When it comes to something as important as resolving your tax liabilities, it is wise to
conduct research on the tax resolution firm(s) you are considering before agreeing to purchase
What sort of things should somebody do as part of conducting their “due diligence”?
Question #1: Are you licensed to be providing me tax advice?
Many tax resolution firms use unlicensed sales personnel to sell their services. These sales
people do not possess the professional knowledge to be advising you on your tax matters, nor are
they legally allowed to do so. The only people that can advise you on tax matters are Enrolled
Agents (EA), Certified Public Accountants (CPA), and attorneys. Ask the person you’re
speaking to whether they are licensed. If they say anything other than EA, CPA, or attorney, then
they are not licensed.
Some sales people have even been known to make up something or just give you their title at
their firm (“Senior Tax Analyst”). Several people have received criminal convictions for this
misrepresentation, but it still occurs.
Question #2: What is your BBB rating?
Ask the company what their BBB rating is, and then verify it. Do a Google search for the name
of the company plus the words “better business bureau”. This should take you directly to their
BBB record in most cases, and you can see the rating, plus how long they’ve been in business
and how many complaints they have had.
Question #3: Are you the actual person that will be representing me?
Third, before signing a contract for taxpayer representation, be sure to confirm that the firm that
will provide your representation will assign your case to a licensed representative. You should be
guaranteed that your representative is a licensed EA, CPA, or attorney, even if it’s somebody
else in the firm other than the licensed person you’re already speaking to. The IRS will not
allow non-licensed representatives to negotiate for a taxpayer, but you would be surprised at how
often large firms have unlicensed assistants doing the actual IRS negotiation. Before you sign a
contract or send money, make sure you see the IRS Form 2848, Power of Attorney, which lists
the name(s) of the people actually representing you.
Question #4: Have you ever actually been involved in negotiating tax resolutions?
In other words, has the person you are speaking to actually worked on tax cases as a
representative. It’s one thing to be licensed, quite another to have actual case experience or not.
Because the government is cracking down on sales practices, some sales closers have actually
taken the Enrolled Agent exam and become licensed. This is better than not being licensed, of
course, but it still does not make them qualified to offer tax advice regarding your IRS debt if
they have no actual case experience. Any case-experienced, licensed salesperson should be able
to walk you through the case proceedings from start to finish.
Question #5: What precisely does the fee you are quoting me include?
The tax resolution is notorious for rebilling clients for work that either doesn’t need to be done,
was excessively overbilled for originally, or that should have been included in the your original
Many tax resolution firms operate on a “flat fee” basis. In theory, the fee they quote you should
include EVERYTHING necessary to resolve your case. Make sure that fee includes some of
these necessary actions:
All Appeals files
Full negotiation of resolution
Preparation of any missing tax returns
Removal of any existing levies or wage garnishments
Representation for all tax types, including state taxes if needed
For business owners, make sure you are covered for Trust Fund Recovery Penalty
representation. This is critical to prevent getting personally stuck with your business tax
Application for a penalty abatement if you meet “reasonable cause criteria”.
If the tax firm you are speaking to works on a retainer basis with hourly fees, rather than a flat
fee, be sure to see a schedule of service fees, and get a copy of their billing policy. Ask for an
estimate of what the total charges will be, and get that in writing.
Understand that hiring a representative to negotiate on your behalf is not a guarantee that your
case will be resolved. You will need to work closely with your representative to ensure that your
best interests are always held in high regard. Although your representative should do nearly all of
the interaction with the taxing authorities, your participation with your representative is vital to
the resolution process, so be sure you select somebody that you are going to be able to work without personality conflicts.
Lastly, be sure that anything and everything you discuss with a tax resolution firm, such as fees,
covered services, responsibilities, deadlines, etc., are all in WRITING. Don’t sign a contract, and
definitely don’t give them your credit card number without seeing everything in writing first.
Armed with these tips, you should be better positioned to make a wise decision regarding hiring professional tax services.