My practice focuses solely on tax related matters, as such I get a lot of inquires related to taxes and the IRS. Many of these inquires come via my Everything Tax Law Blog. Unfortunately many of these inquires do not involve complex tax questions and often the amount of taxes are not large enough to justify hiring a tax lawyer or even an accountant or an enrolled agent. At one time I used to refer these types of cases to other tax professionals. Having practiced in this area for a while I have come across too many cases where these other professionals have used fear of the IRS and other intimidation tactics to get taxpayers to pay way too much for someone to help.

For example, a great number of clients have been contacting my office about what to do when these tax professionals lose or botch their case. After reviewing the contractual agreements that these other firms impose upon their clients, it is clear that these firms will not provide anything beyond very very basic help and that help often harms their client.

Let me give you an example. I was recently approached by a potential client who had hired one of the large “tax resolution” firms. After looking at the “tax resolution” firms website, the taxpayer had hired this firm to file an offer in compromise with the IRS on his behalf.

The “tax resolution” firm filled out the one page IRS form and submitted it to the IRS. Unfortunately the “tax resolution” firm did not take the time to advise the client that all of their federal income tax liabilities were fully dischargeable in bankrupcy. The “tax resolution” firm did not take the time to review this clients financial information as the client could have benefited from filing bankrupcy for his other nontax debts as well.

After looking at the case further, it was apparent that the IRS statute of limitations was about to expire for much of the tax debt that he owed the IRS. As a result, had the taxpayer not submitted an offer in compromise the IRS would not have been able to collect a penny from the taxpayer — never.

Once the offer in compromise was submitted, the “tax resolution” firm had completed their contractual obligations. Thus, they refused to speak to the taxpayer from that point on.

Unfortunately the IRS rejected the “tax resolution” firms offer in compromise and the IRS seized the taxpayers personal assets using their jeopardy collection powers. The taxpayer lost nearly all of his meager belongings.

The “tax resolution” firms charge for these services were well in excess of the prices charged by even the most expensive tax lawyer that I know.

If that is not bad enough, the “tax resolution” firm refused to compensate the taxpayer upon request. Instead, the firm forced the taxpayer to incur the expense and time involved to file a lawsuit. The “tax resolution” ended up compensating the taxpayer, but only when they were facing a near certainty that they would have to pay even more once the judge heard the case.

I wish this were an isolated case, but it is not. I am seeing more and more of these types of cases. I am not one for governmental regulation, but the “tax resolution” industry provides an excellent example of why we should not have a completely unregulated indstry — especially one where the unscrupulous can use fear and intimidation to get clients to pay excessive amounts for “help.”

By: Kreig Mitchell
Law Office of Kreig Mitchell
1942 Broadway, Suite 314
Boulder, CO 80302
Ph. 303.521.0053
http://www.irstaxtrouble.com