So you have found yourself in a bind with the tax man. Perhaps you've fallen behind on your filing, or your business can't keep up with its monthly payments, or like millions of businesses you've run afoul of the rules regarding payroll taxes. Whatever your situation (believe me, there are countless stories of taxpayers in debt and how they got that way) I think it's comforting to know that you're not alone. Nor do you have to go it alone. There are various means of getting help, from free resources to full-on legal representation. But how do you know what's right for your situation? And what is the best value that matches your needs? Before someone 'sells' you something you don't need, get to know your options so you can make an educated, informed decision.
Free Options
If your problem is with the Internal Revenue Service, you may want to start by contacting them directly. The IRS today is not the boogeyman they used to be. While they are in the business of collecting taxes, they also have a wealth of information that may get you started in the right direction.
The downside of reaching out the IRS is that while they strive to be helpful, their objective is still to collect back taxes, as much and as fast as possible. They have an obligation to be honest and forthright but still you can't expect the IRS to lay out every possible option or to fight on your behalf.
If you're already communicating with the IRS and you feel like you're getting nowhere, you may want to consider reaching out to the Taxpayer Advocate Service. The TAS was set up by Congress, and they are a completely independent resource that offers counseling. The TAS is intended to help in situations where the IRS may not be dealing with you fairly or where a standard procedure is not working as it should. If tax collections are causing you financial hardship, they may be able to help as well. The TAS is available to both businesses and individuals, and has an office set up in all 50 states and Puerto Rico.
A state tax liability is different and what free resources are available vary, depending on the type of collectable taxes and which state you are in. Most states have some sort of ombudsman or taxpayer advocate office for dealing with state taxation issues. Usually contacting your State Comptroller or Secretary of State office is a good place to start.
Tax Attorneys
Tax attorneys represent the other end of the spectrum. They are the ideal representation if you are concerned about litigation related to your tax problem. If you are being accused of breaking a state or federal law in regards to your tax liability and need someone who can represent you in court, a tax attorney is your best (and perhaps only) option for help.
The downside is the price of such help. Quality representation is costly, but when weighed against the option of potential jail time it can be a worthy expense.
When trying to select someone to represent you remember experience counts. You want someone who has dealt with situations just like yours countless times. This is why a typical litigator or contract attorney may not be your best option. Tax codes are complex and you don't want someone learning on the job, no matter how much you trust them.
There are many tax attorneys and choosing the right one doesn't have to be difficult. You want to select one that is local, so they can physically represent you in court. Shopping by price may not garner the results you intend, as most attorneys charge a retainer, and if the retainer is low, they many simply request additional funds to continue your representation. Your best option is probably to get a reference from a person you trust because someone who has already worked with an attorney can give insight to their capabilities. There are also local attorney referral sources or websites like http://www.martindalehubble.com where information about attorneys and firms can be found, also the attorneys are rated, which helps provide some guidance about their ethics and practice.
Tax Resolution Firms
There are many companies that fall under this category. They may be a local firm or work nationwide, but either way a tax resolution firm is good option for those who are facing a serious tax liability and are not getting the results they want, and don't feel like they are getting things resolved on their own. When the tax authorities begin the collections process (filing tax liens or tax warrants, visits / phone calls from revenue officers, etc.), it may be time to looking into professional help firms such as these provide. Tax resolution firms employ tax attorneys, certified public accountants and Enrolled Agents (an Enrolled Agent is someone who is certified to handle tax problems by the tax authorities) and often have ample experience in representing businesses and individuals to the IRS.
Tax resolution firms make a lot of sense because they bring a balance between experience and cost. A good firm will have associates with years of experience and a successful track record, and their cost comes well below what a tax attorney would charge. While they are staffed with attorneys, tax resolution firms cannot represent you in a criminal case or civil case where you intend to go to court.
Since there are so many out there to choose from, be picky when choosing a tax resolution firm. While the majority of companies who do tax resolution are honest and reliable professionals, there are some companies who are in the business of ripping off clients. It can be hard to tell the good companies from the bad, so some investigation on your part may be necessary.
- Check the Better Business Bureau to see the company's score. Find out the number of complaints and especially the number of unresolved complaints. A basic search online should reveal if others have had problems with the company you are considering. One or two complaints are understandable and perhaps expected, but if you're seeing a lot of complaints, you should probably stay away. Also keep in mind that less scrupulous firms have been caught creating falsified bad reviews against their competition online. Only the BBB protects against such tactics.
If you are contacted by a tax resolution firm, tell them you want to speak with one of their attorneys. Attorneys have an obligation to be forthright and will tell you what they can do for you. While the tax specialist you first talk to may promise anything is possible, attorneys are required to give you the facts.Thoroughly read the paperwork the firm sends you. There should be specific rates or a flat fee to represent you. Companies like these employ assistants to do a bulk of the basic paperwork and should be willing to charge a lesser rate for their work compared to the work the attorneys do. It shouldn't cost you $200 per hour to have a secretary send a fax on your behalf.
Don't fall for pressure tactics. While you may be in a situation that calls for an immediate need for help, don't let someone rush you into an agreement without being able to do your research.
Avoid larger firms. Those with a lot of associates (say, those with eight or more) tend to lose the personal attention tax resolution needs. You can find many clients complaining they get bounced around from one associate to another at these larger firms. These bigger firms also tend to be highly competitive internally, which causes associates to focus on larger commissions instead of the customer.
The best option is the one that fits your budget and schedule. If you have the time and wherewithal to take on your tax problem yourself, perhaps the available free resources will be adequate in resolving your tax debt. Otherwise, you may want to consider professional services such as a tax resolution firm to take care of the problem for you. However if you are facing not only a tax problem but also a legal issue, you should definitely look to a local tax attorney to step in and represent you.
Aaron Marx is a Managing Member of Safe Harbor Financial Consultants LLC a tax resolution firm based in Chicago IL. You can get more information about tax resolution services or visit their tax wiki for straightforward information about taxes and tax collections. Aaron also hosts a tax advocacy group on Facebook.
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