Tax relief services are companies or professionals that assist individuals and businesses in resolving tax debt by communicating with the IRS or state tax agencies on their behalf. These services often help taxpayers apply for payment plans, negotiate settlements, or address other tax-related issues. However, while tax relief services can be helpful, they often charge high fees for tasks that taxpayers can handle themselves. If you’re struggling with tax debt, it’s important to carefully consider your options before hiring a professional.
#### What Are Tax Relief Services?
Tax relief services are designed to help individuals or businesses catch up on back taxes by creating a plan to pay off the debt. These services typically involve professionals, such as tax attorneys or CPAs, who communicate with the IRS or state tax agencies to negotiate payment plans, offers in compromise, or other forms of tax relief. While hiring a professional might seem like a smart option, it often comes with a high cost, and many of these services are unnecessary for the average taxpayer.
Experts like Greg Hudgins, a CPA in Florida and New York, warn that some tax relief companies take advantage of people’s fear of the IRS. “I think some of these companies are preying on folks a little bit, and that they’re so afraid of the IRS that they’re going to get put in jail or whatever is going to happen, and that’s usually not the case,” Hudgins says. The Federal Trade Commission also advises caution, as many tax relief companies charge high upfront fees and make false promises to eliminate or reduce tax debt.
#### Types of Tax Relief Services Available
More than 11.3 million Americans were behind on federal taxes at the end of 2023, making tax relief services widely advertised. However, these services aren’t always as helpful as they seem. Many charge high fees, and their success is not guaranteed. Paul Miller, a CPA and managing partner at Miller and Company, advises taxpayers to be cautious. “Instead, consider reaching out to non-profit debt counselors who offer credit counseling. They can help you create budgets and payment plans, though some may still charge fees,” Miller says.
The IRS offers several types of tax relief for individuals who need more time to pay their federal tax bill. These include installment agreements, offers in compromise, and “currently not collectible” status. Taxpayers can negotiate these options directly with the IRS without the help of a tax relief service. However, for those who need assistance, non-profit debt counselors or tax professionals can provide guidance.
#### How Tax Relief Services Work
If you decide to engage a tax relief service, it’s important to understand how the process works. Most companies start with a free consultation to assess your debt situation and propose a plan of action. You’ll typically need to provide notices or letters from the IRS, recent tax returns, and proof of tax payments. Some companies require a minimum tax debt of $5,000 to $10,000 to take on your case.
Once you’ve hired a tax relief service, they’ll typically charge a flat fee or a percentage-based fee. You may be required to pay part of the fee upfront before the company develops a personalized plan. This plan should outline the steps the company will take to help you resolve your tax debt, including clear deliverables like approval for an IRS payment plan or an offer in compromise.
#### Choosing the Right Tax Relief Service
If you decide to hire a tax relief service, it’s crucial to choose a reputable company. Look for services with transparent pricing, a money-back guarantee, and good customer service. Don’t rely solely on a website’s sales pitch; read online reviews from sources like the Better Business Bureau, Consumer Affairs, Trustpilot, and Google Reviews. It’s also a good idea to call and ask questions about fees, staff credentials, and the process.
Tax relief services that guarantee results or promise to lower your debt should be avoided, as only the IRS can decide whether you qualify for tax relief based on your financial situation. The best tax relief companies, such as Precision Tax, Anthem Tax Services, Fortnite Tax Relief, and Community Tax, appear on several lists of top services. However, it’s always a good idea to do your own research and consider whether hiring a professional is necessary.
#### Cost of Tax Relief Services
Tax relief services can be expensive, with fees ranging from hundreds to thousands of dollars. These costs are often unnecessary, as many taxpayers can resolve their tax debt on their own. Percentage-based fee structures are common, but they can add up quickly. Look for companies that offer a flat fee that covers all services. After the initial consultation, the company should provide a clear quote, usually paid in installments.
If the thought of dealing with the IRS is intimidating, hiring a professional might be worth the cost. However, the goal should be to pay off your debt quickly and at the lowest possible cost. If a tax relief company is quoting a fee that you can’t afford, it’s not worth going into additional debt. Remember, calling the IRS directly is free and often the best way to resolve your debt.
#### DIY Tax Relief vs. Professional Services
Almost any tax debt can be negotiated directly between an individual and the IRS or their state tax agency. The pros of handling tax relief yourself include saving money and avoiding high fees. The cons include the time and effort required to navigate the process and communicate with the IRS.
If you have the means, a tax attorney or CPA may be a better resource than a tax relief company. These professionals have the knowledge to help you organize your debt and choose the best payment plan option. They can also provide ongoing advice on tax matters like planning, filing returns, and making timely payments.
#### Best Tax Relief Services and Programs
The IRS offers several programs to help taxpayers resolve their debt. One of the most common is the offer in compromise (OIC), which allows you to negotiate a reduced payment if you can prove financial hardship. To apply, you’ll need to submit detailed financial information, including pay stubs, bank statements, and loan documents. There is a $205 application fee unless you qualify as low-income.
Another option is an installment agreement, which allows you to pay off your tax debt over time. If you owe $50,000 or less in taxes, penalties, and interest, you can apply online for a long-term payment plan. There is a $22 setup fee for automatic withdrawals or a $69 fee for non-direct debit payments. Interest and penalties will still accrue, but making consistent payments can help you avoid more serious consequences like wage garnishment.
#### Final Thoughts on Tax Relief Services
Tax relief services can be helpful for some, but they are not a necessity for most taxpayers. The best approach is to contact the IRS directly to discuss your options. Whether you choose to handle the process yourself or hire a professional, the key is to act quickly to avoid additional penalties and interest. Remember, you don’t need to pay high fees to resolve your tax debt. The IRS is often willing to work with taxpayers who are proactive about addressing their debt.
