The answer is a very strong YES.
Whether the case involves a failure to file tax returns, the failure to pay all of the taxes that are owed for prior years, the involvement in a bad investment, a spouse who did not pay all of the family’s tax, or a troublesome audit of your return, a tax attorney who both knows the tax laws and knows how the Internal Revenue Service will likely respond and act in a case can be invaluable.
Too Good to Be True? – Tax Resolution Companies
Many who owe an IRS debt are tempted by the fast ads and promises of Tax Resolution Companies these days. Also
known as tax settlement firms, tax resolution companies often claim they can drastically reduce OR completely eliminate the client’s tax debt. They often promote that they have a large team of lawyers, tax professionals, and ex-IRS employees who are ready to eliminate your tax problem. But, buyer beware.
The firms may include a few lawyers and a handful of people in the company who did work for the IRS at some point in the past, the majority of employees probably haven’t. In fact, the majority of employees may be little more than hourly-wage customer service reps working from their tele-scripts. You may not even have an assigned individual for your case.
These companies often promise to negotiate with the IRS to wipe the tax slate clean. But, the truth is, this rarely happens. Generally speaking, the negotiation will include a new payment plan with additional interest and penalties, and/or property seizures, rather than an Offer in Compromise.
Offer in Compromise
Tax Settlement companies often use an accepted IRS procedure of Offer in Compromise. This is a special agreement reached with the IRS to allow for a tax debt to be settled at a lower amount,
In fact, only a small percentage of cases qualify for that level of back tax reduction. Tax settlement firms that advertise this way are primarily interested in the large fees they will charge new clients, seemingly without regard to the actual viability of the “pennies on the dollar” claim on most people’s unpaid tax situations.
The actual Offer in Compromise is a lengthy process – involving months of correspondence and research. To get such a tax reduction agreement approved, the taxpayer must a) prove that the total amount owed is incorrect, b) the probability of being able to pay back the full amount is very low, or c) paying back the full amount will result in tremendous financial hardship.
Consider Your Costs
Most tax settlement companies charge their clients an initial fee that can be $5,000 to $10,000, depending on the size of the tax bill and proposed settlement. In most cases, these fees are completely nonrefundable. And oddly, these fees can quite often mirror the amount of free cash the client has available. And the fee amount is generally the amount of cash the company says it will save the client in tax payments.
Consulting with a good tax attorney regarding your tax debt can often begin with a no-cost phone consultation. If you and the tax attorney believe that there is a good chance that you can contest the IRS tax claim, the attorney’s fees are based on a time charge of the attorney’s time working directly with you on your tax issue.
A Good Tax Attorney is Your Personal Guide
Keep in mind, a good tax attorney will also know (and tell his client) when there is nothing to be gained, or if the chance of a tax reduction is slim. This type of recommendation could possibly be achieved at no cost to you in an initial phone consultation. Ultimately, a good tax attorney wants happy clients, and will guide them throughout their case with good advice and an honest opinion on the likelihood of success with the client’s tax liability. There is no benefit to a reputable tax lawyer to give bad or misleading legal advice to a client.
That same good tax attorney will not submit an Offer in Compromise unless it has a good chance of being accepted, and will not hurt the client’s chances of success by unnecessarily fighting or delaying the Internal Revenue Service.
So, if you are trying to address an outstanding IRS debt, consider your choice of legal resources carefully. And if you can save money on your tax debt, a good tax attorney can help you win the most in tax savings with less hassle, aggravation, and cost.