Many Americans overpay their taxes annually, and they anticipate receiving a refund from the IRS. Tax refunds are an important factor for many people, but what happens if you do not withhold enough money to meet your tax liability?
If you don’t have enough cash withheld for taxes, you will owe a balance to the IRS to satisfy your tax bill. Millions of Americans end up owing money to the IRS, which can be a surprise and cause financial strain. However, there are many tax relief options for people who owe back taxes and people who believe they will come up short with their withholdings.
Tax relief companies help taxpayers navigate the daunting landscape caused by tax balances. While there are many excellent tax relief companies, unfortunately, many scammers and predatory fraudsters want to take advantage of people in a vulnerable financial state.
This guide will describe how tax relief companies work and how you can identify a trustworthy tax relief provider.
Attributes of a Good Tax Relief Company
Finding a reputable tax relief company that you can trust requires research and due diligence. While you ultimately decide which services and agents you feel comfortable working with, there are three essential attributes to look for when you are researching and interviewing tax relief professionals.
- Transparent Practices
All reputable tax relief companies clearly articulate what they do and which areas of tax relief they specialize in. For example, if they work with small businesses, they should have that labeled on their website. If they employ accountants and hold state accreditations, they should have those clearly marked.
Be aware of tax relief companies that “guarantee” any IRS debt forgiveness or promise they will lower your tax burden without seeing your situation. It is illegal to make these claims since they can be misleading, and nobody can guarantee the IRS will forgive any debt.
- Realistic Consultations
Complimentary consultations are another imperative component for tax relief companies. Since each tax case is unique, they want to gather as much information as they can before making a recommendation on if you should work with them or not.
Many scammers try to pressure people into paying an upfront fee for the consultation, only to stop responding once they have the funds. If you schedule a consultation with a tax relief specialist, ask specific questions that will help you learn what they plan on doing with your help you identify if they are a good fit for you and your tax situation.
- Positive Customer Reviews
Finally, make sure to look at customer reviews for tax relief companies. You should not need to make your decision in a vacuum. Since there are many reputable tax relief companies on the market, you should be able to make a shortlist of the highest-rated companies and avoid all of the options with poor ratings and questionable payment practices.
Along with customer reviews, you can look for third-party accreditations like Better Business Bureau ratings. These independent ratings can provide support for trustworthy companies while steering consumers away from scams and predatory companies.
How Does Tax Relief Work?
When you are looking for tax relief, there are two general buckets most taxpayers fall into – people who already have a balance with the IRS and owe back taxes and people who are facing a large tax liability but need assistance reducing their taxable income.
- Up To Date
Although many tax relief service providers specialize in helping people reduce their tax debt or negotiate with the IRS for an affordable payment plan, they can also provide proactive tax assistance if they have accountants and bookkeepers on staff.
Tax deductions, tax credits, and tax exemptions are all available to taxpayers who want to reduce their liability and Pay Less in taxes. If you want to find a tax relief company to help you lower your current year’s taxes, you should look for one that employs licensed tax professionals like certified public accountants (CPAs).
- Carrying a Balance
Many people with tax debt can feel overwhelmed since the IRS has extensive collections capabilities. While many lenders and collections agencies cannot directly extract funds from bank accounts and other personal property, the IRS has the ability to garnish wages, levy funds from personal bank and investment accounts, and more.
Although the prospect of wage garnishment or levied assets can be scary, the IRS will not pursue these avenues unless the taxpayer has ignored all notices and attempts by the IRS to get in contact.
Suppose you are wondering what tax-relief options are available to those carrying a balance or managing tax debt. In that case, there are a few options available to taxpayers, depending on their situation. The IRS Fresh Start program is the most intensive federal tax relief program because it enables qualified people to make an offer in compromise with the IRS and effectively settle their debt for less than they owe.
While offers in compromise can be difficult to qualify for, there are other options, such as monthly payment plans that function like a loan. Under monthly payment plans, taxpayers can negotiate a monthly payment with the IRS that will terminate once their balance is paid.
Tax relief professionals can advise taxpayers which options may be available to them and even help negotiate with the IRS on their behalf.
Final Thoughts
There are many factors associated with hiring a tax relief company that the pressure of tax debt can compound. If you take your time and perform diligent research, then you will be better prepared to tackle your tax burden and avoid potential scams.
If you have more questions about tax relief and finding a tax relief partner that fits your needs and tax situation, be sure to read our other guides and reviews.
* This content is not provided by the financial institution or the offer’s provider. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and does not constitute a financial or expert advice.