If you’re dealing with a tax problem, you might want some help. The best place to find this help is typically with a tax relief company or attorney. Not only do they have experience handling matters similar to yours, but they have the skills necessary to resolve your issue quickly and efficiently. This can be important as time is of the essence with some tax issues, such as those involving unpaid tax collection actions by the IRS.
Even though choosing to hire a tax resolution professional is the right move, taxpayers can sometimes make a mistake when deciding who to hire. In other words, deciding to get help isn’t a problem, but getting help from the wrong “professional” can make your current problem even worse. The purpose of this blog post is to discuss what happens when IRS help goes wrong and how you can avoid being in this situation.
Key Takeaways
- Hiring the wrong tax professional can be worse than not hiring anyone at all.
- If you make a mistake in who you hire, it can result in bigger tax bills, lost legal rights, and/or sleepless nights.
- To find the right tax relief help, you want someone with the proper credentials, sufficient experience, and who responds promptly to your questions.
- If you need representation before the IRS, you want to hire an enrolled agent, certified public accountant, or attorney.
- Avoid tax relief firms that ask for large up-front payments, use high-pressure sales tactics, or make promises before examining your tax situation.
Bad Help Is Worse Than No Help
Depending on your situation, finding the wrong person to help you with your taxes can put you in a worse place than if you tried to handle things yourself. For example, imagine you hired a tax resolution company that said they’d “take care of” negotiating with the IRS concerning your unpaid taxes.
You agree to hire them and pre-pay them for their “services.” After a few months pass, you get more tax letters and notices from the IRS saying not only do you still owe them taxes, but the amount you owe has gotten bigger, thanks to increasing penalties and interest.
Not only do you now have a larger tax balance to deal with, but you’re also out the money you paid to this dodgy tax resolution company. This shows why the key decision isn’t whether or not to hire a tax professional to help you. It’s deciding who you should hire.
How a Tax Lawyer or Relief Company Can Hurt Your Case
In addition to the earlier example of a tax relief scam, there are many other ways in which a tax resolution company or tax pro can make things worse for you.
Missed or Late Deadlines
Many tax lawyers and tax relief firms are volume-driven businesses. As a result, some tax pros will take on more work than they can handle, which sometimes results in missing important deadlines, like those for filing a tax appeal.
Being late can also be a problem, as it can increase penalties and interest. It can also make a current problem worse. For instance, stopping a wage levy by requesting a collection due process hearing is a lot easier than trying to recover money the IRS has already taken out of your paycheck.
Broken Promises
To lure clients, the less scrupulous companies offering tax help will make promises they can’t keep. A common one is promising to get a tax debt forgiven for “pennies on the dollar.” This is theoretically possible, but most taxpayers who can pay off a tax debt for less than the full amount rarely get such a large portion of their tax debt forgiven.
Insufficient Qualifications
Some of the services from tax relief firms include representing taxpayers before the IRS. But not just anyone can do this. Generally speaking, only a licensed attorney, enrolled agent (EA), and certified public accountant (CPA) can handle tax matters on your behalf. These professionals enjoy unlimited representation rights unless you’re in court. In that case, only an attorney can represent you.
In special cases, limited IRS representation is possible, such that family members and unenrolled tax preparers can represent you. But no matter who helps you, you must provide third-party authorization to the IRS so they know they can talk to someone other than you about your tax case.
Poor Communication
The lack of communication can make your tax problem worse, even if the person you hired is actually helping you. This is because one common reason for hiring a tax relief professional is to have questions answered and have peace of mind that the tax matter is being handled properly. If you’re not getting timely updates or responses to your phone calls or emails, then your stress and anxiety levels could rise to the point where you wonder why you even hired someone.
Just keep in mind that good and prompt communication is a two-way street. If your tax lawyer, CPA, or EA needs information from you and you don’t respond (or respond quickly), it can slow down your case and limit their effectiveness.
Also, don’t worry if hiring a tax professional will alert the IRS or somehow bring you to their attention when you were previously “off the grid.” If you’re thinking about who you should hire to help you with your taxes, there’s a decent chance that the IRS already knows you have a tax problem.
How to Choose the Right Tax Professional
Now that you know what can go wrong if you hire the wrong tax relief company or professional, what can you do to choose the right one? Here are several things to look out for when doing your research or reaching out to a prospective tax firm.
The Right Credentials
This will be less important if you just need a little bit of help with a basic IRS income tax return, but it’s crucial if you have a serious matter that could require direct contact with the IRS. You want to find a firm with professionals who have unlimited representation rights:
- Attorneys: they must have a JD (Juris Doctor) degree and have passed the bar exam in at least one state.
- Certified Public Accountants: they almost always have a bachelor’s degree, plus additional education, usually at the graduate level. They will also have passed the Uniform CPA Exam.
- Enrolled Agents: they have either passed a three-part exam or have a minimum amount of experience working as an IRS employee.
Credential information will often be provided on the law firm or tax resolution company’s website. If not, you can double-check at the professional’s respective state attorney or CPA license look-up webpage. The IRS also has a list of active enrolled agents that you can download. Learn more about the differences between these three tax pros.
The Right Experience
Even with the right degree and license, a person may not have enough experience to handle your particular tax issue. So when deciding who to hire, make sure they have adequate familiarity with your particular tax concern.
If you received an audit letter, then someone with plenty of audit experience should be your priority. If you’re trying to figure out how to pay off a tax bill you can’t afford, then you want to look for someone who knows how to negotiate payment plans, penalty relief, and submit an offer in compromise. And if you have a legal problem that could end up in court, you want a tax lawyer with courtroom experience.
Ask for References
You should check for references by not just asking someone at the tax resolution firm, but also by asking people you know. If they don’t know anything about a lawyer, EA, CPA, or other tax professional you’re considering, they might be able to recommend one.
There’s also the option of doing an online search of a company or person, especially on social media or using a search engine. If you’re looking into a CPA or lawyer, any disciplinary action taken against them for unlawful or unethical conduct is often available to the general public through an online database (this will sometimes be the same database where you can confirm their license status).
Tax Relief Firm Red Flags
The following is a basic list of potential warning signs that you might be hiring the wrong tax pro. This isn’t a comprehensive list, but if a prospective company or professional checks two or more of these boxes, it’s probably a good idea to look elsewhere.
- They require substantial up-front payment before doing any work for you.
- They make too-good-to-be-true claims or promises.
- They use high-pressure sales tactics or try to convince you that you need to make an immediate decision on whom to hire.
- They tell you what tax relief you can expect without first getting detailed financial information about your tax situation.
- They lack the appropriate professional credentials for the work you require.
- They offer the same services to anyone, regardless of the type of tax problem they have.
- A basic online search of the person or company comes up with numerous negative reviews from multiple sources.
- They don’t promptly respond to you, whether you contact them by email, phone, or through their website.
Still Unsure of Who To Hire?
If you need help with your taxes, the right tax professional can make all the difference. You have a plethora of options available, most of which will do just fine. But if you want to find the best tax resolution professional, consider hiring a vetted and licensed tax attorney, such as one from the W Tax Group. To get started, contact us to schedule a free consultation.
Sources
https://www.irs.gov/tax-professionals/enrolled-agents/enrolled-agent-information
https://www.irs.gov/help/tax-scams/recognize-tax-scams-and-fraud
https://www.law.alaska.gov/press/consumer_alerts/2010/0810-tax.html
https://www.michigan.gov/consumerprotection/protect-yourself/consumer-alerts/scams/tax-debt-resolution
https://www.cbsnews.com/news/helpful-tips-for-choosing-the-best-tax-relief-service/
https://www.irs.gov/businesses/small-businesses-self-employed/power-of-attorney-and-other-authorizations
https://www.irs.gov/pub/irs-news/FS-15-06.pdf
