Conducting Research Before Hiring a Tax Resolution Firm

When it comes to something as important as resolving your tax liabilities, it is important to conduct research on the tax resolution firm(s) you are considering before agreeing to purchase their services.

What sort of things should somebody do as part of conducting their “due diligence”?

First of all, visit the Better Business Bureau at www.bbb.com and look for any complaints or outstanding issues that they have with clients.

Second, you may actually want to turn to an unlikely source for information on certain companies: Your IRS Revenue Officer. Revenue Officers will not provide an unbiased opinion, of course, and many of them will even tell you not to secure representation (which is a violation of IRS policies for them to say, but they still do it). However, your RO has probably worked with most of the large, national tax resolution firms and can give you their personal opinion on the firm if you ask.

Third, before signing a contract for taxpayer representation, be sure to confirm that the firm that will provide your representation will assign your case to a licensed representative. You should be guaranteed that your representative is a licensed attorney, licensed Certified Public Accountant, or a licensed Enrolled Agent, before you sign any contract. The IRS will not allow non-licensed representatives to negotiate for a taxpayer, but you would be surprised at how often large firms have unlicensed assistants doing the actual IRS negotiation.

Fourth, be sure to ask if the individual selling you the tax resolution service if they have ever been involved in actual IRS or state tax negotiations. Many times you will get a delayed answer because that answer is “no.” Be weary of salespersons that will base how they can help you from a sales script. Any case-experienced salesperson should be able to walk you through the case proceedings from start to finish.

Understand that hiring a representative to negotiate on your behalf is not a guarantee that your case will be resolved. You will need to work closely with your representative to ensure that your best
interests are always held in high regard. Although your representative should do nearly all of the interaction with the taxing authorities, your participation with your representative is vital to the resolution process.

You will want to confirm that the fee you are paying for the service you are purchasing is a flat fee. If you cannot get this guarantee in … Continue reading

IRS Tax Resolution Through An Installment Agreement

The IRS allows taxpayers to resolve their outstanding tax debt via a payment plan, which they call an “Installment Agreement”. Most of these plans have a set monthly payment, but they can also be adjusted based on your seasonal cash flow, and they also permit tiered agreements that call for occasional increases in the monthly payment amounts.

Some taxpayers may qualify for special installment agreements that require little or no financial documentation, similar to a no-doc or low-doc mortgage.

In rare circumstances, based entirely on your financial situation, you may even qualify for an Installment Agreement in which you never fully pay off the back tax liability, called a “Partial Pay Installment Agreement” (PPIA).

As part of negotiating your installment agreement, a comprehensive financial analysis of your business or personal finances will be required. The kind of information we will need to review, as mentioned above, is very similar to what would be required for a loan application. For businesses, this information includes all of the standard business accounting information, such as:

  • balance sheets
  • bank statements
  • profit and loss statements
  • accounts receivable aging reports
  • asset lists & depreciation schedules

At first, many clients are apprehensive about providing this detailed financial information to a tax consultant. However, this information is necessary to perform a proper financial analysis and properly negotiate your tax resolution.

If your financial situation is such that you can legitimately only pay a a minimal amount, the IRS will likely grant the Installment Agreement, even if the payments will not fully satisfy the tax debt. For example, if you owe the IRS $60,000, and a payment plan of $200 per month is negotiated, and you have 3 years remaining until the statute of limitations runs out on collection, you will have paid in only $7,200, and then the statute of limitations runs out and you’re off the hook for the remaining balance. This is called a Partial Pay Installment Agreement (PPIA), and is nearly identical to an Offer in Compromise being paid under the Periodic Payment option. It is important to weigh the merits of the PPIA option versus the Offer in Compromise option when considering your tax resolution options. Be sure to ask your tax professional about the pros and cons of each of these options.

There are two special types of Installment Agreements that you may be eligible for based on how much you owe. If you owe less than $50,000 … Continue reading

Is the IRS Holding Your Unclaimed Refund Check?

Finally, a happy thought when it comes to taxes: The IRS may be holding money that is yours, and they really, really do want to give it to you!

If you had a job and had income taxes withheld from your paycheck, but you didn’t file a return either because you didn’t have to because of your income level or because you thought you wouldn’t get the money back, you may actually be in for a surprise. It may not necessarily be a lot of money, but I believe you should even file your claim for a $10 refund merely on principle if it’s owed to you.

The IRS keeps millions of dollars every year that they are not legally entitled to keep, simply because taxpayers didn’t realize they could get the money back. In order to file a return for the express purpose of getting a refund, even if you weren’t legally obligated to file a tax return, you need to file the return and request the refund within 3 years of when the tax return was originally due, which is generally April 15th of each year for personal income tax returns. After this three year period, the government says, “Too bad, so sad” and gets to legally keep your money.

If you file a tax return late, but are due a refund, there are no penalties for late filing. They only whack you with late filing penalties if you OWE money, and then it’s a percentage of what you owe (Caution: It’s a BIG percentage if it’s been a while).

If you’re not sure if you would end up owing or getting a refund, here’s a quick tip: Most tax preparers will run the numbers through their computer for you for free, and only charge you if you actually file the return. It’s worth visiting one of the local tax firms listed in our directory to find out if you might be due a refund.

In addition, the IRS receives millions of dollars of refund checks back in the mail every year. If you were expecting a refund check, and it didn’t come, then don’t forget to give the IRS a call (800-829-1040) and ask them where your refund is. There is also a simple and handy “Where’s My Refund?” feature on their web site, at irs.gov.

Lastly, be sure to take every tax break you’re entitled to. If you think your … Continue reading