Tax Debt Resolution
Houston Tax Attorney
- 1 Tax Resolution Companies
- 1.1 What is a Tax Resolution Company?
- 1.2 Common False and Misleading Advertising Tactics Used by Tax Resolution Companies
- 1.3 How do Tax Resolution Companies Operate?
- 1.4 Who is Handling your Case at a Tax Resolution Company?
- 1.5 What do Tax Resolution Companies Think of you?
- 1.6 Do Tax Resolution Companies Ever Help People?
- 1.7 Who Should I Hire?
- 1.8 Conclusion
Tax Resolution Companies
Are you looking for the “best tax resolution company“? Well look no more because there is no such thing as a good tax resolution company! We felt compelled to write this post due to numerous stories about taxpayers being taken in by one or more of these companies.
What is a Tax Resolution Company?
Tax Resolution Companies, claiming to specialize in tax resolution services, generate business by advertising heavily on the radio, television, or internet. If you’ve searched on Google for terms such as “Tax Resolution Companies” or “Tax Relief”, you’ll notice that the first few results have an “ad” button next to it. These are paid advertisements. To get an idea of what such companies might pay for Google ads, here is a list of some commonly searched keywords and the cost per click for the business:
- “Tax resolution companies” – $47.92
- “Tax relief” – $42.31
- “Tax resolution services” – $43.27
- “Tax relief attorneys” – $58.39
- “Tax relief services” – $52.34
- “Tax debt help” – $61.72
- “Tax relief help” – $73.52
Disclaimer: Not all companies that advertise for such terms are tax resolution companies, but they probably are. Look at the name – does it sound like a real CPA or law office? If not, it’s likely a tax resolution company.
Remember, this is the cost per click. Every time someone searches for one of these phrases and clicks on an ad, this is what the company pays to Google Adwords. In addition to online ads, these companies also advertise on the radio and print. As you can imagine, tax resolution companies spend hundreds of thousands to millions in advertising. These companies then have to charge ridiculous amounts for their services to stay in business. It’s a vicious cycle, not unlike a Ponzi scheme.
Common False and Misleading Advertising Tactics Used by Tax Resolution Companies
“Fresh Start Program.” Many tax resolution companies advertise about the IRS’s “new” fresh start program, which is not actually new at all. It refers to programs such as installment agreements and offer in compromise that have been available for many years.
BBB Accreditation. What happens when a client files a BBB complaint? The tax resolution company can just refund the money. However, this does not repair the harm caused to you by mishandling of your case. You may have lost important legal rights such as your right to petition tax court within the 90 day period, or to request a Collections Due Process hearing within the 30 day window. When the company’s BBB ratings start to decline, they’ll shut down the company and start a new one with a fresh A+ rating.
As Seen on “CNN, FoxNews, etc.” If a tax resolution company pays for advertising on CNN, FoxNews or similar news outlets, they are allowed to state on their website “as seen on CNN” etc. While it’s not technically false (it was seen on CNN), it is misleading. It makes it seem to an unsophisticated client that CNN or FoxNews is endorsing this business, which is not true.
But what about all the positive reviews on Google, Yelp, TrustPilot and elsewhere? These can be posted by the company, their employees, or a marketing company.
OK, but what about all the 3rd party websites that say good things about tax resolution companies? If you Google “Best Tax Resolution company”, you’ll find a number of sites. These websites or articles are written by individuals that either directly or indirectly receive money from tax resolution companies for their reviews.
- Example 1. The article appears to be an impartial ranking of tax resolution companies. But there’s more than what meets the eye. The owner of this website is compensated by the tax resolution companies that are posted on the website. In fact, it says so in extremely small print at the bottom of the website. Who actually reads the fine print anyway? It states: “The owner of this website may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear).”
- Example 2: I’ll admit, this one looks very convincing. I could see myself falling for this if I wasn’t a tax attorney. “Consumeraffairs.com” seems like a legitimate website, similar to “consumerreports.org”. The website states “top 10 best rated tax relief” which leads the unwary customer to believe that there is some sort of independent ranking methodology. This couldn’t be further from the truth. The owner of this website also receives money from tax resolution companies in exchange for placement on their website. At the bottom of the webpage in fine print, it states “Advertisements on this site are placed and controlled by outside advertising networks. ConsumerAffairs.com does not evaluate or endorse the products and services advertised.”
How do Tax Resolution Companies Operate?
Step #1: Get leads, lots of them. Advertise, advertise, and then advertise some more. As you can see, this business model depends heavily on advertising. The goal is to get as many potential customers to call as possible. When you call a tax resolution company, your call will be handled by an intake specialist working in a call center. This person probably isn’t any more qualified to give you tax advice than your gardener.
Step #2: Get even more leads. Spam people by sending letters and cold calling. The IRS files a lien against any taxpayer or business who owes more than $10,000 in tax. The lien is filed with the county clerk’s office in the county in which the individual resides. It becomes publicly accessible. Don’t worry though, the only people looking for these records are creditors and tax resolution companies.
Tax resolution companies scour IRS lien filings nationwide like vultures, and mass mail individuals with liens filed against them to offer tax resolution services. Sometimes the letter you receive may look like official government correspondence.
Step #3: Scare potential clients. Once they have you on the phone, you’ll talk to a savvy salesman. In most cases, they have very little knowledge of tax resolution. They’re hired to SELL, not resolve your case. They may make upwards of $100,000/yr plus commissions for their “skills”. Salesmen are the most valued resources at a tax resolution company. After all, they keep the money flowing in.
You may be told by your salesman that the your bank account will be levied or that you wages are going to be garnished, or that your business will get shut down. Some say they can settle your debt for pennies on the dollar, or promise you they will reduce your penalties and interest. They will implore you to act now or it will be too late. They will say whatever it takes to make that sale.
Step #4: Make the sale. You may pay a small investigation fee, often with a money back guarantee, after which you’ll deal with a salesman. After the sale, the case might then be kept in house or the lead might be sold to a contractor, who may in turn sell the case to a subcontractor. You have no idea who will be ultimately working on your case.
Step #5: Fire the client. When you sign the engagement letter, you’ll notice the contract stipulates that you must timely provide documents and information to the company. Failure to do so will cause the engagement to terminate and you’ll lose your fees. People are busy, but tax resolution companies are even busier. They have more cases than they can handle. They don’t want to keep your case sitting around for too long because it creates liability for the company and also means more time spent. Remember, the goal is to keep money coming in, and spending the least possible amount of time on existing cases. If you don’t meet their strict deadlines, your contract will terminate. You’re paying a hefty premium but you’re getting lousy service. Sounds like a bad deal.
Who is Handling your Case at a Tax Resolution Company?
If the resolution company is working on the case and not contracting it out, it’ll be a case analyst. It likely won’t be an attorney or CPA, even though they may state on their website that they have attorneys and CPAs working for them. This person might be making $12-15/hr and has minimal training in tax resolution. The absurdity of it is that the person working on your case is making far less than the sales person who signed you up.
What do Tax Resolution Companies Think of you?
You’re not a potential client or someone in financial distress who needs help. You’re a LEAD in a complex business cycle. After just 10-15 minutes on the phone with a savvy salesman from a tax resolution company and they have all of your financial information – how much you make, what you own, etc. This is all the information needed to extort the maximum amount of money from you as possible.
Do Tax Resolution Companies Ever Help People?
Based on law of probability, after tens of thousands of cases, there are bound to be successes. However, the primary purpose of tax resolution companies is NOT to help people, but to extract as much money as possible from potential clients. Eventually a percentage of people will be helped, but only after they’ve paid a small fortune for their services.
Who Should I Hire?
Hire a licensed law firm or CPA firm. Tax resolution companies often advertise that they have lawyers or CPAs on staff, but don’t be misled. They are not licensed law firms or CPA firms. Consult directly with an attorney or CPA who has experience handling tax debt. Law firms and CPA firms are subject to their state’s disciplinary code. They have much more to lose from being dishonest or producing shoddy work than a tax resolution company. Tax resolution companies are not subject to any professional codes, which allows them to operate and advertise with impunity.
‘Caveat emptor’ is a Latin phrase often used in contract law that means “let the buyer beware.” Ultimately, you are responsible for choosing who you entrust your financial security to. Whether you choose to hire a “tax resolution company” or a licensed law firm CPA firm for your back tax matter is your decision.