Website design By BotEap.comWithin the tax resolution industry, there are a variety of fee models that you should be aware of. Different fee models have different potential for abuse by the company offering the services, and it is important to do your due diligence and fully understand what you are paying, how much, and when, before paying a single penny to a resolution company. of taxes. .
Website design By BotEap.comOne of the most common fee models is a retainer model, which is a carryover from the CPA and law firm world from which many tax professionals hail. Under this model, you pay an amount up front, which is retained by the company and then billed by the hour. Around the time the advance runs out, you’ll receive (or actually SHOULD) receive an invoice showing what was done, how long it took, and the hourly rate at which it was billed. This invoice will usually also include a request for an additional down payment. The key to remember here is that if you don’t keep paying, they don’t keep working.
Website design By BotEap.comIf you’ve been researching individual companies online, you may have already come across BBB, forum, Attorney General, and other complaints against some firms that aggressively charge for advances and constantly ask their clients for more money, without making headway. significant. we have the real tax case of a client. It is important that you thoroughly vet a company before you give them any money, to avoid becoming another victim of a deceptive company.
Website design By BotEap.comAnother common fee model is the flat fee-for-service model. This fee model has a large number of variations, from a flat fee for a specific package of quoted services, to a “menu of services” model where each service you can order from the menu has a specific fee. This latter method is very similar to the more common pricing model used in tax return preparation, where each specific tax form has a particular fee to prepare it. You will see this fee model used by almost any CPA firm or retail tax preparation team (including Jackson Hewitt, H&R Block, etc.).
Website design By BotEap.comWhen talking to a seller about a service package, it’s very, very important that you understand exactly what services you’re being quoted for and what the company’s policy is regarding fees for additional services. When it comes to tax matters, it is not uncommon for additional services to be required, which will require additional fees if they are not covered in the quote you are already working with. Ideally, the sales person you talk to will have done a thorough analysis of his situation and included everything in the proposal sent to him.
Website design By BotEap.comWhen comparing proposals between multiple companies, keep in mind that you’re probably not comparing apples to apples, but apples to oranges. Here are things to consider when comparing proposals between companies competing for your business:
- Is any tax return preparation included in the quote?
- Does the fee include all the appeals necessary to handle your case?
- For business owners, is trust fund recovery penalty representation included?
- How many quarters or years of tax problems are covered by the rate quote?
- Is a penalty reduction request included or is it additional?
- What specific resolution option does the fee cover and what happens if the resolution strategy changes?
Website design By BotEap.comThis last question is particularly important. There are some tax resolution firms that will try to sell
all the world an Offer in Compromise, because they charge a higher fee for this service. However, it is critical that anyone and everyone understand that
most individuals and small businesses DO NOT QUALIFY for an Offer in Compromise. In fact, the IRS accepts less than 20% of all offers that are submitted, and the only reason this number is so low is because of the large number of ineligible offers that are submitted in the first place. It is also important to understand that the average processing time for an Offer in Compromise exceeds 10 months.
Website design By BotEap.comWhat does this mean for your fee? Well, a reputable company will carry out a thorough financial analysis and tell you whether or not you are a candidate for the Offer. If not, they will negotiate another resolution option for you within the same fee. If a company tells you that it will charge you an additional fee for negotiating an installment agreement (monthly payment plan) after you’ve already paid a higher fee for an offer in compromise, then you should seriously question it.
Website design By BotEap.comYou should also be wary of the company that tells you that yes, you are a candidate for the Offer, even when you own assets that exceed your tax liability. Simply put, if you have assets that exceed your tax liability, then the IRS
never accept your Offer. There is one incredibly rare exception to this rule, but it’s so rare that it only happens once or twice a year (literally). This exception is called the “Effective Tax Administration” rule, and if a business tells you that you can qualify under this rule, then they are likely lying to you outright. You practically have to be on your deathbed to qualify for this exception.
Website design By BotEap.comAnother important aspect to consider when discussing fees is the question of what is an appropriate fee and what is too much. The cost of a service obviously varies by geographic location, but in general, rates for tax resolution services across the country fall along a line of what is appropriate and what is not. Here are some examples of what would be considered standard fee ranges for certain services:
- IRS installment agreement negotiation, penalty abatement, and all appeals of a $40,000 personal income tax debt: $2,500
- Same as above, but with a business employment tax liability of $200,000: $5,000 to $7,000
- Trust Fund Recovery Penalty Representation: $1,000 to $2,500 depending on the nature of the case
- Basic personal income tax preparation, married filing jointly, one house, two jobs, couple children: $300-$500
- Prepare an income tax return for a small business with less than $250,000 per year in income and no significant assets: $500-$800
- Preparation of a more advanced corporate tax return with multiple shareholders, assets, high income, etc.: $1,200-$2,500
- Negotiating an Offer in Compromise on a $150,000 Personal Tax Liability: $3,500 to $5,000
- Negotiate the release of a wage garnishment, and nothing more: $400 to $1,000
Website design By BotEap.comThese are just examples of the types of fees you may see when it comes to resolving tax issues. There are numerous factors that go into the proper quote for a tax resolution fee, but when comparing proposals, these numbers can give you a good idea of what is considered reasonable.
