Tax Relief Services: A Guide to Resolving IRS Debt

If you’re struggling with unpaid taxes, you may have come across tax relief services that promise to help lower or manage your tax debt. While tax debt can be stressful, hiring a professional isn’t always necessary. In many cases, you can work directly with the IRS to set up a payment plan or negotiate a resolution.

This guide will explain how tax relief services work, the types of relief available, and how to choose a trustworthy company.

What Are Tax Relief Services?

Tax relief services are companies that assist individuals and businesses in negotiating IRS tax debt, penalties, and payment plans. These firms communicate with the IRS on your behalf, helping you:

  • Set up an installment agreement to pay your debt over time
  • Apply for an offer in compromise to settle your debt for less than what you owe
  • Stop wage garnishments, liens, and levies
  • Request penalty abatement for first-time tax penalties
  • File overdue tax returns and correct errors

While tax relief services can be useful, it’s important to be cautious when selecting a provider. The Federal Trade Commission (FTC) warns that some tax relief companies charge high upfront fees and make false promises about eliminating tax debt. In reality, only the IRS can approve debt reduction programs based on your financial situation.

How Tax Relief Services Work

How Tax Relief Services Work 1

Free Consultation and Assessment

Most reputable tax relief companies offer a free initial consultation to evaluate your tax situation. During this session, they review your IRS notices, financial records, and any existing tax liens or levies.

Developing a Tax Relief Plan

Once you agree to hire the service, they will create a personalized plan outlining the best strategy to resolve your tax debt. This may include:

  • Setting up a payment plan with the IRS
  • Negotiating a settlement through an offer in compromise
  • Requesting a delay in collections if you’re facing financial hardship

Tax relief companies usually charge flat fees or percentage-based fees for their services, and some require an upfront payment. Be sure to get a clear breakdown of costs before signing a contract.

Negotiating with the IRS

The company will handle communication with the IRS on your behalf, ensuring that all required forms and supporting documents are submitted correctly. This step is crucial because mistakes on IRS applications can lead to rejections or delays.

Resolution and Compliance

Once the IRS approves the tax relief plan, the company helps you stay compliant by ensuring that you:

  • Make your required payments on time
  • File future tax returns correctly
  • Avoid penalties and additional tax issues

Common Tax Relief Programs

Common Tax Relief Programs

IRS Payment Plans (Installment Agreements)

If you can’t afford to pay your tax bill in full, the IRS allows you to set up a monthly payment plan.

  • Short-term plan: If you owe less than $100,000, you can set up a six-month payment plan with no setup fee.
  • Long-term plan: If you owe $50,000 or less, you can arrange monthly direct debit payments with a $22 setup fee.

This is often the simplest and most affordable option for resolving tax debt.

Offer in Compromise (OIC)

An offer in compromise allows taxpayers to settle their tax debt for less than what they owe. The IRS considers factors like income, expenses, and asset value when deciding whether to approve an OIC.

To apply, you must submit:

  • Form 656 (Offer in Compromise application)
  • Form 433-A (Collection Information Statement)
  • A $205 application fee (unless you qualify for a low-income waiver)

This process is complex, and while tax relief services can help with paperwork, approval is not guaranteed.

Currently Not Collectible (CNC) Status

If paying taxes would cause extreme financial hardship, the IRS may pause collections by placing your account in Currently Not Collectible (CNC) status.

  • This does not eliminate your tax debt, but it stops IRS enforcement actions like wage garnishment and bank levies.
  • You must prove that you can’t afford basic living expenses by submitting financial documents.

Innocent Spouse Relief

If you filed a joint return and your spouse made mistakes that led to unpaid taxes, you may be eligible for innocent spouse relief, which removes your responsibility for the tax debt.

Penalty Abatement

If this is your first time facing tax penalties, you may qualify for penalty abatement, which reduces or removes fines for late filing and payment.

How to Choose the Best Tax Relief Service

When selecting a tax relief company, keep these key factors in mind:

  • Transparent pricing: Avoid companies that demand large upfront fees or refuse to disclose their pricing. Look for flat fees rather than percentage-based pricing, which can get expensive.
  • Positive customer reviews: Check Better Business Bureau (BBB) ratings, TrustPilot reviews, and customer feedback to ensure the company has a strong track record.
  • Accreditations and Licenses: Look for companies that employ licensed tax professionals, such as: Enrolled Agents (EAs); Certified Public Accountants (CPAs); Tax Attorneys
  • Money-back guarantee: Some companies offer a refund policy if they can’t secure a favorable outcome. A 30-day guarantee is common among reputable firms.
  • No false promises: Be wary of companies that guarantee they can reduce your tax debt. Only the IRS has the power to approve settlements.

Final Thoughts

Before hiring a tax relief service, consider whether you can resolve your tax debt directly with the IRS. Payment plans and penalty relief options are available online, and contacting the IRS yourself is free.

However, if you have complex tax issues or need legal representation, a tax relief service may be worth the cost. Just be sure to choose a reputable company with transparent pricing and positive reviews to avoid scams.

By understanding your options and taking the right steps, you can resolve your tax debt efficiently and regain financial stability.