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Filing taxes is already stressful enough, and it is even more so if you find you owe the IRS money. As the number of people who owe a tax bill at the end of the year increases and household budgets are getting tighter, you might find yourself with a tax debt you can’t pay.
The process for addressing your unpaid tax debt with the IRS is known as tax resolution and can help avoid punitive and costly collection efforts (or at least minimize them). Tax resolution comes in many forms, including installment agreements, an offer in compromise, or requests for delayed collection, just to name a few.
You may be able to take a do-it-yourself approach to your tax resolution if you only owe a small amount or your situation is relatively simple. But for more complex situations or larger tax bills, you could do more harm than good, and it’s likely better to enlist the help of a pro. However, there’s not necessarily a one-size-fits-all solution for when it’s time to hire a tax professional to help with your resolution. It depends on the amount you owe the IRS, the complexity of your situation, and your desired resolution.
To help you decide the right strategy for you, we spoke with three tax relief experts to learn when you should hire a tax professional and when it’s possible to go it alone.
Start by exploring your top tax debt relief options here now.
DIY vs. professional tax resolution: Which one is right for you?
There is no uniform answer to this question, as it depends on a variety of factors. Here’s when each may be applicable:
When DIY tax resolution is sufficient
Because hiring a tax professional will cost you money in an already financially stressful situation, it’s worth checking in to see if you can deal with the situation yourself. And if you have a relatively small tax debt without many complexities, you may be able to do exactly that.
According to Stephen Weisberg, the principal attorney and founder at The W Tax Group, many taxpayers can handle a tax debt of less than $10,000 themselves as long as they don’t have any unfiled tax returns and can confidently afford the payment plan.
“If you owe less than $10,000, you’ll probably spend more on professional fees than it’s worth,” says Weisberg. “In that situation, you can call the IRS and set up a basic payment plan over time. That is, assuming you can afford it. Even under those circumstances, you may be missing a better option.”
Anyone with a tax debt of $50,000 or less, including penalties and interest, with no unfiled returns, can set up a payment plan online. You’ll usually have up to 10 years to pay off your balance, but know that a longer payment plan will increase your interest and penalties.
And remember that just because you can handle the situation yourself doesn’t mean you have to. If it’s worth the money and peace of mind, you can still choose to hire a professional to help you deal with your smaller tax debt.
Explore your professional tax relief options online here.
When to hire a tax relief professional
On the other hand, there are some situations where you definitely should enlist the help of a professional to help you resolve your tax debt.
“As a debt attorney of 25 years, my best piece of advice about when to bring in a professional is when you feel your financial situation is beyond your control,” says debt relief attorney Leslie Tayne. “Whether that means the amount of money you owe is overwhelming or the processes are too complex to sift through yourself, a finance professional’s job is to simplify the situation for you and advocate on your behalf, and to help provide relief and peace of mind to the indebted consumer.”
Generally speaking, Tayne recommends hiring a tax professional if you owe more than $10,000 or if the IRS has initiated collection efforts, such as tax liens or levies. “In this case, a finance professional, such as a tax or debt attorney, can help negotiate an installment agreement with the IRS or a settlement offer,” says Tayne.
According to Tayne, you should also hire a professional if you have additional complexities to your situation — having unfiled tax returns or being self-employed, for example — or if you’re seeking an offer in compromise (when you settle your debt for a lower amount), which can be difficult to manage yourself.
The risks of not hiring a professional when you need one or of ignoring your tax debt altogether can be severe. You could end up with a more expensive payment plan than you can afford because you weren’t aware of your other options. You could also find yourself further in debt or facing tax levies, making it even more difficult to dig yourself out.
Watch for red flags
The last thing you want when you’re already in a financially vulnerable situation is to be taken advantage of by a company that doesn’t have your best interests at heart. When hiring a tax professional, look out for red flags that indicate a company may not be the right choice.
First, Logan Allec, a CPA and the founder of Choice Tax Relief, advises avoiding companies that aren’t owned by either a CPA, an attorney, or an enrolled agent.
“These are the only three kinds of professionals that can represent taxpayers before the IRS, and they are held to high professional standards when it comes to tax relief and representation,” says Allec. “If a company is not owned by one of these kinds of professionals, they may not have as strict standards for themselves, their company, or their staff.”
You should also look out for companies that guarantee any results, especially before they’ve really taken a hard look at your situation. Some tax resolution methods, such as an offer in compromise, have a relatively low success rate. A professional who doesn’t disclose this isn’t being entirely honest with you.
The bottom line
If you owe a tax debt to the IRS, it’s important to take the situation seriously. Unpaid debt that’s not addressed can lead to interest, penalties, and even legal consequences. Whether you should hire a professional to help with your tax resolution depends on your personal situation, including the amount of debt you have, the complexity of your situation, and your comfort with IRS processes. While there are certainly situations where taxpayers could take a DIY approach, it’s worth hiring a pro when the circumstances call for it.
