I read many articles about resolving tax debt and see many posts on forums about the experience of tax debtors in trying to resolve their tax debts. One common question that I see answered more often than it is asked is whether one should seek professional representation when dealing with the IRS regarding delinquent taxes. My answer like that of any competent professional is, “it depends.” In this post I would like to give three areas of consideration for any tax debtor faced with the decision of whether to seek representation.
How complex is your tax matter?
If you have always filed all of your tax returns and because of an unplanned financial event—perhaps an early 401k withdrawal or better year than expected—you are unable to pay your entire tax bill in the current year, your tax negotiation can be handled rather simply by you or even your tax preparer. My advice in cases like this is call the IRS yourself. If you owe less than a certain amount for only one year, then you qualify for an automatic installment agreement to pay your taxes. You can even make this request on form 9465 when you file your tax return without speaking with anyone at IRS. If your matter involves more than one delinquent year and you have more than one unfilled tax return or if you are beginning to receive correspondence from the IRS your matter may be more complex and the IRS will view you differently. You likely would benefit from the services of a professional with experience dealing with the IRS specifically on collections matters. This is usually not your normal CPA or tax preparer who generally work with compliant taxpayers on their current year’s tax return. This is someone who deals frequently with IRS collections issues.
How much money is at stake and do you challenge the amount you owe?
Certainly larger amounts of money at risk increase the value of a competent professional. The amount of tax you owe and finally agree to pay is governed by a complex set of rules. You are at a severe disadvantage with regard to the IRS Revenue Officer or Agent who is assigned to your case. This person deals with delinquent taxpayers multiple times each day. You deal with the IRS only once in your life, and believe me no other experience can prepare you for that. Sometimes IRS employees themselves—either knowingly or unintentionally—misapply or break the rules. You need someone who can recognize that if it happens and hold them accountable.
If you do not accept the amount you owe to be correct you will most likely benefit from good representation to establish your true debt. If the IRS has already ruled against you then your representative can be invaluable in negotiating the appeals process and even an Offer in Compromise based on doubt as to liability if that becomes necessary. One word of caution: in order for your representative to be effective it is essential that you own up to the liability that your professional tells you is owed. If you bull headedly maintain your position and refuse to pay your taxes there is no professional in the world that can help you. You must take responsibility for the mistakes you have made and be willing to face your problem. You must also be willing to take the steps necessary to begin piecing your life back together. No matter what you hear on late night TV, there are seldom painless solutions to a large tax liability
How much sleep are you losing?
If your tax problem is causing you or someone dear to you a great deal of stress it pays to entrust your problem to a competent professional for many reasons. First, if your problem generates strong emotion for you then you are not likely to negotiate effectively on your own behalf. Second, there is a deep peace of mind that comes with knowing that you do not have to deal with this problem alone. Finally, your significant other will derive a great deal of relief in knowing that you have hired professional assistance in dealing with this stressful situation.
In summary, not every tax issue requires that you spend the money for good professional representation, but you do not want to be involved in a high stakes card game in which you are the only one at the table with no knowledge of the rules of play. Before selecting anyone to entrust with your tax problem do careful research. Speak to more than one firm; ascertain the level of competence by the level of technical consultation you receive before you pay any fees. Research each firm’s record using independent third party sources such as the Better Business Bureau. Never do business with any firm that touts “Pennies on the Dollar Settlements” or proposes an offer in compromise right out of the gate without knowing much about your tax and financial situation. Once you find good representation trust them and follow their instructions. Own up to your mistakes where appropriate and take the steps to get your life back. Above all stop procrastinating because the problem will never go away on its own.
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