If you’re facing a tax problem, you may want to hire a tax relief company – but you don’t always have to. Many tax problems can be handled on your own, with a DIY approach. The IRS offers a lot of self-service solutions that can be easy to use if your situation isn’t too complicated or your tax debt isn’t too high.
But in other cases, hiring professional assistance can save you a lot of time, money, and stress. How do you know when to hire a tax relief company and when to handle things yourself? This guide covers it all.Â
When You Don’t Need to Hire a Tax Relief Pro
The most common tax problems, like owing tax debt, have simple solutions. In many cases, you can fix minor tax problems on your own, without paying for outside assistance. Here are a few situations when it doesn’t make sense to hire a tax relief company:
Your Balance Is Low
If you only owe the IRS a small amount of money, say $1,000 or $2,000 or even $10,000 or $20,000, it may be easiest for you to handle the issue on your own. You can set up a payment plan to make monthly payments until that balance is paid off, and you’ll be done before you know it. (But don’t forget to factor in all penalties and interest on your account when you’re deciding how much your monthly payment will be.)
You Agree with the Balance
If you get a bill in the mail, and you were expecting it or it looks right to you, you may not need professional help. There’s nothing to dispute if you agree with it, and you can contact the IRS to learn about your options or request an installment agreement online.
You Owe Less Than $50,000
The IRS also offers streamlined installment agreements for balances under $50,000. To get approved, you typically don’t have to provide any financial information to the IRS, and you can do everything through your online account. This is a good option when you can afford to make monthly payments until your balance is paid off.
You Want to Fight a Small Bill
If your tax liability or penalties are incorrect, you may want to fight the IRS out of principle because something is wrong or you feel they’re not acting fairly. However, what if the mistake is pretty small? What if it’s just $1000 or less on the line? Hiring a professional through a company may cost a lot more than your bill — up to $4,000 in some cases.Â
In this case, you need to consider both the size of the IRS liability and the cost of a tax attorney. In contrast, if you were disputing a larger bill, paying an attorney to help makes a lot of sense.Â
You Understand Your Tax Notices
If you get an IRS notice in the mail, your first inclination may be to panic and call a relief company right away. But the IRS provides a lot of contexts in these notices, and they may provide enough info so that you can take care of the problem on your own.
For example, if you are being charged with a penalty because you filed your tax return late, follow the instructions to request first-time penalty abatement or just pay the balance if you can afford it. Again, it’s probably not worth spending more money on tax help if you can figure out the issue on your own.
When You Need to Hire a Tax Relief Company
When you can handle things on your own, you might want to consider going that route first. But in other cases, hiring a tax pro can help you resolve complicated tax issues, and their fees are an investment into your peace of mind.Â
So, when does it make sense to hire a tax relief company? Consider these scenarios:
You’re Facing Serious IRS Collection Action
If you’ve let your debt accrue and haven’t done anything to rectify it, the IRS may start mailing you notices about impending tax liens, levies, or wage garnishment. These are serious steps that could mean the government will seize your assets, like your property, wages, or financial accounts. A professional is needed to step in and help you with these more legally complex matters so you can negotiate with the IRS and avoid levies.
You Can’t Afford to Pay Your Debt
Sometimes, a payment plan just may not be an option for your financial situation. Your balance may be building, and you can’t afford monthly installments. If that’s the case, working with an expert can be the right call to help you gather your information and apply for the appropriate relief program, like an offer in compromise or currently not collectible (CNC) status. A professional will be able to explain your options and guide you through the entire process.
You’re Facing a Tax Audit
While some tax audits are simple and only require you to send documents through the mail, some are very lengthy and complicated. When you’re facing an IRS audit, contact a tax professional who can help you understand why you’re being audited, gather the appropriate documentation, and avoid errors that will trigger even more IRS scrutiny.
You’ve Already Tried DIY
You may get going on your own, only to figure out that you’re not making the situation any better. Maybe you can’t get the IRS to respond to you, or you figure out you can’t afford an installment agreement after all. Hiring a tax professional can help you understand the next steps to take to continue resolving the tax issue. They will be able to get in touch with the IRS on your behalf.
You’re Submitting an Appeal
If you don’t agree with a decision the IRS made or a tax assessment, you may want to consider filing an appeal. It’s usually a good idea to talk to a tax expert about this process, and a tax professional can represent you in front of the IRS and negotiate on your behalf.Â
You Have a Complex Situation
Not all tax problems are easy to resolve. If you’re dealing with something complicated, it’s best to work with an expert. You may have a lot of business tax debt, unfiled returns that go back years, or mounting penalties. These are matters you may not be able to untangle on your own.
What About the Gray Area?
Every taxpayer’s situation is different. This means the guidance above isn’t always the right call for you. Sometimes, you may want to hire someone just to get peace of mind that you’re doing everything correctly. Or, maybe you don’t want to deal with the IRS without an expert’s support. These are completely valid reasons for working with a tax relief company.
Don’t underestimate the power of reducing stress for yourself, even if you have to pay a little extra for help. You want to be sure you are resolving your issue fully so you don’t risk any future issues with the IRS.Â
| Tax Issue | Hire a Pro? | Why / Why Not |
|---|---|---|
| Low balance | No | Easily resolved through payment or installment agreement |
| You agree with the balance and it is low | No | There is nothing to dispute |
| Owe under $50K and can afford payments | No | Streamlined installment agreement available online, without professional help |
| Disputing small bill | No | May cost more to hire a pro than to resolve on your own |
| You understand your IRS tax notice | No | You understand what to do next and can respond on your own |
| Facing a lien, levy, or wage garnishment | Yes | You need to act quickly and with assistance to avoid asset seizure |
| Can’t afford to pay your debt | Yes | You may qualify for CNC or OIC relief programs |
| Facing a tax audit | Yes | To understand obligations and how to respond |
| Tried DIY | Yes | Can’t resolve on your own; now it’s time for professional help |
| Filing an appeal | Yes | Need help with the legal process |
| Your situation is complex | Yes | More complicated issues require an expert to step in |
| Just want peace of mind | Optional | Valid reason to hire someone even if unnecessary |
| Want to avoid dealing with the IRS | Optional | Valid reason to hire someone even if unnecessary |
How Much Do Tax Relief Services Cost?
Another important factor when making your decision is, of course, cost. How much do tax relief companies actually charge?
Typically, you won’t be able to get someone to review your case and documents without agreeing to pay at least $1,000 to $1,500 initially. Then, to engage a professional to guide you through resolution could cost between $3,000 and $6,000 total, but it varies a lot depending on the situation. The more complex your case, the more expensive it will probably be, sometimes up to $10,000 for assistance.
If you owe the IRS less than what it costs to hire the company, don’t enter into these arrangements lightly. Weigh the pros and cons of spending the money. Assess the severity of your situation and whether you can handle it on your own with the IRS. However, when you’re facing a time-sensitive problem or dealing with legal risks, it’s a good idea to get help however you can.
Making the Right Call for Your Situation
Tax relief services are important for taxpayers dealing with a serious issue. While these companies can help you with any kind of problem, small or large, sometimes the cost isn’t worth it if you can resolve your problem yourself — whether setting up a payment plan, making a one-time payment, or filing an overdue tax return.Â
But sometimes the cost is worth it, especially when the IRS is taking serious enforcement actions, you have financial hardship, or your case is especially complex. Getting qualified help can prevent a disaster, like asset seizure.
Don’t forget you can always ask a company for an initial consultation, usually for free. This way, you can get a sense of what the company would do to help you, how complicated it is, and how much it would cost.Â
Schedule a completely free consultation with W Tax Group for a quick initial review. We’ll let you know the extent of your situation and what we suggest. Contact us today to learn more about our services.
Sources:
https://www.cbsnews.com/news/how-much-does-tax-relief-cost-and-is-it-worth-it/Â
https://www.businessinsider.com/personal-finance/taxes/tax-relief-servicesÂ
https://www.irs.gov/payments/offer-in-compromise
