How Much Do Tax Relief Services Cost? A Breakdown by Service

If 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, a tax relief company may be able to help. However, it comes at a cost. Tax relief services typically range from $250 to $7,500, depending on how much debt you have, the complexity of your situation, and the type of assistance you need.

In this guide, you’ll find the average costs of various tax relief services, how fees are structured, and whether seeking professional help is worth it.

Discovery/investigation fee

Cost: $250 – $750

The discovery or investigation fee covers the initial analysis of your tax debt. During this phase, the company will evaluate your financial situation, review your IRS records, and determine which services may apply to your case.

Offer in Compromise

Cost: $2,000 – $7,500

An Offer in Compromise allows you to settle your tax debt for less than what you owe. Tax relief companies negotiate with the IRS on your behalf, but these services can be costly due to their complexity and the amount of paperwork involved.

Installment agreements

Cost: $1,500 – $5,000

Installment agreements help you spread your tax debt into manageable monthly payments. The cost of setting up an installment agreement depends on the complexity of your debt and the amount of assistance required.

Penalty abatement

Cost: $250 – $1,000

Penalty abatement can help you reduce or eliminate fees associated with unpaid taxes. This service typically requires proving financial hardship or demonstrating reasonable cause for failing to pay on time.

Innocent spouse relief:

Cost: $3,500 – $5,000

Innocent spouse relief protects individuals from penalties stemming from a partner or ex-partner’s tax filing mistakes. This service often involves a detailed review of financial records and requires significant documentation to succeed.

Currently not collectible

Cost: : $1,500 – $4,000

Currently not collectible status indicates you cannot afford to pay your tax debt and prevents penalties or collections. Tax relief companies assist in filing the necessary documentation to achieve this designation.

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:

1. Set up an initial consultation. The initial free consultation is when you’ll go over your tax issues.
2. 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.
3. 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.

Before deciding whether to work with a tax relief service, ask the company what it expects to save you and compare that to the savings of doing it yourself.  For example it doesn’t make sense to spend $3,000 in fees to save $2,000 in taxes, or a slim chance of saving $4,000.  Also, consider meeting with more than one service before selecting one.

Michael Menninger, CFP®

Is tax relief worth it?

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 work directly with the IRS to settle your debt. Consider these resources to get you started:

• The Federal Trade Commission’s instructions on filing CNC status, setting up an installment plan, and other options
• 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?