My bookkeeping and tax resolution firm helps people who have problems with the Internal Revenue Service (IRS) to get fair representation and the IRS off their backs. Anyone who has experienced owing the IRS knows it can be stressful and scary, and is something you do not want to drag out. It’s my firm’s job to help people get back to normal, back to working and back to sleeping peacefully as quickly and as painlessly as possible.
If you have problems with the IRS and need to hire a tax representation firm, there are a few important things to know. In dealings with the IRS, what you don’t know can hurt you.
All the late-night TV ads promise settlements with the IRS for “pennies on the dollar,” but many of these companies work differently and deliver different results—differences that you may wish you had known before getting involved with the wrong representation. If you perform your due diligence and ask the right questions, you will be able to get better representation when you have to face the IRS. The following are five questions you should be asking before hiring a tax representation firm.
1. Are you licensed to be providing tax advice to me?
Some tax resolution firms use unlicensed sales staff to sell their services, which is against the law. If they do not possess the licensed, professional knowledge to advise you on your tax matters, you should not accept their services. The only people that can advise you on tax matters are enrolled agents (EAs), certified public accountants (CPAs) and attorneys. When assessing a tax partnership, be sure to ask for their credentials and confirm that they are licensed to practice before the IRS. If they are anything other than an EA, CPA or attorney, it could be the case that they are not licensed. It is against the law to represent a taxpayer without the proper credentials. There have been criminal convictions for this type of misrepresentation, so do not get caught using unauthorized representation for yourself or your company. It could hurt your case with the IRS and cost valuable time and money.
2. Are you the person who will be representing me?
If you are not initially asked to sign an IRS Form 2848 Power of Attorney, you may not be getting the best representation and your case may be sitting in a pile in the corner of someone’s office. To represent, negotiate and work with a client, the Power of Attorney form must be signed and accepted by the IRS. The person or firm representing you will be listed on the Form 2848 Power of Attorney, along with your name and the information on your case. Pay close attention to the names on this form when signing, and before you sign any contract or send payment. The credentials of your representative will also be on the bottom of the form—they must be an EA, CPA or attorney to be able to speak to the IRS on behalf of you, the taxpayer.
If you are the owner of a company, such as an S Corporation, then you must also sign a Power of Attorney for the company, as well as personally. This is especially important for tax issues such as 941 Trust Fund Recovery Penalty cases that affect both your business and you as an individual. Cases in which inexperienced firms have not filed Power of Attorney forms for both the business and the individual have resulted in significant long-term financial damages to the owner of the company.
3. What is your BBB rating?
Ask the company for their Better Business Bureau (BBB) rating, and then verify it. Conduct a Google search for the name of the company, plus the words “Better Business Bureau.” Just like making any major purchase or working with any other company, this quick research and the information you find can be invaluable.
4. Have you been involved in negotiating tax resolutions?
Has the firm and staff you are considering worked on tax cases as a representative? As important as it is to be licensed, having experience working cases is also imperative, because you want qualified representation to offer tax advice regarding your IRS debt. An experienced, licensed representative should be able to walk you through what you can expect while working your case from start to finish.
5. What is included in the quote or fee?
Some firms are notorious for rebilling clients for work that either does not need to be done, was originally excessively overbilled, or should have been included in the first fee/quote. Many tax resolution firms operate on a “flat fee” basis, meaning the fee/quote includes everything necessary to resolve your case. In your due diligence, make sure the fee includes some of these necessary actions:
- All appeals files
- Full negotiation of resolution
- Preparation of any missing tax returns, including catch-up bookkeeping for certain years
- Removal of any existing levies or wage garnishments
- Representation for all tax types, including state taxes, if needed
- For business owners, make sure you are personally represented for 941 Trust Fund Recovery Penalty resolution. This is crucial to prevent getting personally stuck with your business tax bill.
- Application for a penalty abatement if “reasonable cause criteria” applies
If you are considering a tax firm that works on a retainer basis with hourly fees rather than a flat fee, be sure to see a schedule of service fees, and get a copy of their billing policy. Ask for an estimate of the total charges and get it in writing.
Hiring a representative to negotiate on your behalf is not a guarantee that your case will be resolved. You will need to work closely with them to ensure that your best interests are always considered. Your representative should conduct nearly all of the interaction with the tax authorities, but your participation is vital to the resolution process, so be sure you select someone you can work with without personality conflicts. Be sure that anything and everything you discuss with a tax resolution firm, such as fees, covered services, responsibilities, deadlines, etc., are all in writing. Do not sign a contract or give them your credit card number without seeing everything in writing first.
These questions (and a firm’s responses to these questions) should give you a basic understanding of how the process works and what you need to know to make this important decision. Take the time to shop around and research the people you hire to represent you and/or your company to be as informed as possible when hiring professional tax services.
