantics, but there is a lot more to it than that.

But the more thought I put into it, the more I know I’m right: Tax resolution is dead.

What the hell am I talking about?

I’m talking about terminology, public perception, and professionalism. The term “tax resolution” has become tainted in many respects, due the actions of a small number of large companies. The phrase now evokes images of boiler room sales people cramming a canned sales pitch down the throat of somebody that can’t even rub two dimes together.

I personally quit using the phrase over a year ago to describe what it is that I do. When somebody asks the inevitable question in our social system, “What do you do?”, my answer, also referred to in the sales world as an “elevator speech”, is pretty simple. I do not consider myself a part of the tax resolution industry, rather, “I represent small business taxpayers in front of the IRS to remove the stress and anxiety of audits, seizures, levies, and other collections action. I deal with the IRS for you, so you can continue doing what you do best, which is running your business.”

Contrast that to, “I do tax resolution.” Which sounds more professional to you?

My friend and mentor James Orr has ingrained into me the concept of always being on “the right side of the desk”. When people call you, even if that phone call was sparked by your marketing, that puts you on the right side of the desk. When you have positioned yourself as a professional, rather than a shark hunting for prey, you are on the right side of the desk. When you “represent people”, rather than “settle debts”, you’re on the right side of the desk.

I personally think that this approach is even more important more those of us that are Enrolled Agents. Why? Because nobody knows what we are! “Attorney” and “CPA” are common, everyday words — everybody knows what they are. Enrolled Agents have to explain what we are. Instead, let’s remove that explanation from the equation, and get right to the core benefit we provide our clients.

In my writing to you, I’ve continued using the term “tax resolution” because it’s the common … Continue reading

Firefighter and ambulance meal deduction facts

There is a pervasive myth within the emergency services professions regarding a tax deduction for meals during their on-shift days.

This myth is most common with the firefighter ranks, but is also seen within ambulance, police, and other emergency services professions.

Where this myth comes from, I’m not certain. But it definitely maintains it’s urban legend status due to being passed from one person to another. It can only be assumed that tens of thousands of emergency services personnel illegally take this deduction every year.

So let’s set the record straight: There is no on-shift meal deduction permitted for emergency services personnel.

It doesn’t matter if you work a 24-hour shift, and it doesn’t matter what you do for a living (this isn’t limited to emergency personnel, it’s EVERYBODY): If you’re at your job, in your home area, regardless of shift length, there is no meal deduction. Period.

Meal deductions, including per diem (Meals and Incidental Expenses – M&IE), are only permitted when you travel away from home for business or work, and are not reimbursed. If you actually get paid per diem, you can’t also deduct it (no double dipping, in other words).

Here is what firefighters and other workers can do, however. Some fire stations, police stations, and other work places where it is common to work long shifts have what is called a common meal fund. Basically, everybody pitches in a certain amount of money per day, and it pays for food for the entire crew for that day.

If everybody does it, and it’s required by the employer, then it’s deductible. In other words, your fire department or other agency must have made it a mandatory participation practice. In this case, the money you put into the food bucket every day is deductible on Form 2106 under Miscellaneous Deductions, which are subject to a “floor” of 2% of your Adjusted Gross Income.

Hopefully this will clarify this practice. If you work in emergency services, do your co-workers a favor, and refer them to this blog post — it may help them avoid an “undesired IRS interaction.”… Continue reading

Friday Q&A: Client payment plans for tax resolution fees

It’s one of the most critical questions in the tax resolution industry: To accept or not to accept client payment plans for fees.

I’ve written quite a bit about fee structures and payment arrangements, and this morning Danny sent me an email with several questions pertaining this topic:

How many months do you allow someone to pay? What sort of upfront fee do you collect? Do you use an online auto bill to their credit card? Do you have a written agreement and do you file the agreement?

Let me first start with this: I no longer offer payment plans to clients, and I advise other solo practitioners not to, either. My stance is that if a client wants my help, and cannot pay my full fee up front, then that client does not meet my established criteria for my ideal clients. When you are a solo practitioner in particular, you should set fairly strict criteria regarding the clients you will work with. When it’s only you, you should be far less willing to deal with problem clients, and you don’t have to.

Please note that this entire article really applies to those doing flat-fee client work (aka, value billing). If you are billing hourly against a retainer, then most of this will not apply to you, because these tips are sort of built in to the retainer model.

With that said, if you either choose to accept payment plans from clients, or own a larger firm and are going after the volume angle in order to compete on the playing field with the large national firms (which is perfectly OK, of course), then you should set strict guidelines regarding your fee payment arrangements.

First of all, collect as much of the fee up front as possible. Never go for a series of equal payments over time — always insist on the first payment being significantly larger. The reason for this should be obvious: Tax resolution work is heavily front-loaded in terms of your time commitment to the client. It’s not uncommon for half your billable hours on a tax resolution case to occur within the first week of a client hiring you. Collect enough in the initial payment to cover this work.

Second, whatever payment arrangements you do make, automate it. In other words, set up the payments on automatically recurring ACH drafts or credit card drafts, so that you don’t even have … Continue reading