Ingredients for tax resolution/tax relief disaster:
1. A person with a tax problem who is desperate and afraid.
2. A "salesperson" at a tax relief company who is very good at creating fear and eager to "close the deal."
3. A tax resolution company that is set up to do Offer in Compromise/Payment plans in volumes, but has very little know-how on how to do cases outside of the box.
A Connecticut person's tax problem:
Client made a deal with credit card companies in 2010. Received "cancelled debt" as a result of that deal with credit card companies. He reported that as income on his tax return, creating a tax liability which is NOW $30,000.00.
His experience with Tax Relief Companies
Client's first mistake was to hire this company in 2012. He paid them a total of $9600.00 in three different payments. In spite of multiple emails and phone-calls by this person - this company sent him a letter that his case was "closed."
Today, the client contacted one company who said they would represent him for $3100.00 but wouldn't work to stop IRS collection process UNTIL that fee was paid in full. A 2nd company, charged $3500.00 and also wouldn't contact IRS UNTIL a $1000.00 was paid.
Interesting thing about all of the above companies: they're all rated A plus at the BBB?
Finally: The Right Price and The Right Analysis
In the four years that this person had been dealing with this tax problem, not one "professional" had mentioned if his tax return was done correctly!? Our suspicion is that this person failed to take advantage of the "insolvency rules" as relating to cancelled debt. We couldn't be sure but we think it is entirely possible that this person will ERASE his debt by filing an Amended return/Audit Reconsideration showing that he was "insolvent" in the year that the cancelled debt was incurred. If we decided that wasn't a proper route to go, we would work up Currently Not collectible or Offer in compromise for this fellow. At our price of $1050.00, the client was very satisfied not to mention his appreciation of our analysis. We'll post on the blog here what happens with this case later.