Reading the business news recently, I came across an article about how the Federal Trade Commission (FTC) was returning $16 BILLION to the customers of a tax relief company that they (FTC) had previously put out of business. American Tax Relief (ATR) was found guilty of falsely claiming it could reduce tax debts. Unfortunately for all the people who signed up, they are only getting back an estimated 16% of the monies given to ATR.
This makes at least 4 cases where tax relief (or tax problem resolution) companies have been put out of business – ‘Tax Lady’ Roni Deutch in 2011, as well as JK Harris and TaxMasters in 2012. On one site (www.accountingtoday.com), a person, claiming to be a retired IRS Appeals agent said (in part) that those companies would:
“…prepare a very simple Appeals protest, or Offer in Compromise application, or Innocent Spouse Relief Request form, etc. and then disappear. I would contact the named POA (power of attorney) to discuss the case and they would say they were no longer representing the taxpayer, their engagement only included the preparation of the application, etc.!!! The taxpayers would tell me they paid from $3,000 – $5,000 for this minimal service.”
Things like this upset me as I’ve been working with tax relief clients for many years, and I keep hearing all the radio ads that say you can ‘pay pennies on thousands of dollars owed, if you qualify’. The key words are ‘if you qualify’ as every situation is different.
Tax Agencies will review your financial situation (both current and projected) to see if there is a reasonable chance you’ll be able to pay the debt either immediately or over time. In addition, the Tax Agencies will look at your assets to see if anything can be used to pay down the tax debt immediately (401k or retirement accounts, home equity, major assets, etc.). Health issues, job loss, economic downturns and other factors will be taken into account. Even when you enter into an agreement (payment plan, offer in compromise, etc.) penalties and interest will continue to accrue. Also, all of your tax returns must be on file with the Tax Agency – they won’t do any negotiation with open tax returns.
If you’re not comfortable with working with the Tax Agencies on your own and decide to seek help, be careful, do your homework and make sure you ask any and all questions that come to mind – here are a few I’d recommend:
- What happens if the Taxing Agency turns down your first proposal – what will you do next? How many times are you willing to send in a proposal?
- How long has your firm been providing these services?
- How much of your fee will be paid up front or as a retainer? (always a bad sign when the firm wants more than 50% upfront)
- Who will be working on my case – someone local or in your home office? (some firms out-source their services to practitioners in each state especially if there are state & local taxes involved)
- Is the person who will work on my case accredited to practice before the IRS (or other Taxing Agencies)?
- Does your fee cover both state/local & federal taxes?
- Will your firm file late tax returns and how much will that cost?
- Are you accredited by the Better Business Bureau (BBB)?
- Ca you give me at least 3 references with similar tax problems who you’ve helped?
Again, each case is unique – you may have additional questions for potential tax relief companies so be sure to add them to your list. Make sure you feel comfortable with whomever does handle your case as that person will have to know almost everything about your finances, assets, health, family, etc.
If you’d like more information, or have a tax relief question, please feel free to send me an inquiry below:
Thomas C. Hodge, CPA
The Hodge Group
3040 N. Menard Avenue
Chicago, IL 60634