Content of the material
- If you’re expecting a refund, you may actually feel excited about tax time
- How Does Optima Tax Relief Work
- Optima’s Four Step Process For Tax Relief
- How to settle tax debt
- Should you apply by yourself or employ a professional tax relief firm?
- Why you should be wary of tax relief companies
- What Is a Tax Relief Company?
- How Much Will the IRS Usually Settle for? A Closer Look at Offers in Compromise
- Jobs and Making Money
- How does tax relief work?
- Common tax problems
- 4. Larson – Best Corporate Tax Relief Company
- Larson Tax Relief Company Pros:
- Larson Tax Relief Company Cons:
- Types of Tax Help Services Offered by Larson: 5/5
- Minimum Debt Required for Larson Tax Services: 3/5
- Reputation of Larson Tax Services: 4.5/5
- Larson Experience: 5/5
- What About Tax Relief Companies?
- Who Is Eligible
- How Much Does Tax Relief Services Cost
- Select a Payment Option
- Financial Analysis
- Alternatives to Using a Tax Relief Service
- For More Information
If you’re expecting a refund, you may actually feel excited about tax time
But if you end up owing and it’s more than you can afford, or you’re still behind on previous years’ taxes, the stress and anxiety can feel crushing.
Tax-debt-relief companies claim to be able to help you settle your bill with the IRS for far less than what you owe. Some of these offers are outright scams. Others may just be an expensive way to do something you can do on your own for free. Learn how to reduce the risk with the knowledge and tips we’ve gathered.
- What is tax debt relief and why might you need it?
- Why you should be wary of tax relief companies
- Signs of a tax-debt-relief scam
- IRS tax-debt-relief options
How Does Optima Tax Relief Work
Below is a quick breakdown of the product details for the Optima Tax Relief service:
- Free consultation via an online form.
- Initial costs start at $295.00
- $10,000 minimum debt required.
- 2 to 6 months turn around time.
- Available in all 50 States.
- 15-day money back guarantee for initial investigation phase.
If you decide to retain Optima Tax Relief you’ll have access to a personalized client portal where you can monitor the progress and developments of your case.
Optima’s Four Step Process For Tax Relief
Optima has a four-step process for getting you free from tax debt:
The free consultation is a key step in the tax relief process. An Optima Tax representative will review your situation with you, explain your options, and help you decide whether a tax relief company is your best option. Many companies treat a free consultation as a sales pitch. Optima does not.
If you choose to retain Optima’s services you’ll proceed to the investigation phase. Optima will focus on contacting the IRS, freezing any ongoing collection efforts, and developing a strategy to resolve your tax debt.
In the resolution phase Optima will pursue the selected resolution strategy. This will fit one of the tax relief options offered by the IRS: like every other tax relief company, Optima works within the framework set by IRS rules.
Resolution may involve a payment plan or an attempt to reduce your arrears, but this will always involve following one of the options offered by the IRS.
How to settle tax debt
Most of us don’t like dealing with the IRS, but the longer you wait, the larger your tax debt becomes. Some different tax debt resolution options to pay off the IRS in full or partial payments include:
- Lump-sum payment: If you owe money to the IRS, it’s always best to pay in full to minimize interest charges and penalties. If you can’t make the whole payment all at once, you could qualify for an extension of up to 120 days.
- Payment plan: If you can’t pay everything you owe immediately, you can negotiate with the IRS to come up with a short- or long-term payment plan.
- Credit cards: You can pay federal taxes with a credit card. The IRS doesn’t accept direct credit card payments, but there are licensed payment processors that accept credit card payments on the IRS’s behalf. Be aware that these companies charge a fee to settle tax debt with a credit card. You must also pay interest to your credit card issuer until you pay back the amount.
- Bankruptcy: Filing for Chapter 7 bankruptcy can discharge income tax debts under certain conditions. The debt must be at least three years old, you must have filed a tax return and the IRS must have assessed the debt within 240 days before you file for bankruptcy.
- Statute of limitations: Generally, the IRS collection process on taxes, penalties and interest has a 10-year statute of limitations. The 10-year period starts on the date of your tax assessment. If IRS tax debt forgiveness after a decade sounds too good to be true, keep in mind the period can be suspended multiple times and may last much longer.
- Hire a tax professional: If you owe more than $10,000, it’s smart to hire a tax relief professional with expert knowledge of how to negotiate with the IRS. The average cost of a tax attorney ranges from $750 to $10,000 or more, depending on the complexity of your case.
Should you apply by yourself or employ a professional tax relief firm?
If the quantity you owe is less than $5,000, you probably need to attempt to bargain your tax obligation expense with the IRS directly to reach a deal quantity. Although tax obligation relief companies are beneficial to carry your side when negotiating a negotiation quantity with the IRS, their expense can surpass the cost savings they create when managing small tax financial debt customers.Nonetheless, if your tax bill quantity is larger or you’re concerned about a tax audit, you must seriously consider working with a tax attorney or a tax obligation relief firm that has tax attorneys on its team. Click here to obtain a free examination with a senior tax obligation pro.The expense of these services can be well worth it to taxpayers struggling to navigate the IRS’s settlement process. My Tax Settlement just suggests tax obligation relief firms that supply budget-friendly fees, offer repayment options, and have tax attorneys on the team.
Why you should be wary of tax relief companies
You’ve probably heard or seen advertisements from tax relief companies offering to help distressed taxpayers by reducing or even eliminating their tax debt. And technically, it is possible to settle your tax debt for less than the full amount you owe through an IRS offer in compromise, known as an OIC.
Even though many of these companies charge nonrefundable fees — which can be thousands of dollars — they may not be able to deliver on their promises. It’s not easy to qualify for an offer in compromise. The criteria are strict — you can’t be in the middle of a bankruptcy, must be up to date with all filing and payment requirements, and meet other qualifications. We’ll talk more about an offer in compromise shortly.
Some of these companies even venture into scam territory by taking your money and then neglecting to send the IRS the necessary paperwork to apply for a payment plan or OIC.
The Federal Trade Commission has even received complaints that some tax relief companies have made unauthorized charges on top of the upfront fees.
Some also offer to advocate on your behalf with the IRS to get you on a payment plan. But in this case, you’ll likely overpay the company to do something that you can do on your own by contacting the IRS or your state directly.
What Is a Tax Relief Company?
Tax relief companies rely on their extensive knowledge of tax laws and established relationships with IRS agents to help taxpayers resolve unpaid tax debt. Tax relief companies often hire tax lawyers, certified public accountants (CPAs), and even former IRS agents to deliver service to their customers.
Many tax debt relief firms advertise that they can reduce or eliminate tax debt, penalties, and late fees.
How Much Will the IRS Usually Settle for? A Closer Look at Offers in Compromise
How Much Will the IRS Usually Settle for? Each year, the Internal Revenue Service (IRS) approves countless Offers in Compromise with taxpayers regarding their past-due tax payments. Basically, the IRS decreases the tax obligation debt owed by a taxpayer in exchange for a lump-sum settlement. The average Offer in Compromise the IRS approved in 2020 was $16,176. How do we get to that amount? In 2020, the IRS accepted 17,890 Offers in Compromise with a total worth of $289.4 million (resource). Divide $289.4 million by 17,890, and – presto! – you get an average deal in compromise of $16,176. Naturally, that number is meaningless…
Jobs and Making Money
What to know when you’re looking for a job or more education, or considering a money-making opportunity or investment.
How does tax relief work?
Tax relief companies employ tax experts, including tax attorneys, certified public accountants and enrolled agents, who serve as intermediaries between their clients and the IRS. These tax experts work with the IRS to find ways for clients to resolve their tax debt. IRS debt help experts can also help by negotiating tax relief programs, tax debt settlement agreements or tax debt installment agreements.Seek professional tax relief help if you owe more than $10,000.
The IRS offers several tax debt relief programs. Taxpayers can apply for tax relief from the IRS directly or hire a tax relief company to help negotiate on their behalf. If you owe a tax debt of more than $10,000, it’s smart to hire a tax relief professional who has experience negotiating with the IRS.
When you work with a tax relief company, its professionals negotiate a tax relief program for you. Some IRS tax relief programs, like innocent spouse relief, remove improper tax liabilities. Others, like the release of wage garnishments, stop the IRS from seizing your wages or assets to pay back taxes.
Tax relief companies use different types of contracts — some tax relief companies require clients to sign a contract, while others don’t require signatures on any paperwork and let clients start and stop work at their discretion. Any contract you sign with a legitimate tax relief company should clearly define the scope of the work, the payment schedule and how you’re billed.
Common tax problems
If you have a tax debt, you should attempt to pay the balance as quickly as possible. Unpaid tax bills collect interest and monthly penalty fees. If you can’t pay everything you owe at once, negotiate with the IRS to come up with an installment plan. The IRS is patient — and even flexible — if you make an effort to set up a payment plan. Ask a tax relief company for help if you need assistance with tax problems, including:
- Unfiled tax returns
- It’s always best to file your taxes on time, even if you can’t pay what you owe at that point. Unfiled returns create tax issues such as penalties, loss of refunds, refund holds, substitutes for returns and tax resolution hurdles.
- Tax filing mistakes
- The IRS may assess penalties and interest if you file a return with math mistakes, submit the incorrect form or file the wrong status. You can avoid tax issues caused by filing errors by filing an amended tax return with Form 1040X.
- Penalties and interest
- When you don’t file taxes or file them incorrectly, the IRS charges failure-to-pay penalties and interest on unpaid balances. These penalties add up quickly — IRS debt interest compounds daily from the due date of the return until you pay the full balance.
- IRS wage garnishments
- If you’re not making payments on your taxes, the IRS can have your employer redirect a portion of your income to pay your tax debt. The IRS can apply wage garnishments to hourly wages, salaries, commissions and bonuses. The IRS can legally seize up to 70% of your wages through garnishments until you make arrangements to pay the overdue tax debt. To qualify for the release of a wage garnishment, you need to provide proof of income and expenses to show how the wage garnishment creates a financial hardship for you. You can avoid wage garnishments by entering into an installment agreement or making an offer in compromise.
- Tax liens
- The IRS can claim your property and assets if you neglect or refuse to pay your tax debt. Tax liens secure the government’s interest in your assets. A Notice of Federal Tax Lien may stay on your credit report even if you file for bankruptcy.
- Tax levy
- If you owe taxes and don’t make payment arrangements, the IRS can seize your finances and assets. The IRS can put a levy on bank accounts, which lets the agency take funds to cover the balance you owe. Unlike a lien, an IRS tax levy takes your assets to pay off a tax debt. The IRS and state governments use tax levies to seize all types of property and assets.
4. Larson – Best Corporate Tax Relief Company
Larson Tax Relief Company Pros:
- No retainer charges
- Licensed to work in every state
- Flexible payment options
- Available for complex corporate taxes
Larson Tax Relief Company Cons:
- Short 15-day money-back guarantee
- Standard $10,000 minimum debt requirement
- Little pricing information before individual consultation
Types of Tax Help Services Offered by Larson: 5/5
Larson Tax Relief provides various services to their clients. Not only do they handle individual tax relief, but they offer services to small businesses and corporations.
Minimum Debt Required for Larson Tax Services: 3/5
If you do not have a minimum debt of $10,000, Larson Tax Relief will not be able to help you. It costs $200 to file tax returns and between $250 and $500 for research. For those who need power of attorney services or representation, these services cost a minimum of $1,750.
Reputation of Larson Tax Services: 4.5/5
Larson Tax Relief is a well-known, nationally recognized brand. They have been accredited by the BBB since 2006 and have an A+ ranking. In addition to helping individuals, they are ideal for corporations and business owners. They have various positive reviews from individuals and businesses alike.
Larson Experience: 5/5
Larson Tax Relief is one of the oldest companies on the list, opening in 2005. They boast over 18,000 satisfied customers and clients in every one of the 50 states. They can handle business tax preparation, corporate income taxes and paperwork for payroll taxes. You can find federally licensed individuals on the staff, including the owner, a member of the National Association of Tax Professionals.
What About Tax Relief Companies?
Tax relief companies regularly use the internet, radio and television to advertise their services to struggling taxpayers. Essentially, tax relief companies work by negotiating with the IRS on your behalf—for a fee. That fee can reach into the thousands of dollars, with no guarantee that they’ll be any more successful than you’d be if you negotiated with the IRS on your own.
If you hire a reputable tax relief company to work on your behalf, they may contact the IRS to try to negotiate an offer in compromise, installment agreement, or penalty or interest abatement.
If you prefer to have a third party represent you, make sure you hire a reputable and qualified tax professional. The Federal Trade Commission (FTC) cautions that only certain tax professionals have the authority to represent you with the IRS. These include:
- Enrolled agents (federally authorized tax practitioners who can represent taxpayers before the IRS)
- Certified Public Accountants (CPAs)
When hiring a third party to represent you, be on the lookout for high upfront fees, unfavorable refund policies, and default billing rates that kick in if you decide to cancel.
Furthermore, the FTC recommends that you meet face-to-face with any tax professional you’re considering hiring. Ask them to explain your options and the company’s fee structure in detail before you pay anything or sign an agreement.
Who Is Eligible
Confirm you’re eligible and prepare a preliminary proposal with the Offer in Compromise Pre-Qualifier Tool.
You’re eligible to apply for an Offer in Compromise if you:
- Filed all required tax returns and made all required estimated payments
- Aren’t in an open bankruptcy proceeding
- Have a valid extension for a current year return (if applying for the current year)
- Are an employer and made tax deposits for the current and past 2 quarters before you apply
How Much Does Tax Relief Services Cost
With most clients needing a few years of tax prep, the average case tends to be around $3,500-$4,500 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 940s or 941s. Therefore, for businesses with complex situations, the fees could be in the $5,000 to $7,000 range.
Major firms that spend a great deal on advertising can charge substantially more for the same services you can find 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.
Select a Payment Option
Your initial payment varies based on your offer and the payment option you choose:
- Lump Sum Cash: Submit an initial payment of 20% of the total offer amount with your application. If we accept your offer, you’ll receive written confirmation. You must pay any remaining balance due on the offer in five or fewer payments.
- Periodic Payment: Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If IRS accepts your offer, continue to pay monthly until it is paid in full.
In many cases, your financial situation determines your best course of action with the IRS or State. The ability to qualify for an IRS or State tax resolution hinges mostly on your personal or your business’s financial situation.
Some tax firms provide the tax transcript and financial analysis for free. Others will charge you a small fee upfront, while others will include it within a total flat fee for services.
Alternatives to Using a Tax Relief Service
Although tax relief services can help guide you through the process of qualifying for IRS hardship programs, you don’t have to pay for this help. You can take steps to renegotiate your tax debt on your own, directly with the IRS.
Some of these options include:
- Installment Agreement. This type of agreement is common when individuals need to make a payment plan for their tax debt.
- Offer in Compromise. This tax debt solution lets you settle your debt for less than what you owe. This option is typically only available after other avenues have been exhausted.
- Penalty Abatement. A penalty abatement takes place when the IRS agrees to waive penalties assessed on your back taxes.
- Interest Abatement. An interest abatement takes place when the IRS agrees to waive interest charged on your back taxes.
The IRS website can help you learn more about payment plans for tax debt, and other options like the Offer in Compromise process. It’s important to know that you can apply for most tax resolution options yourself, and you don’t have to pay a third party for assistance.
For More Information
The IRS has additional information on the collection process and payment options at irs.gov.
Publication 594, The IRS Collection Process, has information on options available to taxpayers, and the IRS YouTube channel has a video with helpful information, as well.