Do you owe the IRS a significant amount in back taxes or face wage garnishment or other penalties for not paying your federal or state taxes? If so, a tax relief company may be able to help. Use this guide to get an idea as to what you might pay for tax relief services.
In this guide:
- How much different tax relief services cost
- How tax relief companies structure fees
- The average cost of tax relief companies
How much different tax relief services cost
The costs for tax relief services generally vary based on how much debt you have, what kind of assistance you’re needing, and the complexity of your tax problems.
|Discovery/investigation fee||$250 – $750|
|Offer in compromise||$2,000 – $7,500|
|Installment agreements||$1,500 – $5,000|
|Penalty abatement||$250 – $1,000|
|Innocent spouse relief||$3,500 – $5,000|
|Currently not collectible||$1,500 – $4,000|
Sources: TaxDebtHelp, Optima Tax Relief, and Community Tax
The discovery fee is what you’ll pay for the company and its tax professionals to do an initial investigation into your tax debts. It usually runs between $250 and $750, depending on the provider.
Offer in Compromise
An Offer in Compromise is a way of settling your tax debts with a payment lower than your owed balance. You’ll typically pay anywhere from $2,000 to $7,500 to pursue this option.
An installment agreement lets you pay your unpaid taxes out over time, via monthly payments. You can expect to pay between $1,500 and $5,000 for this service.
Penalty abatement can help you stop wage garnishment or avoid other penalties you might be charged due to your tax debts. In order to stop wage garnishment, you’ll have to prove that such an action would create a financial hardship. This service typically costs between $250 and $1,000.
Innocent spouse relief
Innocent spouse relief is a way for former partners to avoid tax penalties due to their ex’s tax return mistakes. Seeking this type of tax assistance usually runs from $3,500 to $5,000.
Currently not collectible
This service designates that you’re currently unable to afford your taxes and cannot face penalties or collections due to your overdue balance. You will typically pay between $1,500 and $4,000 for CNC status.
Get a Free Consultation With a Tax Relief Firm
How tax relief companies structure fees
Not all tax resolution companies charge the same. While some charge flat rates, others ask for hourly fees. Firms also differentiate in when they expect payment.
Depending on which company or tax attorney you go with, you can usually expect one of these payment options:
- Full payment upfront. Be wary of this, as it could be a scam. You’ll want to be sure you’re working with a proven and reputable company before paying anything upfront.
- Partial upfront payments. Some firms require you to pay a portion of your total bill upfront. The rest you will pay once the issue has been resolved.
- Deposits. You might have to pay an initial fee/deposit to secure the company’s services, with the rest of your balance payable upon resolution.
- Payment plans. With a payment plan, you might make a monthly installment payment until your bill is fully settled.
In most cases, you will at least pay a discovery or investigation fee upfront. This fee compensates the company for looking into your tax problems and evaluating whether their tax experts can be of assistance.
The average cost of tax relief companies
The fees you’ll be charged vary widely by tax relief provider. To make sure you’re getting the best deal, always consider at least a few options. You should also ask for a full breakdown of fees so you can accurately compare each company.
|Company||Discovery Fees||Resolution Fees|
|Community Tax||$250||$1,500 – $4,000|
|Tax Hardship Center||$495||$3,750|
|Anthem Tax Services||$250||Not disclosed|
Each tax relief company has a unique process for providing tax relief services. Still, you’ll generally start with an initial free consultation that helps the company determine whether you are eligible for their services.
Here’s what the process usually looks like, at a high level:
- Set up an initial consultation. The initial free consultation is when you’ll go over your tax issues.
- The company will contact the IRS for your records and analyze your tax problems. They’ll then propose a solution and break down the costs of resolving your debts.
- Finally, they’ll arrange the resolution, which might include an offer in compromise, an installment agreement, or another alternative.
You’ll receive word when your problem has been resolved and instructions on what you should do moving forward.
Is tax relief worth it?
As you can see, tax relief services can come with potentially costly fees. If you’re considering seeking assistance, you’ll want to be sure the reward outweighs the cost. Have a good handle on how much your tax debt is, and make sure you’re clear on the total costs you’ll pay to settle the debt. This calculation can help you determine if the help is worth it. (For example, if the tax firm charges $5,500 but your debts are only $5,000, it’s probably not the right move).
If tax relief services are too pricey, you can always work directly with the IRS to settle your debt. Check out the Federal Trade Commission’s instructions on filing CNC status, setting up an installment plan, and other options, or use the IRS Taxpayer Advocate Service for more help. The National Association of State Auditors, Comptrollers, and Treasurers is also available to help with state tax issues.
Remember, everyone’s financial situation is different. While a tax relief company may be able to reduce someone else’s tax liability, it may not be able to do the same for you. Gather as much information from the company as you can before paying any fees to ensure this is the right approach for you.
>> Read More: What is tax relief?