If you’re struggling with tax debt and looking for help, two of the biggest options are tax relief firms and tax attorneys. Should you hire a tax relief firm or an attorney? The right answer is in the middle – you should consider a tax relief company operated by a tax attorney.

However, you need to move forward cautiously and look for an experienced team. A lot of tax relief firms do not have your best interests in mind, and they often use misleading statements about what they can do for you. To help you hone in on the best option, this post explains how many big tax relief companies work, and then, it looks at the advantages you get from choosing a company run by an attorney.

To set up a consultation with our experienced legal team today, contact us at Seattle Legal Services.

Key Takeaways

  • Many tax relief companies have sales-driven business models that lure unsuspecting taxpayers with misleading promises.
  • These organizations try to process as many tax cases as possible, which normally results in boilerplate tax “solutions” that either don’t help or could have been implemented for free.
  • A taxpayer should seek out tax relief help from qualified tax professionals with verifiable credentials, such as an attorney, enrolled agent (EA), or certified public accountant (CPA).
  • While many tax matters can be handled by an EA or CPA, going with an attorney offers several distinct benefits, such as the availability of legal advice, attorney-client privilege, tailored tax solutions, greater transparency, and court representation (if necessary).

An Inside Look at the Operations of Many Tax Relief Companies

Many tax relief companies have volume-driven business models that emphasize finding new clients over obtaining the best tax help possible for their clients. This leads to several problems from the client’s point of view.

Broken Promises

To convince the taxpayer to hire them, the tax relief company uses sales representatives who will say almost anything. This includes claiming they can settle tax debts for “pennies on the dollar.” The problem is that this is rarely possible for most taxpayers.

High Initial Deposits or Fees

There’s nothing wrong with charging for an initial investigation, but these upfront fees are often nonrefundable and excessively high for the work provided. The tax relief company may still charge this fee even though they know ahead of time that the taxpayer won’t be eligible for the tax relief they desperately seek.

Tax Help from Inexperienced Individuals

To save money, tax cases are rarely handled by credentialed tax professionals, such as certified public accountants (CPAs), enrolled agents (EAs), or tax attorneys. Instead, the case is often sent to a “tax associate” who is effectively a glorified document grinder who gets paid to process case files, not find tax solutions to unique financial situations.

Generic Tax Settlement Solutions

The tax relief company might offer some form of tax resolution, like a payment plan or installment agreement. However, this is often something the taxpayer could have obtained by themselves for free. Additionally, the tax “professional” will do the least amount of work possible to set up the payment plan, with no negotiating for more favorable terms for the taxpayer.

Poor Communication

Due to the dodgy nature of how their businesses operate, many of these tax resolution firms will give as little information to their clients as possible. The less the clients know about the process, the less likely they’re going to learn the truth. This explains why many clients have difficulty getting answers to their questions or timely status updates.

Lack of Transparency

Trying to get information about their pricing or the qualifications of their tax professionals will be difficult. Their websites have little to no information on their “about us” pages relating to specific individuals who work on tax cases. There will also be difficulty getting information on how much they’ll charge to handle the case.

Benefits of Hiring a Tax Attorney

Almost anyone can claim to offer tax relief help to individuals struggling with unmanageable tax debt. So, going with a licensed or credentialed tax professional increases your chances of getting real tax help that you can actually use. Many debt-related tax issues can be handled by an EA, CPA, or tax lawyer – ultimately, the most important consideration is their experience with your type of problem. However, there are several key benefits that come with hiring a tax attorney instead of an enrolled agent or certified public accountant.

Attorney-Client Privilege

Tax relief companies may try to keep your personal information confidential, but your information and communications with your tax pro aren’t protected in the same way as they are when you hire a tax lawyer. This privilege is amongst the strongest of all licensed professionals and usually surpasses any confidentiality protections available with EAs or CPAs.

Honesty

Lawyers have the unfortunate reputation of being thought of as liars or slick talkers who try to get away with saying one thing while doing another. The irony is that they’re among the most candid of all professionals. This is due to the fact that they must abide by special ethical and professional conduct rules about what they can tell current or prospective clients. These relate to how the attorney may advertise, as well as how transparent they must be about their services, such as pricing.

In other words, lawyers have to be very careful about what promises and assurances they give, otherwise they risk losing their law licenses.

Thoughtful and Well-Reasoned Advice

One thing an attorney can offer that no other tax professional can is legal advice. If there’s a question as to the legality of something you want to do (or did), then the tax attorney is the person to hire. This also means that when an attorney examines your case, you’ll receive a customized assessment that considers legal factors in addition to the financial ones.

Legal Representation

Thankfully, most tax issues don’t result in litigation or time in the courtroom. But if they do, usually it’s only tax lawyers who can represent clients in court, such as the U.S. Tax Court or U.S. District Court. One exception is a U.S. Tax Court Practitioner (USTCP), who can represent clients in U.S. Tax Court, but only if they pass a written exam. Most USTCPs are also EAs or CPAs, and there are only a few hundred USTCPs in the country.

How to Find the Right Tax Professional

Hiring a tax lawyer who focuses their practice on tax resolution and settlement matters is the safest option in terms of ensuring you get the help you need. Despite this, not all tax issues require the services of an attorney. There are plenty of certified public accountants and enrolled agents who are more than capable of helping you.

So, how do you decide on whom to hire? A lot of it comes down to how comfortable you feel with the tax relief firm and the person who will handle your tax matter. At a minimum, when doing your research, avoid tax pros with red flags, but also look for tax pros who have:

  • Verifiable credentials: If they claim to be a lawyer, EA, or CPA, look them up on the applicable state bar attorney directory, check the IRS’s list of active EAs, or check CPAverify.
  • Good online reviews: Reading reviews from former clients and customers can be very helpful. Just remember to take the opinions with a grain of salt, especially reviews from those who give their opinion before their tax case has been resolved.
  • Relevant experience: Not all tax professionals have the same level of experience handling all tax matters. For instance, most tax resolution professionals know how to submit an offer in compromise (OIC), but not all of them can handle certain OICs, such as those involving business taxes or submitting OICs to certain state tax agencies.
  • Good communication: Look for companies that promptly return phone calls and reply to emails. If you’re trying to schedule an initial consultation and the tax relief company takes days to respond, imagine how much slower they’ll be to respond after you hire them.

After finding a suitable tax pro, it also doesn’t hurt to get a second opinion. It’s nice to be able to double-check the advice from one tax professional with another tax professional. This also offers an opportunity to choose someone you feel even more comfortable with, or offers a better price for their services.

Learn More About How a Tax Lawyer Can Help

There are plenty of advantages that come with hiring a legal tax professional to assist you with your tax struggles, especially those involving unpaid taxes. But that doesn’t automatically mean you should hire a tax attorney for your particular situation. To find out more about what a tax lawyer can do for you, contact Seattle Legal Services, PLLC online or by calling 425-428-5262.

At our firm, you not only get direct access to an experienced and highly-skilled tax resolution attorney, but you’ll also appreciate our transparency, prompt communication, and client-first approach to tax help.

Attorney Versus Tax Relief Company FAQs

What does it take to become an attorney?

To become a licensed lawyer in the United States, an individual must earn a Juris Doctor (JD) degree (from an accredited law school), which is a professional graduate degree and typically takes three years to earn. After graduating from law school, the individual must be admitted to the bar in the jurisdiction (state) they wish to work in. The primary requirement for bar admission is passing the bar exam, but there are also character and fitness requirements to help screen out any individuals who aren’t morally fit to practice law.

If I don’t hire a lawyer, are my conversations with my tax pro still confidential?

Probably, but only to a limited extent. Most tax relief companies will strive to keep your personal information private, including your conversations with their employees. And your conversations with enrolled agents and certified public accountants enjoy legally recognized confidentiality privileges that likely exceed anything offered by a run-of-the-mill tax relief agency. However, none of those privileges rise to the level of those offered by the attorney-client privilege, which is almost absolute, subject to certain exceptions.

Do I really need to hire a lawyer to help with my tax problem?

It depends on what kind of tax trouble you’re in. For most tax issues, an enrolled agent or certified public accountant can probably offer sufficient assistance. So, chances are good that any of these three types of tax pros can help resolve your tax matter. That being said, you should strongly consider hiring a tax lawyer if you have any legal questions, could end up in court, or want the greatest level of confidentiality privileges available under the law. Finally, don’t assume that hiring a lawyer will be more expensive.

Isn’t it more expensive to hire a tax lawyer than to hire a non-attorney from a tax relief company?

It depends. From a billable-hour perspective, it could be, but some highly experienced CPAs and EAs could, in certain cases, charge more for their services than an attorney. It all depends on the work required and the tax pro’s prior experience handling similar matters.

Pricing aside, hiring a tax lawyer will often save money in the long run, in that they can offer more effective tax relief help than the average tax resolution company. This is because tax attorneys often have more training and skills to handle many tax issues. Most importantly, there’s the fact that most lawyers who offer tax relief services can afford to spend more time and effort on each case. So, a tax relief firm might charge $3,000 to save $5,000 on your tax bill, while a tax lawyer might charge $4,000 to save $8,000 on your tax bill. In this hypothetical, the tax lawyer was “more expensive,” yet achieved a two-fold greater reduction of your tax debt.

 

Sources

https://www.naea.org/naea-education-foundation/enrolled-agents

https://ustaxcourt.gov/files/documents/Rule-2002nd-amended.pdf