12 Things To Consider When Choosing A Tax Relief Professional.
July 30, 2010 
Cynthia Kuhne 
Putting your personal information and money in the hands of a tax relief professional or firm can be a daunting task no matter how reputable they seem. The following list should get you started in your search for the right tax pro.
1. What are their credentials?
Only an Attorney, CPA or Enrolled Agent can represent taxpayers before the IRS in all tax matters, including matters regarding collections, appeals, audits and Offer in Compromise.
2. What is their experience?
Being an Attorney, CPA or Enrolled Agent does not mean they have the experience to represent you in your tax matters. Many tax professionals limit their practice to tax preparation. They do not have the knowledge or experience in the collection dept. or Offer in Compromise dept. of the IRS.
3. How long have they been in business?
4. What is their rating with the BBB?
Although it in not all inclusive, a BBB rating can tell you a great deal about a company.
5. Beware of Inexperienced Salesperson.
Many tax firms hire sales people to handle calls of potential clients. They do not tax experience or knowledge and are not licensed to represent taxpayers. They are hired to generate business for the company.
6. Are you speaking with the Tax Professional who is going to handle your case?
I hear this one more than any. Tax payers hire companies and do not know at any given time who is handling their case and some have never even spoke with them or had contact with them. It is important that you know who is representing you and are able to speak with them directly.
7. How easily accessible is the Tax Professional?
Ask from the beginning if this is the one who will be assigned to your case and how accessible are they? How frequently will you be update? Will they stay in contact with you? It can be very frustrating if you hire a tax professional and can never get past the secretary.
8. How thoroughly is your specific tax situation evaluated at the beginning?
This is very important. Beware of firms making promises that seem unattainable or specific resolutions before they have thoroughly evaluated your unique situation and your current financial situation.
9. Beware of Scams.
Unfortunately, there are many tax resolution companies that are nothing short of scams. Beware of sales people. If the person you are speaking with is more interested in your credit card or bank account information than analyzing, evaluating and providing options and solutions to your needs, you are better off without them. The IRS itself has issued warning on this.
Ask yourself if they genuinely seem interest in you and your case and what they can do to benefit you. After all that is what tax professionals and tax resolution companies are supposed to be here for, to help the taxpayer and to offer tax solutions to their needs.
10. Are their fees discussed upfront once they have evaluated your tax situation and offered options?
There should be no sense of hidden fees or fees that are known and not disclosed.
11. What, if any, is their Guarantee?
Make sure expectations are discussed upfront. What type of Guarantee is offered on each service and are they willing to put it in writing? What are their refund policies?
12. Does this Tax Professional or Tax Firm seem like a “fit” for you?
After speaking for a few minutes, you should have a sense of whether there is a “fit”. Are you comfortable with them, do you have a sense that they are competent to handle your case? Do you sense you can trust them? You want someone you feel is genuinely concerned about you and your needs and is competent and available to handle your questions and concerns throughout the case.
What Is An IRS Levy?
A levy is a legal seizure of your property to satisfy a tax debt. A lien is different than a levy as a lien as used as security for a debt, while a levy actually takes the property to satisfy the tax debt.
If you do not pay your taxes (or make arrangements to settle your tax debt) the IRS may seize and sell any type of real or personal property that you own or have interest in.
The IRS can seize and sell your property that you hold (such as car, boat or house) or
The IRS can levy property that is yours but is held by a third party (such as wages, retirement accounts, bank accounts, dividends, licenses, rental income, accounts receivable, the cash loan value of your life insurance or commissions).
The purpose of an IRS Levy is usually to get your attention after other notices or contacts have been ignored.
Typically, the IRS will levy either your wages, or other income, and your bank accounts, although they can levy any type of property you own or have interest in.
3 things typically happen before the IRS will levy:
1. The IRS assesses the tax and sends you a Notice and Demand for Payment
2. You neglect or refuse to pay the tax and
3. You were sent a Final Notice of Intent to Levy and Notice of Your Right to A Hearing at least 30 days before the levy. They may give you this notice in person, leave it at your home or usual place of business or send it to the last known address they have on filed for you by certified mail, return receipt requested.
If the IRS levies your bank account, this is a onetime levy and the bank must hold the funds you have on deposit, up to the amount you owe for 21 days. After 21 days, if not released the bank must send the funds plus any interest to the IRS.
A levy on your wages, salary or federal payments is a continuous levy that will end when:
The levy is released (usually when arrangements are made for the tax debt or there is a hardship
You pay your tax debt or
The time expires for legally collecting the tax.
Our recommendation for quickly stopping an IRS Levy:
Hire a licensed tax professional with knowledge and experience in the IRS Collection Dept.
The Tax Consequenses Of Debt Cancellation 1099C
In the past few years due to the economic troubles, many distressed taxpayers have had some or all of debt cancelled or forgiven. This can be through a foreclosure on a home, accounts written off, credit card or other loans from financial institutions. While this can be a relief to those who have received it, many do not understand the tax consequences.
The IRS considers as income amounts over $600 shown on the 1099C with some exceptions:
- Cancellation of debt by a private lender, such as a relative or friend which is considered as a gift
- Certain student loans.
- Cancellation from deductible debt that which could have been included on the Schedule A (home mortgage interest).
The IRS tax laws include income from the discharge of indebtedness in gross income.
There are exclusions from the canceled debt being considered as income:
- Discharge of debt through bankruptcy
- Discharge of debt of an insolvent taxpayer
- Discharge of qualified farm debt
- Discharge of qualified real property business debt and
- Discharge of qualified principal residence
A taxpayer is considered insolvent when liabilities exceed the fair market value of assets. However, you cannot exclude any amount of cancelled debt that is greater than the amount you are insolvent.
Excluding the discharge of debt through bankruptcy (unless the debt was for business or investment purposes) the income still must be reported on the return but form 982 can be filled out for the exclusion. Failure to do this will result in the IRS considering the cancellation of debt income.
These exclusions can be complicated and detailed especially in the reporting of them in the preparing of the tax return. It is best to consult a tax professional when dealing with these issues.
Common IRS Notices & What They Mean
When you receive an IRS notice, look in the top right hand corner to find the notice number. The notice should cover a specific issue about your account or return. Below are some common notice numbers and the reason for the correspondence or letter.
CP 11:
Changes to your tax return, there is a balance due. During processing your return, the IRS made changes and there is a balance due now.
CP 14:
Balance due. This is not a math error notice, it show the amount of underpaid tax according to their records.
CP 22E:
Examination Adjustment Notice, Balance Due. This notice shows there was an exam adjustment done to your return.
CP 31:
Your refund check was returned. You should update your address, it was sent to your last address on file.
CP49:
Overpaid tax applied to other taxes you owe.
CP 90/CP 297:
This notice is telling you the IRS is intending to issue a levy against any federal payments due you. The IRS may also file a tax lien if they have not already done so. You have 30 days from the date of the notice to contact the IRS before they issue a levy.
CP 297A:
This notice is telling you the IRS has issued a levy against any federal payments due you.
CP 91/CP 298:
Final Notice Before Levy on Social Security Benefits
CP 161:
Request for Payment or Notice of Unpaid Balance Due
CP 501:
Reminder Notice- Balance Due
CP 503:
Second Notice- Balance Due
CP 504:
Final Notice Intent to Levy. This notice is letting you know the IRS intends to levy against your state refund and is looking for other assets to levy
CP 523:
Notice of Default on Installment Agreement. This notice is letting you know the IRS has terminated your Installment Agreement. The notice should tell you the specific reason, it could be that you missed a payment, you have a new balance due or you did not file a required tax return.
