Now and then I get a call from someone who has fallen prey to TV or radio advertisements that tell the listener that their “team of experts” are there to help the poor taxpayer “settle his tax debt for pennies on the dollar” or will “stop liens and levies immediately” or will otherwise make the taxpayer’s IRS debt somehow go away forever.
What amazes me is the size of the fees these companies often charge upfront, even for low income taxpayers. Just the other day I got a call from an elderly taxpayer who owed the IRS less than $100,000. This guy was charged about $10,000 as an advance fee. About two days later he contacted me and I analyzed his tax situation in a few minutes and estimated I could likely handle his situation for around $2,500.00. He then asked the tax debt company for a refund, and was told they had already used nearly half of the $10,000 fee in just two days! I asked him to ask them how they could burn up that much time in two days, especially over a weekend. They did not really give him an answer.
Why the big difference between me and them? It’s not that I charge a low rate for my time. I charge $250 an hour for my time as I have for the last 20 years or so. (probably time to finally raise my rates! )
One big difference is that I just charge for my exact time spent working, whereas these companies (which often having catchy sounding names that sound like “Tax Guard” or “IRS Be Gone” etc.) apparently have huge marketing costs if they can advertise like that.
But the big difference is that I really know the most efficient ways to handle a tax debt. And often the most efficient way is to do very little. For example, many of the tax debt relief companies love to file “Offers in Compromise” (“OIC’s”) for their taxpayers. (see my earlier blog article on this subject). OIC’s can be very time consuming, and when you file an OIC the IRS leaves you alone for a year or so, which can appear to be a great result initially. But, as I said in my other article, most OIC’s are rejected. Even payment plans can be very time consuming.
Often the most effective way to handle an IRS debt is to do nothing. I tell that to some people, and at first they think I am crazy! But what other accountants and tax relief people often fail to tell these taxpayers is that taxes automatically expire after 10 years. So, if I get a call from someone whose tax debt is already 7 years old, I often tell them to do nothing except let good old Father Time let the IRS debt go away. Of course, telling someone to do nothing except wait out his debt does not make much money for a tax professional, does it? But often it is the best advice, assuming his assets are protected, which is also one of my areas of specialty.
Another thing to keep in mind is that the IRS Collections Department since Obama became President has had their funding cut by about one third. As a result, IRS Collections is nowhere near the nasty, intimidating force that they were back in the 1980’s and 1990’s when I was first cutting my teeth as a representative of taxpayers.
But even if the new administration starts funding the IRS again, absent a big change in the Internal Revenue Code regarding collections, these techniques all will still apply just as well.
So, don’t get gouged by one of these tax debt relief firms. If you come to me you will get the most efficient and professional service possible. And all of the work is done by me personally.