Everyone knows “ballpark” how much it cost to have their taxes prepared annually. Sure there will be some variation if you do it yourself, or if you go to a chain store or if you go to a solo practitioner. But that variation will be within a certain range.
When one has debt with the IRS and needs to hire professional representation, one may find that the fees quoted between various companies/firms can vary drastically. It’s not uncommon for a person with a simple 1040 case where all returns have been filed but there is a balance due, to get quotes from anywhere between $500 up to say $6,000!
Why The Difference?
While two different cars will get you to the same place (i.e. the destination) in pretty much the same fashion, the price you pay for each could vary. This typically has to do with branding, production processes and other factors involved in getting the car to the consumer (e.g. overseas vs. domestic production).
In a similar manner, the fees each tax resolution company will quote you will vary because of their infrastructure, sales model, overhead costs, etc. A “Big National” firm that uses outbound telemarketing to obtain its clients will have a very different overhead structure than Plain Jane, CPA who uses direct mail and a referral structure to find her customers. Who pays for the differences? The consumer of course!
What Is Reasonable?
While it is hard to come up with standardized prices for the multitude of resolution tracks one may go down (i.e. Installment Agreement, Offer In Compromise, Currently Not Collectible), not to mention that the cost of working a particular track can be more/less complicated depending on the individual, here are some general guidelines to consider as a “middle ground” so to speak:
Base Fee: $500 – $1,000. Most companies will charge a certain “minimum fee” in order to analyze your case, review IRS records/transcripts and ultimately determine the extent of the tax matter. While this may not be explicitly called out in their fee quote, realize that it is buried in there in some fashion.
Straightforward 1040 Case: $1,000 – $4,000. This would be in addition to the fees mentioned above. This type of case involves back taxes, doesn’t usually involve an audit and could be either in the Automated Collection System (ACS) or it could be assigned to a Revenue Officer (RO). If the work involves interacting with an RO and potentially satisfying some of their request, expect to be towards the higher end of the range where those dealing with ACS would tend to be towards the lower end.
Business Payroll Tax (941) Case: $1,000 – $6,000. The variation in fees primarily will center around if the business is still operating or is closed (or about to be), and if there are Trust Fund Recovery Penalties that are being assessed to various individuals. The more periods/quarters that are involved, the more expensive it will tend to be.
While the prices listed in this post are a little dated, they provide yet another perspective on how much one should expect to pay.
Nasty Little Industry Practices
While the following isn’t publicly broadcast, most tax resolution practitioners know that it exists. Many of the “Big National” firms using unlicensed sales people (illegal, by the way) to obtain their clients, will use a fee matrix to quote fees. This matrix is usually broken into $5,000 or $10,000 increments, and the fees are given for negotiating an Installment Agreement based on the tax debt amount. Further, fees are added (typically $2,000 to $4,000) on top of the fee on the matrix if the customer is being sold an OIC.
It is also known that these same firms will later tack on a “rewrite” once the client is well into the process. If you’re not familiar with the practice, it’s the lowballing of a fee in order to make the sale, then “rewriting” the contract later in order to get more money out of the customer. This is a highly unethical way to operate.
Have A Problem?
A proper consultation, conducted by a competent, licensed tax professional, will yield a complete picture of the taxpayer’s situation and what they need. We offer our clients “flat fee” representation services that are rather affordable and include all the fees necessary to complete your case. Likewise, the fee you will be quoted will be based on the amount of work required, not the amount you owe. Thus, if you owe $15K or $115K, the amount we’ll charge will be EXACTLY the same, every time, as long as the circumstances surrounding each are otherwise the same.
Ready To Stop Shopping?
If you are ready to get “around to it” then visit this link, complete your information and before you know it, you’ll have a licensed representative on your side working your case.
Until next time…