When Should You Hire a Tax Relief Company for IRS Debt?

When Should You Hire a Tax Relief Company for IRS Debt?

Dealing with the IRS can be super stressful and intimidating. I totally get it. I’ve been there myself! When you get that letter in the mail saying you owe back taxes, it can make your stomach drop. You start worrying about wage garnishments, bank levies, tax liens – yikes! Not fun. But take a deep breath – there are options and help available.

In this article, I’ll walk you through when it makes sense to hire a professional tax relief company to help you deal with IRS debt. I’m not a tax pro myself, so I’ll share what I’ve learned from my own experience and research. My goal is to give you the real scoop on tax relief companies – the good, the bad, and the ugly – so you can make the best choice for your unique situation.

First Things First – Know Your Options

Before deciding if you need to hire a tax relief company, it’s important to understand all of your options for dealing with IRS debt. Here are some common routes people take:

• Payment plans – The IRS offers short-term and long-term payment plans you can set up yourself. This allows you to pay off your tax debt over time while avoiding aggressive collection actions.
• Offer in Compromise – An Offer in Compromise allows you to settle your tax debt for less than the full amount owed, based on your financial situation.
• Penalty abatement – You may qualify to get certain tax penalties waived or reduced if you have reasonable cause.
• Innocent spouse relief – If your spouse is responsible for the tax debt, you may qualify to be relieved of liability.
• Bankruptcy – Declaring bankruptcy can eliminate tax debt in some cases. Chapter 7 bankruptcy wipes eligible tax debt completely, while Chapter 13 bankruptcy allows you to pay it back over time.

As you can see, you have options for dealing with the IRS directly yourself. But the rules and paperwork around these programs can be super confusing and intimidating. This is where a tax relief company can come in handy.

When Should You Consider Hiring a Tax Relief Company?

Here are some common situations where it may make sense to get help from a tax relief pro:

• You owe $10,000+ in back taxes – The more you owe, the more likely a tax pro can save you money compared to what you’d pay on your own.
• You are facing aggressive IRS collection – If you are facing a wage garnishment, bank levy, or tax lien, time is of the essence. A tax pro can help get collection stopped.
• You don’t understand the rules and forms – IRS rules can be overwhelming. A tax pro can handle dealing with the IRS bureaucracy for you.
• You lack time or confidence – If you are too busy or don’t feel equipped to handle this yourself, it may be worth getting help.
• You’ve been rejected before – If you tried applying for relief yourself but were rejected, a pro may be able to re-approach it more effectively.

The bottom line is – if you’re staring down a large tax debt and the idea of dealing with the IRS yourself makes you break into a cold sweat, hiring a tax relief pro to handle it for you may be worth the investment.

Be Wary of Scammy Tax Relief Companies

Here’s the thing – there are a lot of sketchy “tax relief” companies out there that overpromise, underdeliver, and charge ridiculous fees. The IRS even warns about tax relief scams on their website. Here are some red flags to watch out for:

• A company that wants lots of money upfront before doing any actual work on your case.
• Claims they can settle your debt for “pennies on the dollar” or makes other too-good-to-be-true promises.
• Won’t provide you a detailed agreement of services before asking you to pay.
• Refuses to provide any references or testimonials from actual clients.
• Is not upfront and transparent about their fees.

Reputable tax relief companies will be transparent, work on contingency, and provide you references. Do your homework to avoid getting scammed!

Questions to Ask Prospective Tax Relief Companies

To find a reliable tax relief firm, make sure to ask these key questions:

• What tax resolution services do you offer?
• Can you provide references from past clients?
• Who will be handling my case – are they lawyers, CPAs, or enrolled agents?
• What is your fee structure – what will this cost me?
• Can you provide me a detailed agreement upfront that outlines your services?
• Do you offer any money-back guarantee if you don’t deliver results?
• Are you bonded and licensed in my state?

A reputable company will have no issues answering these questions. Run away if a company seems dodgy or won’t give you straight answers.

Is DIY an Option?

Given the risks of shady tax relief companies, you may be wondering if you should try resolving your IRS debt yourself. Here are some pros and cons to consider:

Pros of DIY IRS Debt Resolution

• You don’t have to pay a company’s fee, which saves money.
• You have control over the process instead of relying on someone else.
• You gain a better understanding of IRS rules and procedures.

Cons of DIY IRS Debt Resolution

• It can be extremely complex and time consuming to navigate IRS bureaucracy.
• One mistake can sabotage your chances of getting relief.
• The IRS may not take you as seriously without professional representation.
• If not resolved quickly, debt amount may increase due to interest and penalties.

As you can see, doing it yourself is cheaper but can be risky if you don’t know what you’re doing. Make sure to weigh the pros and cons carefully for your situation.

Should You Ever Try Dealing with the IRS Alone?

Here are some situations where it may make sense to try resolving IRS debt yourself before shelling out money to a tax relief company:

• You owe less than $5,000.
• You can afford to just go on a payment plan.
• Your tax situation is straightforward without complications.
• You have tax knowledge or accounting experience.
• You have time and confidence to handle this yourself.

Even if some of the above apply to you, it doesn’t hurt to consult with a tax pro first to fully understand your options before deciding on DIY. But if your tax situation is relatively simple, DIY may be feasible.

Questions to Ask Yourself Before Hiring a Company

Before pulling the trigger on hiring a tax relief firm, ask yourself these important questions:

• Realistically, what are my chances of qualifying for tax relief based on my financial situation?
• Is my tax situation super complex, or relatively straightforward?
• Just how overwhelmed am I by this tax problem?
• Is the cost of tax relief services within my budget?
• How likely am I to follow through if I try handling this myself?

Being very honest with yourself about factors like your time, budget, confidence level, and willingness to handle this yourself can help you determine if hiring a tax pro is your best route.

In Closing

Dealing with IRS debt is stressful, but you have options. Arm yourself with information so you can make the most informed choice. If you decide to hire a tax relief firm, do your homework to find a reputable company that fits your budget. And don’t be afraid to start with DIY if your tax situation is relatively simple. With the right plan, you can put this behind you!

Let me know if you have any other questions! I’m happy to help however I can.