Answering the #1 Question: How Much Does Tax Resolution Cost?
When you owe back taxes to the IRS, the last thing you need is another bill. That’s why we’re sure that the first question you have is, “How much is this going to cost?” It’s smart to do your homework, and we want to help you know what to expect.
An independent company surveyed several dozen tax resolution firms, south, north, east, and west of the United States, and arrived at a general pricing framework that isn’t dependent on geography.
This will help you create an initial budget for hiring a tax resolution firm to help you solve your tax problem.
All tax relief professionals charge fees for their services. The way they calculate and assess these fees may vary, but they can be generally categorized as Flat Fee, Hourly Rate or Flat Fee + Hourly Rate:
A flat fee covers the estimated time and out-of-pocket costs to resolve a tax problem from beginning to end, including tax preparation for an IRS or state issue. Some firms may have flat fees for specific resolutions that vary based on your debt level. This means a sliding scale of fees for a payment plan based on the total amount you owe.
Some licensed tax professionals, Attorneys, CPAs, and Enrolled Agents bill on an hourly basis, with fees that often range from $300-$650 per hour, or charge a combination of a flat fee and an hourly rate.
However, the survey found that most firms charge based on a service progression. The first phase consists of a transcript and compliance analysis. Then a compliance phase if the taxpayer has unfiled tax returns. And finally a resolution phase. This phase is where all the negotiating, offers, and major work gets done.
Here’s a list of the typical fees tax resolution companies around the US typically charge:
Transcript Investigation – this initial phase is where we learn what the IRS knows about you
- Transcript Investigation $1,250 – $1,500 – this includes the following:
- Power of Attorney (IRS Form 2848) – this lets us halt any IRS actions and deal with the IRS on your behalf
- Tax Information Authorization Form (IRS Form 8821) – this gives us details of your tax situation
- FOIA (Freedom of Information Act) Request: Account Transcripts (up to 5 Years) – this helps us determine if you’re in compliance with the IRS, your tax filing history
- FOIA (Freedom of Information Act) Request: Wages & Income Records (up to 5 years) – this gives us more information to get a better understanding of your history through the IRS’s eyes
- $90 per year over 5 years
- Case evaluation and analysis of your tax resolution options
- There are additional fees if a business is involved.
Compliance (Preparing Unfiled Tax Returns) – The IRS won’t negotiate a deal until any back taxes issues are resolved
- Individual Income Tax Returns ($400 – $500) per tax year.
- Corporate Income Tax Returns ($1,750) per tax year.
IRS Tax Resolution
- Release of a Bank or Wage Levy ($1,000 to $1,500)
- Installment Agreements ($1,250 to $4,250)
- Offer in Compromise ($5,000 to $20,000)
- Penalty Abatement ($3,500 to $6,500) – “Abatement” is simply removing the penalties after they are assessed to the taxpayer
- 941 Representation ($5,000 to $15,000) – for employers, Form 941 is a quarterly payroll report filed by employers indicating employees’ wages, tips, withheld tax, medical, taxes, and social security taxes
- Trust Fund Recovery Penalty Representation ($6,500 to $20,000) – for employers, this is doing tax resolution for a situation of unpaid payroll taxes
As previously mentioned, most charge a flat fee plus a $250 to $500 hourly rate. In most cases, an hourly fee will cost more. If one tax resolution firm has more years of experience, it’s likely they can get a problem solved quicker than a firm with less experience. You need to consider the level of experience when thinking about pricing. More experience = quicker solution with a better result!
How We Charge
While you might be a very detailed person and have kept every letter the IRS has sent you, it’s not enough. Or, you might be a taxpayer who hoped somehow that the IRS would forget about you – they won’t. Pulling your IRS transcripts is how we can do a forensic analysis. You might not be yet aware of any open investigations, but that doesn’t mean they don’t exist. We have to know your specific situation before we can craft the best plan to resolve your tax debt.
Getting your forensic account records is our way of doing an MRI. A surgeon would never start an operation before first examining MRI scans before they could tell you what they’re going to do. How they’re going to do it. What outcome you can expect. And how much the surgery will cost. Your upfront cost is the MRI.
At IRS Tax Freedom, the only beginning fee we’ll quote upfront is $500. This fee covers our time to prepare and submit a FORM 8821, or maybe a FORM 2848 (Power of Attorney) to the IRS. Either form will give us permission to contact the IRS on your behalf to request your tax records.
Do you have penalties? If so, the IRS is charging you interest on the tax debt, plus the penalties added to the overall debt, plus you’re paying interest on top of the interest. It’s a snowball that gets bigger and bigger by the month.
So the initial transcript investigation will tell us the exact amount we’re dealing with. We can quickly determine if there’s a good shot for penalty abatement. A penalty abatement could save you thousands.
BUT – and this is very important – if you have any unfiled tax returns, the IRS is not going to listen. Why? You’re considered “non-compliant”. They won’t consider any negotiations until all your tax returns have been filed. If you’re non-compliant, no problem, we can get you compliant.
A tax transcript review and compliance check is a necessary first step. From our perspective, it’s essential – it’s the key that unlocks everything else! A tax transcript review and compliance check is how many licensed tax resolution firms like ours can assess your specific problem, determine the best solution, and provide a competitive fee.
This first phase involves obtaining your tax transcripts or transcript information from the IRS or the State. This process is essential because it identifies your fees & interest, penalties, and tax debt balance for each year (if applicable) as well as your tax filing history. Some companies call this a transcript review or compliance check. Others call it an investigation and include financial analysis.
Once your personal or business’s financial situation is analyzed, it’s the foundation for developing a strategy – the right strategy for you and your situation.
With most clients needing a few back-years of tax preparation, when everything is factored in, the average case tends to be around $8,500 dollars.
If a business, such as a partnership, LLC, C-Corp, or S-Corp, is involved the fees for tax preparation will lead to an overall higher cost, especially if you need to file 940 or 941 forms. Therefore, for businesses with complex situations, the fees could be in the $7,000 to $15,000 range.
Major tax relief firms that spend a great deal on advertising can charge substantially more for the same services you can find more reasonably priced elsewhere. In many cases, many of the firms you recognize spend so much on advertising that their fees need to be higher to compensate for marketing costs.
Other Factors to Consider With Pricing.
Although the average case is $8,500, it doesn’t mean that you will pay the average. There are many different types of services offered by tax resolution companies that all vary in price. Usually the more complicated and intensive the service, the higher the cost. For example, an Offer in Compromise will typically carry higher fees than a simple payment plan.
Another factor in the cost of the service is the amount of debt owed by the taxpayer. As the debt amount increases, the complexity of services usually increases. For example, the IRS requires more documentation and financial information for taxpayers that owe over $50,000 in most cases. A taxpayer who owes less is likely to fall on the lower end of the average pricing while a taxpayer that owes over $50,000 is likely to pay more than the average fee.
But don’t get ahead of yourself – what you need to start the process is that compliance check!
A Word of Caution.
Please note that, while many tax professionals are reputable and are able to help taxpayers get relief from their tax debt, there are others who charge tremendously overpriced fees for simply handling options that are not even appropriate for a person’s particular situation. For example, many firms will propose an IRS Offer in Compromise, when this option is not suitable in the first place, will not be accepted by the IRS (and they even know that likelihood), and could very well lead to additional charges because the offer most likely won’t be successful.
While this is the most commonly advertised tax debt solution, the number of Offers in Compromise applications that get approved is generally very low. In order to have such a reduction approved, taxpayers must prove that the total amount owed is incorrect, the probability of being able to pay back the full amount is very low, or paying back the full amount will result in tremendous financial hardship.
Also, realize that the more complicated your situation, the more scrutiny you’re likely to receive from the IRS. It would be smart to have a tax resolution specialist prepare your financial documents and handle the negotiations with them. For example, in an Offer in Compromise, this could mean the difference between acceptance or rejection of your offer, or paying more for your offer than would otherwise have been required. That’s why we prefer to handle everything for our clients!
What You Don’t Know Can Hurt You.
To avoid getting ripped off, you should do as much research as possible. Learn about the options for resolving your tax debt and try to get a grasp on what is realistic in your case and what isn’t.
In the vast majority of potential settlements, clients need to work out a payment plan with the IRS that will allow them to clear out their tax balances over time while keeping both their assets and their dignity.
In addition to cost comparisons, be sure to check into a resolution firm’s experience in dealing with the IRS, years in business, specialties, reputation, professional memberships, and how easy it will be to get in touch with the company, as needed.
Go with Experience…and a Successful Track Record.
The tax settlement business is a difficult maze of confusing tax laws, deadlines, and IRS procedures. While the IRS does write off millions in tax debt every year, tax procedures are complicated, and although there are legitimate ways that tax obligations can be reduced, accessing and leveraging them is a painstaking process.
Generally, the more serious and substantial your tax situation is, the more credentialed and experienced the firm negotiating on your behalf needs to be. Those seeking assistance with their unpaid tax balances should have a qualified tax resolution professional with years of experience dealing with the IRS.
We Bring Experience and a Guarantee
IRS Tax Freedom is a competitively-priced firm with a highly experienced team of CPAs, Enrolled Agents, and former IRS agents who know the ways of the IRS inside and out.
Your IRS resolution journey starts at $500. This fee covers our time to prepare an IRS FORM 8821/2848. Submit the forms to the IRS. Request your transcripts. Review the transcripts to determine the seriousness of your case. And most importantly, we need to find out if there are any new investigations started.
Our guarantee: If we can’t help you, we’ll refund you the $500.
Make today the last day you deal with the IRS and get behind our shield of protection. Schedule a Free consultation using one of the contact methods below. Take that first step to IRS Tax Freedom, and if you choose to have us represent you, we’ll handle everything for you.