Discover The Dirty Little Secret About Tax Resolution Fees And "Rewrites" That Will Infuriate You...and Probably Land Me A Bounty On My Head!
My name is Jassen Bowman, and I am licensed by the IRS as an Enrolled Agent. What I'm about to tell you is going to piss off a lot of people. In fact, what I'm about to tell you is such a closely guarded secret in the tax resolution industry that at least two dozen people I personally know are going to be incredibly pissed off at me. This information is the secret behind tens of millions of dollars in personal profits for the owners of large tax resolution companies (especially in Colorado, Florida, and California), and it's time that this information was shared with you, the tax resolution customer.
If you have already worked with a tax resolution firm, then you may already have been a victim of what I'm about to reveal. What you may not know, however, is how and why it works.
If you have a Federal Tax Lien issued against you, I almost guarantee that you are getting bombarded with telephone calls and letters from slick sales guys trying to convince you to hire them to resolve your tax issues. These sales people are often pushy, unprofessional, and often lack any tax training or professional tax experience in any way, let alone the knowledge to conduct a proper analysis of your situation and offer the best resolution option.
Remember, commissioned tax "closers" get paid based on how much they can get you to spend.
Here's the dirty little secret of the tax resolution industry: Closers are trained to ask you certain financial questions about you and your business. You are lead to believe that this "tax analysis" is used to determine the best resolution strategy for you and to help you resolve your IRS problem. The reality, however, is that these questions are asked in order to determine how big of a fee you can afford to pay them.
In other words...
The fee you are quoted has NOTHING to do with the amount of work required to resolve your tax problem, but how much money they think they can get you spend.
Here's the reality behind the vast majority of the tax cases that these firms work (that is, assuming you end up with a firm that actually DOES work your case, but that's another issue entirely...): There is very little difference in the work required to resolve a $30,000 tax liability or a $300,000 tax liability, all other things being equal. Yet, the fee quoted to you by the tax resolution company is going to be heavily based on how much you owe. Why? Because they assume that the more tax debt you owe, the more cash flow you have, and the more you can afford to pay in fees.
I should also add the fact that the solicitation of tax representation services by an UNLICENSED person is a FEDERAL CRIME, but that's a story for another time...
Like I said, all other things being equal, whether you owe $25,000 or $800,000 makes very little difference to me as a licensed tax professional. I'm going to have to do the same financial analysis...review the same IRS transcripts and notices...file the same appeals...and do the same monthly payment plan negotiation, regardless of how much you owe.
But then, they want more money...
Here's the next dirty little secret that the tax resolution salesman on the other end of the phone doesn't want you to know: The fee they are quoting you isn't going to be the final fee you end up paying. That's right...further down the line, they're going to demand more money.
These are called "rewrites", and the attorney or Enrolled Agent assigned to your case most likely earns their living by the commissions they collect on these demands for more money.
Here's how it works. It takes slightly different forms at various companies, but the basic idea is the same.
First, the sales person quotes you the fee they think you can cough up immediately. In the industry, this is called the "front end".
Next, after you've become a client and the representative (actually, their assistant) is working (hopefully!) on your case...something happens. Yes, just like that...something just sort of happens. And guess what they expect YOU to do when "something" happens. That's right, pay more money.
What exactly IS this "something"? It could could be any number of things:
- The "complexity" of your tax case has drastically increased over what you first told them, requiring more work.
- A "new tax issue", such as the Trust Fund Recovery Penalty, pops up.
- The amount of your tax liability is much, much higher than you told them, making the case more time consuming.
- You are not eligible for the IRS program you were first sold, requiring more work to resolve your case under a different resolution option.
- An appeal filing is required in order to resolve your case.
- Assets covered by the lien need to be sold, requiring a Certificate of Discharge application that is not covered by your fee.
- An elephant trampled a butterfly in the Bronx Zoo, requiring additional time to resolve your tax matters.
...and many, many more ridiculous examples. The most interesting thing about ALL, yes...ALL of these examples is this: Any competent professional, licensed tax representative or not, should have discovered these issues in your initial, comprehensive consultation.
A proper flat-fee tax tax resolution consulting quotation should be based on a thorough review of your tax situation, and is based on an estimation of the WORK required to resolve your tax case. This is how a professional will evaluate your situation and quote you. If, down the road, a LEGITIMATE issue arises that genuinely changes the scope of the tax case, then your tax representative may be justified in requesting additional fees, especially if they are working for you on an hourly basis with a retainer.
However, for tax resolution companies that are promising you a flat-fee, this is simply not what happens. In essence, you're sold a smoke and mirrors show. The representative working your case is usually paid a small base salary, such as $500 to $2,000 per month. Then, they actually make their living by being paid a commission on the extra money they generate from clients in "rewrites". In the industry, this is called the "back end", and is where a LOT of money is made for both the licensed staff and the owners of the firm. An attorney, CPA, or Enrolled Agent working the "back end" might make anywhere from 20% to 50% of the extra money they can charge you, and often receive bonuses for "hitting their number" every month. This means they get a bonus for bringing in $20,000.....$30,000.....$50,000 in "back end" money.
Given this pay structure, doesn't it just make sense that your tax representative is going to bill you for every little extra thing they can?
Exactly how much are you going to get nickel and dimed under this sort of fee structure? Let's take a look at a real life example. (Note: Client identities are not shared for privacy reasons, and competing firm names are not shared so that I don't get sued. However, this is a real, honest to goodness story.)
A current client of mine is a small business that owes the IRS about $77,000 in unpaid employment taxes and about $20,000 in unpaid state sales taxes. He was formerly represented by one of the largest tax resolution firms in America, based in Colorado. Given the nature of his business and how much he owed, he was originally quoted a fee of $3,250 to handle both issues.
After two months had gone by and with almost nothing having been done on his case, this small business was sent a form letter requesting payment of an additional $2,000 to cover personal representation for the Trust Fund Recovery Penalty, something that a competent consultant would have discussed with the client from the get go.
After paying this extra fee, another three months goes by and he receives another letter stating that $1,500 more is needed in order to continue working on his case because of the state sales tax issue, which was already covered by his original service contract. After arguing with the firm about it, the client eventually paid the extra $1500, since he had already paid in so much that he didn't want that money to go to waste.
Our client is now in a total of $6,750, more than double what he was originally quoted. When he discovered that the company had done NOTHING for him, and was not even returning phone calls to his Revenue Officer, he became irate and tried to get his money back, to no avail. After a new tax lien was filed, he hired me for a flat fee of $4,250, which includes personal and business representation in full for the IRS, plus state representation, plus some additional services that I discovered he was in need of.
This is just one example of the "flat-fee-bait-switch-rewrite" tactic employed by some of the biggest tax resolution firms in the country.
Let's take a look at typical fees charged for many different types of service "rewrites":
- Collections Due Process Appeal: $450 to $1,000
- Application for Certificate of Discharge of Lien: $750 to $1,500
- Personal Trust Fund Recovery Penalty representation: $1,500 to $3,500 (depending on amount)
- Preparing 3 years of unfiled personal income tax returns: $600 to $2,000
- Attempting to get you into Currently Not Collectible status: $500 to $1,500
- Switching to an Offer in Compromise instead of monthly payment plan: $2,000 to tens of thousands of dollars, depending on how much you owe
This isn't looking like quite such a "flat rate fee" anymore is it?
Each and every one of the scenarios listed above doesn't just "happen", as your representative may lead to you to believe. The reality is that each of these steps is not only fairly common, but predictable as well.
Just these fairly common work requirements alone could add up to an additional $11,500 in "rewrite" fees, if not more!
A former client of mine was originally quoted only $1500 by a competitor, and wound up paying over $20,000 to that firm, and got NOTHING for it. They would have simply been better off giving the money to the IRS, and this client owed nearly a million dollars. In the end, we resolved their tax problem for under $4,000.
Before you get ripped off for $3,000....$11,000....even $20,000 in rewrites, I'd like to introduce you an alternative option.
Introducing the first truly flat-fee, all inclusive tax resolution service.
With Tax Help HQ, your fee is all inclusive. Your service fee from Tax Help HQ is guaranteed to include all the tax services necessary to completely resolve your tax problem. You'll receive all of the following tax representation benefits:
- Full Investigation of Liability
- All negotiations with ACS or Revenue Officers
- Complete mail audit (CP-2000) defense
- Tracking and maintenance of all deadlines
- Filing all possible administrative appeals, including Collections Due Process (CDP) appeals
- Any necessary lien subordination, withdrawal, or discharge applications
- Full financial analysis
- Installment Agreement negotiation, including Partial Pay Installment Agreements
- Determination of eligibility for Offer in Compromise program and application and negotiation thereof
- Determination of eligibility for Currently Not Collectible (CNC, Status 53) and negotiation thereof
- Penalty abatement application and any necessary appeals
- Personal representation for Trust Fund Recovery Penalty assessment
- Representation for all tax types for which you owe, both personal and business, including IRS, state, and local governments
- Preparation of all past due personal or business tax returns required to get you caught up and compliant with filing requirements
- Preparation of all current year personal or business tax returns, including Federal, state, and local
- Comprehensive tax planning to minimize your future taxes and keep more money in your pocket
You also receive comprehensive NON-TAX assistance in critical business or personal finance areas that eventually impact your tax obligations.
Unlike other firms, we also recognize the fact that your tax matters are directly or indirectly impacted by other important factors, and vice versa: Taxes have direct or indirect impacts on other areas of your life. The very presence of the government's nose in your personal and business life through the vehicle of taxation requires a comprehensive plan.
For clients on our Business plan, we will essentially step into your small business as a CFO, with an "outside looking in" perspective, to get your business restructured to operate in an efficient and organized fashion. This means that you also receive the following services:
- Complete "catch up" of all your bookkeeping for the current fiscal year (no more receipts in shoe boxes!)
- Proper set up of an accounting system if you don't have one in place (QuickBooks setup)
- Complete set up of a payroll system to help prevent future payroll tax liabilities
- Business entity restructuring to provide the most advantageous business structure for your situation (e.g., LLC, corporation, etc.)
- Comprehensive customer analysis to determine customers that are costing you more money than you make from them
- Comprehensive expense analysis to cut costs and eliminate waste
- A customized plan for increasing efficiency and reducing payroll burdens
For our business customers, however, it doesn't stop there. While I have purposefully kept my two companies separate for years, I'll be offering you advisement on critical day-to-day business operations areas, including such critical things as:
- Development of Standard Operating Procedures for peace of mind
- Business continuity planning, in case the unforeseen should happen to you
- Development of Employee Handbook to set expectations and reduce the risk of employment lawsuits
- Implementation of strategic marketing campaigns to increase company revenue
- Re-evaluation of company product/service offerings to maximize profitability
Tax Help HQ is the nation's only all inclusive, flat-fee tax resolution firm, and the only company to offer the All Inclusive Guarantee: If resolution of your tax case requires a service that we did not take into consideration in our initial consultation and fee quote, that service will be provided to you absolutely free of charge.
Comprehensive, All-Inclusive Flat-Fee Tax Representation
||For families and individual taxpayers that are self-employed, own a sole proprietorship business, have rental properties or other investments, etc.
|Small Business Plan
||For small businesses organized under a legal entity such as an LLC, partnership, corporation, or S-corporation, with or without employees, with assets and annual revenues less than $10 million. Includes one 1040+ plan for one officer, shareholder, or partner.
Regardless of your situation, location, or type of tax you owe the IRS, there is hope! Our firm works with taxpayers in 43 states to resolve their state and IRS tax issues, and we work on all sorts of taxes, including:
- Payroll Taxes
- Income Taxes
- Sales & Use Taxes
- Estate Taxes
- Business Taxes
- State Withholding Taxes
- Unemployment Taxes
- Trust Fund Recovery Penalties
- Heavy Vehicle Highway Use Tax
- Wage & Income Reporting Penalties
Remember, it is up to you to exercise your rights as a taxpayer (you do, after all, have rights...don't forget that).
If you would like full service representation, simply submit a completed Case Review Worksheet to me and I will match you with a licensed tax professional that has completed my custom tax resolution training program. This licensed professional is personally vetted by me, and adheres to a strict ethical code of conduct and way of doing business that not only exceeds legal requirements, but also exceeds standards established by professional organizations.
Completing this worksheet gives you time to formulate the best possible answers, which helps us help you. In addition, the worksheet removes all actual or perceived time pressure upon yourself or us that usually occurs during a telephone consultation. Your time is valuable, and so is mine, and the Case Review Worksheet provides a simple way for us to make the best use of each other's time. In addition, you avoid having to pay an hourly fee in order to have your situation evaluated.
If you are discussing your tax situation over the telephone with other firms, be sure to ask them one important question:
"Are you a licensed tax professional that is legally eligible to offer me tax advice, or are you a salesman?"
This is by far the single most important question you should ask anybody trying to offer you tax advice. If they are a salesperson, I highly encourage you to run quickly in the opposite direction.
Jassen Bowman, EA
Visit Tax Resolution Blog