So you owe taxes to the state or federal government, then all of the sudden one day your phone rings. It’s a representative from a tax resolution company stating he is aware you have a tax debt and he wants to sell you a service to resolve your tax liability. You hear him out, accept his offer to send a proposal, and for the next month, maybe longer, your phone rings constantly. It rings so often that you start to cringe when you hear the sound. Every time it’s a different salesperson from a different company. Each representative seems to think he has all the answers. Many of the callers provide conflicting information, and most are willing to bash all the other companies that are calling, claiming “we are the best, so and so will just take your money, don’t get ripped off, you can trust us, you can’t trust others” and on and on.
Now you are faced with a difficult decision. You’re being told multiple different stories. Some salespeople are so aggressive they tell you “you’re going to get levied, you’re going to get shut down.” Some say they can “settle your debt for pennies on the dollar.” Others tell you “there is no way the IRS or state will ever give you a break.” Many promise you they will “reduce your penalties and interest and you stand to save thousands of dollars,” but you must hire them NOW!
You’re feeling frustrated about all the calls, overwhelmed by the amount of information, nervous about hiring the wrong company, and scared that the taxing authorities might actually do what these guys claim the taxing authorities will do!
How do you determine the best path to travel? Do you decide “these guys are all the same” and shop for the cheapest price? Do you trust your gut and hire the one that sounds the best to you? Do you conclude that none of them can be trusted and decide to instead hire a local accountant who might have a good reputation, but little or no experience handling tax collection cases? Do you arbitrarily decide to hire the company that called you first?
How to Find a Trustworthy Tax Resolution Company
The truth is that there is no one-size-fits-all answer. Ultimately, you are going to have to decide which service provider best meets your specific needs. Every competitive service industry has amazingly fantastic service providers, tremendously awful ones, and everything in between. The tax resolution industry is no different. Simply put, tax resolution companies are not all the same. In order to find the amazingly fantastic service provider who best suits your needs, do your homework, trust your instincts, and consider the following recommendations:
1) Proceed with extreme caution if you are considering a tax resolution company that runs an ad on the radio or TV. There are many marketing firms known within the tax resolution industry as “lead aggregators.” These “aggregators” do not actually provide tax resolution services. Instead, they run ads, generate inbound phone calls, and sell these “leads” to a variety of different tax resolution companies. If you hear an ad on the radio or see an ad on TV, there is a high likelihood that the ad is run by one of these aggregators. If you place a phone call to the toll-free number stated in an aggregator’s ad, your call will be re-routed to a company willing to pay as much as $200 for the opportunity to try and sell you on their services. The problem is that you are taking a crap shot. If your luck is good, you might wind up with one of the amazingly fantastic tax resolution companies. If your luck is bad, you might wind up with one of the bad apples of the industry. As a further word of caution, think about how much money the aggregators charge for a single phone call. If the tax resolution company who purchases these leads is spending a huge portion of its budget on leads, ask yourself how much money they might have left over to pay the people who will actually help you?
2) Is the company you are considering a member of the Better Business Bureau (BBB)? There are many, many tax resolution service providers who are members in good standing with the BBB. If the company you are considering is not a member of the BBB, why take a chance with them?
3) Take a look at the company’s online customer reviews, especially with the BBB. While you are at the BBB website verifying the company’s BBB membership status, take a few minutes to read their customer reviews. See what actual clients of the company have to say about their experience working with the company you are considering. I happen to like the BBB online reviews the best because the BBB has a solid system in place to make sure that the customer reviews are from actual customers. Some of the other customer review websites have no verification process, which calls into question the legitimacy and value of the reviews. I don’t discourage you from checking other customer review websites. However, keep in mind that some of the glowing “customer” reviews could be from the company’s owners or friends, while some of the negative “customer” reviews could actually be from an unscrupulous competitor or a disgruntled ex-employee.
4) How many complaints do they have with the Better Business Bureau and what is the nature of the complaints? If they have more than 5 complaints within the last 3 years, you may wish to take your business elsewhere. Consider their BBB reliability rating (e.g. A+, B, C), but take it with a grain of salt. Many companies have an A or even an A+ rating, but a ton of complaints. Look at both the number of complaints and the nature of complaints, and read the complaints. If there is a pattern of similar complaints, be careful. Nobody is perfect, and even the best providers can make a mistake from time to time. However, patterns of similar complaints—especially clients complaining of being ripped off—are a strong indication that the company is not committed to the care of its clients.
5) Does the contract you have been provided include all of the services you are expecting to receive? For example, let’s say you have a $30,000 state tax debt, a $72,000 IRS tax debt, and the IRS has recently levied your bank account. You need to make sure that the contract covers all of the services that you need. In this example, assuming you want both tax liabilities resolved and the levy released, the contract should specify that the stated fee includes resolving the $30,000 state tax debt, the $72,000 IRS debt, and the IRS levy. If the contract doesn’t include all of the services you need, you will have to pay additional fees for the omitted service. This renders your original fee expectation useless.
6) Who within the company you are considering will actually perform the services? Keep in mind that you will rarely speak with the actual tax professional that will be doing the important work on your behalf until you hire the tax resolution firm. If you haven’t hired the firm, you are almost certainly speaking with a salesperson. While the salesperson might sound great, keep in mind that he or she will not be doing the work that matters the most—resolving your back tax liability. Find out what kind of tax professionals the company employs, and take a look at their bios on the company’s website (if there are no bios, ask yourself why the company wouldn’t want to tell prospects who their pros are). There are 3 types of professionals who are legally authorized to represent taxpayers who are in collections: attorneys, enrolled agents, and certified public accountants. Think about your needs. Do you only need help filing or amending returns and have no perceived tax debt? If so, consider firms with accountants (CPAs or enrolled agents). Do you need someone to defend your rights and negotiate vigorously on your behalf? If so, you may want to consider a firm who will promise you that you will be represented by an attorney who is experienced handling tax collection cases. If you would like to learn more about the differences between these three types of professionals in the context of tax resolution work, click here.
7) Do a Google search for the company you are considering with these search terms. Enter the name of the company as they write it on their letterhead and then add the word “Complaints”. This search will enable you to see if a company has complaints all over the internet. If they do pop up in multiple places and have many complaints with the criteria I listed in #4, think twice—especially if there is a pattern of recent complaints where the consumers feel that they were ripped off.
Finally, some taxpayers in collections may be tempted to save fees and represent themselves before the taxing authorities rather than hiring a professional. If you owe business taxes of less than $10,000 or income taxes of less than $50,000 and this is your first time in collections, you might be fine representing yourself. However, you might also wind up paying back all of the taxes, penalties, and interest when you could have qualified for a settlement or reduction. To be safe, talk to a couple tax resolution service providers.