Taxation & Estate Planning

The Truth about Tax Problem Resolution Fees

By Darrin Mish

With the nation's largest tax resolution company settling a class action lawsuit recently and the IRS holding tax professionals increasingly more accountable, there has been a lot of focus lately on the fees professionals charge for tax problem resolution. Here's the straight talk, seriously you have a problem and there's no such thing as a "free lunch." So you need to expect to pay a reasonable fee for help with your problem. Even if you can't settle your tax debt for pennies on the dollar, you need to understand that professionals sell their time and that time costs money. So the straight talk is you need to be smart, you need to have realistic expectations, and you need to be patient. Run hard and fast from any professional that doesn't give it to you straight. There simply are no guarantees in life (except death and of course taxes).

Who do you hire? Well there are three professionals that can represent you in an unlimited capacity before the IRS; an Attorney, a CPA and an Enrolled Agent. As far as attorney's go, any attorney can represent you before the IRS as long as they are in good standing with the bar for the state in which they are licensed and have never been suspended from practice before the IRS. You don't need a "tax attorney." In fact tax attorneys are trained in tax planning or tax "avoidance" which can often times be the reason why you are in trouble with the IRS to begin with. However, if you choose an attorney to represent you, pick one that specializes in tax problem resolution. Similarly, CPAs that are in good standing with their state's board and have never been suspended from practice before the IRS can represent you. However, more commonly than not CPAs are trained in accounting not tax problem resolution.

What is an Enrolled Agent? An enrolled agent is a person who has earned the privilege of practicing, that is, representing taxpayers, before the Internal Revenue Service. Enrolled agents, like attorneys and certified public accountants (CPAs), are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can practice before. An Enrolled Agent is really a tax problem resolution specialist. No matter what type of professional you choose pick one that specializes in tax problem resolution. Don't expect your estate planning lawyer or your tax preparer to get you results, choose an attorney that handles only tax problem cases, or an enrolled agent that does the same.

Resolving a tax problem takes time, there is no way around this, simply because the IRS is a huge bureaucracy. So be patient. Expect to pay a fee that professionals charge. Professionals charge for their time, that means a reasonable fee will start around $2500 to $5000 and increase for more complicated cases. The IRS does not allow contingency fees (fees based on results), be wary of professionals that advertise them. Regardless of how frustrated you are with the IRS and your tax problem, take ownership of it, understand you are not alone - many others experience the same frustration. Don't cry about it, don't pitch a fit, bow up and hire a competent professional, be patient, relax and have realistic expectations. A fresh start is just around the corner.

Full post as published by IRS Problem Solver Blog on September 09, 2008 (boomark / email).