What do Tax Relief Companies Charge for?
Tax relief companies charge for the financial services they offer and the expertise of their professionals. These companies hire tax relief attorneys and other licensed professionals. You simply pay their tax relief services fees and they will review your situation and help you take advantage of the tax-saving measures you are eligible for.
When you sign up with a tax relief company, you’re enlisting the services of professionals. Tax relief attorneys, certified public accountants, and enrolled agents are present alongside other administrative staff.
Tax relief companies need licensed professionals with a deep understanding of personal finance and the IRS. Most of the steps a tax relief company will take for you will require expertise to be conducted legally, effectively, and ideally.
A tax relief company isn’t in business to just sign some papers and make your tax bill lower. But they, with the help of professional employees, will take a series of legal steps to reduce your burdens as best they can.
Tax Transcript Review
A tax attorney will review one of the free IRS tax transcripts that you are entitled to. Using the transcript, they can review your tax returns from the last 3 years. They can also see all of your basic information that is relevant to your tax bill.
A professional review of your recent tax history allows tax relief companies to spot things you may have missed. They can provide you with advice and find out what IRS relief measures you are eligible for.
Soft Credit Pull
You can get your credit score checked on your own if you’d like. But apart from the free credit reports, you’re entitled to once per year, checking your financial history can cost you. A hard pull on your credit score may take as many as 5 points from your total.
Tax relief companies always perform a soft credit pull. They can delve into your financial history while having zero effect on your credit score.
The IRS offers everyone a few tools to enable them to pay their taxes. One of those tools is an installment agreement.
It’s normal to not be able to afford your tax bill with a single, large payment. The IRS claims that an installment agreement is “generally available to people who can’t pay their tax debt in full at one time.” To be eligible for a plan of 120 days or more, you must owe $50,000 or less in combined taxes, penalties, and interest. You can also apply for a short-term repayment plan (less than 120 days) with a tax bill of up to $100,000. Tax relief companies help you come up with a workable installment agreement so you can afford to pay your taxes. When they deem it advisable, they will try to negotiate:
- Installment agreement
- Offer in compromise
- Penalty abatement
- Interest abatement
Apart from the first option, most taxpayers aren’t eligible for this kind of relief. But a tax relief company will find out if these other options are available to you and ensure you get what you can.
What is the Fee Tax Relief Companies Charge?
The tax relief cost you end up paying depends on the services you need and the IRS fees that come alongside them.
Some tax relief fees come in the form of a complete upfront payment for all services rendered. In other cases, you will have the option to either pay everything upfront or make several separate payments. In these cases, they usually provide a discount for complete payment.
If your tax relief company asks for an upfront payment, make sure you understand their services from the start. They should give you a full explanation of exactly what they will do for you and what you can expect. If they demand an upfront payment without an explanation, that is a serious red flag (more on that below).
Many tax relief companies will ask for a starting fee to get started with your taxes. After that, they will charge periodic fees that are defined in your contract. This can mean a few monthly payments ending once the work is complete.
Monthly Payment Plan
Monthly payment plans involve a simple monthly fee that continues until their case is over. Unlike split fees, these monthly plans aren’t based on milestones. However, the monthly rate is normally flat.
With a monthly payment plan, you still might have to pay an extra starting fee. Apart from that, you will normally only need to pay for fees charged by the IRS, when applicable. For example, the IRS fee for opening an Offer in Compromise is $205.
Tax relief companies allow for the above arrangements under one of two structures. A flat fee structure implies you will pay a flat fee that is based on any mix of:
- Specific actions which the company takes for you
- Specific resolutions that the company reaches for you
- If they have to communicate with several agencies or take multiple separate actions, they will charge more
- A specified percentage of the money the company saves for you
Hourly rate fee structures are calculated based on the hours that licensed tax professionals spend working on your case. Normally, you won’t be paying for just one professional’s time, and other small fees may be charged. Typical tax relief company hourly fees range from $200 to $550 per hour.
What Total Cost Can I Expect?
Most tax relief cases involve a lot of variables and prep. For individuals, these services normally add up to between $3,000 and $4,500. The more complicated your tax status and situation are, the higher your bill will normally be.
Business tax relief services almost always cost more than services for individuals. Partnerships, C-Corps, S-Corps, and LLCs require greater preparation. You can expect a bill of $5,000 to $7,000 for a small business. Large businesses with revenues exceeding $1 million per year can expect higher bills for comprehensive tax relief services.
|Total Fee Upfront
||You pay the entire cost of all tax relief services. The tax relief company then handles all your needs.
||Tax Defence Network
Tax Hardship Center
|Partial Payment Upfront
||You pay a portion of the total cost upfront, and you finish paying the rest once your case is closed.
||Victory Tax Lawyers
||You pay a flat monthly rate and possibly additional fees until the company closes your case.
||Anthem Tax Services
How to Avoid Tax Relief Scams?
Unfortunately, there are also a few scams that you can fall victim to if you’re not careful. When you’re pursuing tax relief services, there are several warning signs to watch out for. The red flags of a tax relief company scam are typically offers of impossible services or a lack of transparency.
The big warning signs for tax relief scams are:
- Promises that your tax liabilities with the IRS will be removed or settled
- A lack of transparency surrounding their fees or asking for a large upfront payment without a clear explanation
- Aggressive sales practices
- A lack of transparency surrounding the company’s licensed tax professionals
- Delaying your case by asking for the same forms repeatedly or other delaying tactics
- Failing to assess and address your specific tax circumstances
The best way to avoid the above problems is to work with reputable tax relief companies. Make sure you check for reviews and testimonials from former clients. Check to make sure the company employs licensed tax attorneys.
The best tax relief companies offer free consultations and don’t promise to solve all your tax problems. They won’t push you to pay for a comprehensive be-all-end-all solution. Remember, you can’t negotiate your total tax bill with the IRS. The IRS rejects most offers in compromise for your tax bill. An organization that offers a “guarantee” for a settlement is lying to you.
What you can do is use the relief that legitimate tax relief companies offer and make payment arrangements with them. Tax relief companies will help you do that.