What is tax relief?

Tax relief is any reduction in taxes owed by an individual taxpayer or business entity, including tax deductions and tax credits. For example, a tax credit can incentivize homeowners to make energy-efficient repairs, and a tax deduction can decrease the overall tax burden for those affected by a natural disaster.

People who owe a tax debt often seek tax relief to reduce the amount they owe to the IRS or state tax agencies. Those who didn’t file a tax return, misfiled their return or were unable to pay taxes end up owing a tax debt that accrues penalties and interest. Many people facing this tax burden do not have enough liquid assets to pay the full amount at once and require assistance.

Tax resolution companies specialize in tax reduction strategies to resolve back tax debt and unfiled returns, including installment plans. IRS debt tax relief professionals also negotiate with the IRS and state tax commissions on behalf of their clients.

How Much Does Tax Relief Cost?

The price of tax debt relief varies tremendously among providers. Some request a flat-rate payment upfront. Others charge a portion of the money you are saving by filing for tax debt relief or a percentage of your total tax debt. Others charge an upfront setup fee and then hourly rates, so the more complex your case and the more time it takes, the more you will pay.

Tax debt relief rates often may cost up to $8,000, with upfront setup fees ranging from $400 to $600.

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How Tax Resolution Fees Are Structured

The way a tax resolution company charges client fees varies by company. However, we can generalize how these fees are structured:

Flat Fee Structure

Many tax relief firms use the term “flat fees.” Flat fees can refer to two things.

A flat fee for the total service. In other words, resolving everything from soup to nuts, including tax preparation for an IRS or state issue. Usually, if you have a problem with multiple tax agencies (IRS, State), there is a separate flat fee for each tax agency.

Second, some firms may have flat fees for specific resolutions that vary based on your tax amount owed. In other words, a sliding fee scale for a payment plan based on the total amount you owe the IRS or State.

Hourly Rate Structure

Some tax relief firms and licensed tax professionals will bill on an hourly basis. Their fees can range from $200-$550 per hour.

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.

5. Tax Defense Network – Best Bilingual Option

Tax Defense Network Company Pros:

Tax Defense Network Company Pros:

  • Bilingual services
  • Wide range of preparation and debt relief services
  • Tax education resources

Tax Defense Network Company Cons:

  • Poor communication
  • Limited availability
  • Only a three-day money-back guarantee

Types of Tax Help Services Offered by Tax Defense Network: 5/5

Tax Defense Network offers many of the same services as the other companies on the list. Additionally, they work with small business owners. In addition to providing various services, if your first language is Spanish, Tax Defense Network can accommodate you.

Minimum Debt Required for Tax Defense Network: 4.5/5

When it comes to your tax debt, you don’t have to owe a minimum of $10,000 to receive assistance. The Tax Defense Network is willing to work with clients with $5000 in tax debt. Be careful to assess the complexity of your case ahead of time to ensure that if you have a lower tax debt, you do not pay more than the services are worth.

Reputation of Tax Defense Network Services: 3.5/5

The Tax Defense Network has been accredited by the BBB since 2008 and has an A+ rating. While there are many positive reviews, there are some negative critiques. Some customers complain that it is difficult to get a hold of the company when they need information on their case. Some clients also note that the price may be too high for their services.

Tax Defense Network Experience: 3.5/5

Some of the options on this list have experience in every state, but the Tax Defense Network doesn’t. There are approximately 30 states with Tax Defense Network locations. While the Tax Defense Network has been in business for 14 years, you may not always have an opportunity to speak directly with your attorney or agent.

What are the chances that the IRS will approve my ask for an OIC?

In 2019, the IRS received 54,225 offers in compromise as well as accepted just 17,890 of them– that’s a success rate of roughly 33%.Specialist tax obligation relief firms usually have acceptance rates of 90% and also greater. This is because they can better spot better applications and understand if the taxpayer meets the requirements and also they understand the IRS is likely to say yes. The most effective tax obligation alleviation business has tax lawyers and signed-up agents on personnel, supplying a money-back guarantee as well as fee affordable rates. Using a specialist tax obligation relief company can aid you to save money and time on meaningless applications.

Just how does the IRS calculate the minimum offer it will accept?

The IRS formula to calculate your OIC is a two-step process based upon your month-to-month earnings and also the worth of your possessions, so the IRS can estimate your “sensible collection possibility.” The OIC formula, which identifies what you’re able to pay, resembles this:

If You Apply and Are Not Eligible

If you apply for an Offer in Compromise and we can’t process your offer, we’ll:

  • Return your application and offer application fee
  • Apply any offer payment you included to your balance due

Understand the Process

While IRS evaluates your offer:

  • Your non-refundable payments and fees are applied to the tax liability (you may designate payments to a specific tax year and tax debt)
  • IRS may file a Notice of Federal Tax Lien
  • IRS suspends other collection activities
  • Your legal assessment and collection period is extended
  • You make all required payments per your offer
  • You don’t have to make payments on an existing installment agreement
  • Your offer is automatically accepted if the IRS doesn’t not make a determination within two years of the IRS receipt date (This does not include any Appeal period.)

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.

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2. Community Tax – Most Affordable Investigation and Fees

Community Tax Relief Company Pros:

Community Tax Relief Company Pros:

  • Low minimum debt required
  • Low initial fees
  • Provides education for agents
  • Offers transparent pricing options

Community Tax Relief Company Cons:

  • Limited money-back guarantee
  • High fees for complex tax situations
  • Limited tax debt relief for state taxes

Types of Tax Help Services Offered by Community Tax: 4/5

Like most tax relief services, Community Tax provides various options to help with debt relief. They can assist you with penalty abatement, offer in compromise, tax assurance programs, and “currently not collectible” status. However, they do not provide help with innocent spouse relief.

While Community Tax’s services are offered throughout the country, you may have to meet with them remotely. If you are less enthused about remote meetings, they may not be ideal.

Minimum Debt Required for Community Tax Services: 5/5

The minimum debt requirement for Community Tax is only half of the national standard. If you owe as little as $5,000, you may be qualified to seek help from Community Tax. Given that every client’s financial situation is different, financial hardship can occur just as quickly with $5,000 in debt as it can $10,000. The impact of tax debt depends heavily on your income and cost of living.

Reputation of Community Tax Services: 4.5/5

Community Tax has been accredited since 2015 and has an A+ rating with the BBB. They are open to hearing every detail about your case and have various positive reviews. In addition, they respond quickly to all consumer and client complaints.

Community Tax Experience: 4.8/5

Community Tax boasts over $800 million in resolved taxes and claims to have helped over 100,000 people with their tax debt. While they have only been in business for about 12 years, their staff includes licensed tax practitioners. Resolving tax debt is a complex scenario that requires experience. The founders of Community Tax were bankers and attorneys with plenty of experience in debt resolution.

What Tax Settlement Firms Offer

Most tax settlement firms promise to send their experts to the IRS to negotiate on behalf of the client, where they can presumably persuade the agency to accept a much smaller amount—often pennies on the dollar. In reality, this is virtually impossible to do, and the IRS rarely accepts any real reduction in the amount of tax owed. There are, of course, several very extenuating circumstances under which Uncle Sam will accept a deal for repayment of back taxes, including:

  • If the taxpayer is experiencing an exceptional circumstance and the amount due would cause an economic hardship or would be unjust (this would have to be an extraordinary situation)
  • If the debtor is unable to obtain any type of gainful employment with sufficient income to repay the amount, such as in the instance of a long-term illness or disability
  • If the person owing taxes has absolutely no assets whatsoever that could be used in a meaningful way (via asset seizure) to cover the required tax liability

The best everyone else can hope for is perhaps an extension of time to pay off their tax debts, which typically includes additional interest and penalties as well.

Optima Tax Relief Client Bill Of Rights

Optima’s Client Bill Of Rights defines their relationships with customers.

Optima makes a real effort to live up to those promises, which is why they get such high scores on customer service. 

Tax Settlement Firm Success Rates

As stated previously, the IRS rejects most offers in compromise it receives each year. The number of clients who get satisfaction from tax settlement companies is negligible, and most are virtually destitute financially. The vast majority of potential settlement clients need to work out payment plans with the IRS that allow them to clear out their tax balances over time while keeping their assets—and dignity.

You can find more information about payment plans on the IRS website.

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…

How to Find a Reputable Tax Relief Service

When it comes to finding a reputable tax relief service, there are plenty of red flags to watch out for. According to the FTC, some taxpayers who’ve filed complaints about tax relief services said that, after they signed up and paid upfront fees, some companies charged additional fees to their bank accounts or their credit cards. 

The FTC says, “think twice if the entire fee for services is requested upfront with no explanation of how services will be billed or whether a refund of unearned fees will be made.”

Also, beware of tax relief companies that promise to get you relief from tax liabilities, misrepresent how long the process might take, and omit relevant asset information to the IRS. Since tax relief companies can’t guarantee any relief, ignore promises of a tax relief program that can resolve your tax debt. 

“Only the IRS or your state comptroller can make that determination,” says the FTC.

If you’re still interested in working with a tax relief service, check to see if a default billing rate applies. This acts as a flat rate which applies to any hours spent by the firm’s employees, not just its tax experts. Some tax relief services might apply this charge, if you cancel your services with the company.

With these warnings in mind, the following tips can help you find a reputable company to work with:

  • Look for a tax relief service that’s transparent about its costs and fees.
  • Don’t sign up for services without a clear contract that outlines potential fees and next steps.
  • Look for tax relief providers that offer a free consultation.
  • Read reviews offered by the Better Business Bureau (BBB), Google Reviews, and TrustPilot.
  • Choose a company with a money-back guarantee or “no fees upfront” practices.

Optima Tax Reliefs Other Services

Optima Tax Relief doesn’t just handle tax relief. They provide a range of other tax-related services.

Tax Consultation

This service is offered to customers facing an IRS or state collection action. 

This consultation is more than just 1 simple phone call and gives you access to a team of consultants, attorneys, enrolled agents, and CPAs.

👉 A tax consultation can provide you with the guidance and representation you need to get through a collection action with as little damage as possible.

Tax Negotiation

The team at Optima is known for its skills in negotiating with the IRS. They have licensed professionals that specialize in helping you resolve your tax dilemmas.

Depending on your financial situation and how much you owe, you might be able to set up a payment plan or even debt reduction.

Tax Preparation

Optima Tax has a team of tax preparers, CPAs, and attorneys ready to assist with your tax preparation needs.

Tax Resolution

Optima Tax Relief provides experience – based tax resolution advice. They will offer guidance and representation needed to get through the IRS resolution process. 

These are some of the tax resolution problems and solutions that Optima can help you address:

  • Audit Representation
  • Criminal Tax Defense
  • Currently Not Collectible
  • Dealing with the IRS
  • Innocent Spouse Relief
  • Installment Plans
  • IRS Tax Discharge
  • IRS Tax Expiration
  • Levy Release
  • Offer In Compromise
  • Payroll Tax Debt Relief
  • Penalty Abatement
  • State Tax Issues
  • Stop Wage Garnishment
  • Tax Lien Removal
  • Tax Preparation and Planning
  • IRS Tax Expiration
  • Unfiled Tax Returns

If you have any questions about the IRS collection process or would like more information about how Optima can help with your IRS tax problems, get a consultation today.

State Tax Relief Programs

The process for tax settlements with the states is very similar to the process with the IRS, although it varies from state to state. In some states, for instance, a taxpayer’s penalties can be waived, but interest can’t. In other states, interest can be waived, but penalties can’t. And in some states, legitimate tax debt can’t be reduced at all. For more information, contact your state comptroller. For a state-by-state listing, visit the National Association of State Auditors, Comptrollers and Treasurers (NASACT) at .

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