If you’re reading this, you’ve probably decided that you want professional tax help. However, you might not be sure who to hire or what happens after you hire them. For example, do you need to hire an enrolled agent (EA), certified public accountant (CPA), or tax attorney? And after you hire them, what can you expect?
The goal of this article is to address the second question, where we’ll identify the major steps that take place when hiring a tax professional for representation and what you can expect during each step of the process.
Key Takeaways
- Even though tax professionals can make a big difference in your tax case, it’s important to understand that it can take some time to resolve your particular tax matter.There are seven main steps when hiring a tax professional and they start with the initial consultation.
- After the consultation, you’ll sign documents formalizing the engagement and complete a detailed case evaluation.
- Next, your tax pro will initiate contact with the IRS, and then prepare and submit a tax plan or proposed resolution.
- The process usually ends with waiting for a response from the IRS, and then implementing the approved tax plan.
Expectations When Hiring a Tax Professional
The most important expectation when hiring a tax lawyer, EA, or CPA is to understand that it could take some time to resolve your tax matter. Unfortunately, hiring a tax pro won’t usually make your tax problem go away within hours or days. For some problems, such as significant unpaid tax bills or disputes over the amount owed, it can often take several months (or longer) to achieve a final resolution.
One reason for this is that there could be extensive financial analysis required by both your tax professional and the IRS. Or if you’re disputing a tax or appealing an action, you may need to deal with strict procedures and wait for IRS conferences, reviews, or hearings.
Then there’s the fact that the IRS is slow, whether it’s trying to get a human being on the phone, getting a decision regarding your proposed tax resolution, or obtaining confirmation that your tax problem has been fully resolved. In other words, there’s typically a lot of waiting involved. The good news is that hiring a tax professional can sometimes reduce this wait (or avoid unnecessary delays) by ensuring your submission has been properly completed and filed.
Every tax problem is different, which means each resolution process will be unique. That being said, when you hire a tax professional to help you, there will usually be seven major steps involved in the representation process.
Step 1: Consultation
The point of the consultation is twofold. First, it’s for you and the tax pro to better understand your situation and determine if the tax pro can help you. Second, it’s to decide if you and the tax pro have a good “fit” and will feel comfortable working with each other.
During this initial evaluation, you should expect to answer questions about your financial situation, what notices and letters you’ve received, and what sort of tax problem you’re having. The primary goal of the consultation is to gather information, not provide legal or financial advice. Despite this, you can expect some amount of professional advice, especially if you’re in a situation where there’s an impending deadline.
For example, if you’ve just received an LT11 from the IRS, you have just 30 days from the date on this notice to address your tax debt to avoid the levy. During the consultation, you can expect the tax professional to explain when you must act and provide a general recommendation on what your options are. However, a more detailed financial analysis that includes your full tax history will probably be needed before they can advise you on which option to use and how to make use of that particular form of tax relief. To get this information, you’ll need to formally hire a tax resolution professional.
Step 2: Formalize the Engagement and Sign the Power of Attorney
Once you decide to hire a tax professional, you’ll need to formalize the arrangement. This may include signing an engagement agreement, which will:
- Outline the scope of the representation;
- Detail the services to be provided;
- List the costs for those services; and
- Explain how you’ll be billed for the tax representation.
Another important document that you’ll sign will be IRS Form 2848, Power of Attorney and Declaration of Representative. This authorizes the tax advisor you just hired to represent you before the IRS.
You’ll also likely need to sign IRS Form 8821, Tax Information Authorization. This permits your tax professional to receive and review your otherwise confidential tax information. You need to sign these forms so the tax professional can:
- Request your IRS transcripts.
- Talk to the IRS on your behalf.
- Submit forms to the IRS for you.
- Negotiate directly with IRS employees, such as revenue agents and revenue officers.
Step 3: Detailed Case Evaluation
This is where the substantive work on your case begins. Your tax professional will review any documents (like IRS notices and letters and past tax returns) and other information you’ve provided to assess your case. This will help them:
- Confirm your potential tax liability (if applicable).
- Determine the exact amount of back taxes you owe, if any.
- Calculate how much time the IRS has to assess or collect any taxes from you based on the applicable statutes of limitations.
- See if you’ve missed any tax payments or filings.
- Check if there are any current or potential future IRS enforcement actions.
- Decide your eligibility for tax relief.
- Assess your risk of a tax audit (if applicable).
- Identify what information you need to provide to the IRS.
Besides the information you’ve given, the most important source of information your tax pro will use to decide any of the above will be to request and review your IRS tax transcripts. Your tax pro can do this using the authorizations you provided in Step 2.
IRS Tax Transcripts
An IRS tax transcript is a summary of your tax information and history with the IRS. These are free to request, and there are several different types of transcripts available:
- Tax return transcript: Provides a basic overview of information from IRS Form 1040, U.S. Individual Income Tax Return, from the last three years. Specifically, major line items and information from any schedules and accompanying forms.
- Tax account transcript: Offers basic tax filing information, such as taxable income and filing status for the current and last nine tax years. Older years can be obtained, but only by using IRS Form 4506-T, Request for Transcript of Tax Return.
- Record of account transcript: This is a combination of your tax return and tax account transcripts.
- Wage and income transcript: Gives income data from tax reporting documents received by the IRS. Some of these include IRS Forms W-2, Wage and Tax Statement; 1099-MISC, Miscellaneous Information; 1098, Mortgage Interest Statement; and 5498, IRA Contribution Information.
- Verification of non-filing letter: The IRS provides this letter when they have no record of a Form 1040 being filed for the time period requested.
Step 4: Initial IRS Communication
The purpose of the initial contact your tax pro makes depends on your type of tax issue. This could mean calling the toll-free number located on a tax notice or letter you received in the mail to talk to the revenue officer assigned to your tax collection case to request a temporary hold on collection actions. It might also mean reaching out to the revenue agent overseeing your tax audit to schedule the time and place for a field audit.
These are things you could do yourself, but having a tax pro do it for you provides at least two main benefits.
- Convenience – The first relates to convenience, as it can sometimes require being on hold for hours or playing phone tag over several days to finally get a human being you can speak to.
- Established professional connections – The second has to do with finding the right IRS employee to work with. Tax professionals make their living resolving tax issues, which means working with some of the same IRS employees over and over again. Over time, tax pros learn which IRS individuals are the most helpful. Hiring a tax pro dramatically increases the chances you get the best IRS employee possible to handle your case.
This may not only benefit you by saving time, but also by obtaining better tax benefits such as reduced penalties and/or more advantageous tax settlement terms.
Step 5: Preparing a Tax Resolution
Assuming your tax concern couldn’t be fully resolved by contacting the IRS, this is the stage where your tax professional will begin working on your specific tax resolution. Common tax resolution strategies include:
- Penalty abatement
- Appeals
- CNC Status
- Innocent spouse relief
- Offer in Compromise (OIC)
- Payment plan or an installment agreement
If you haven’t already done so, you’ll need to provide financial documents to your tax pro, such as bank statements, pay stubs, and other detailed financial disclosures. This information will be particularly critical if the plan for dealing with your tax issue relies on your financial resources, such as assets and income.
Step 6: Waiting
This is both the easiest and hardest part. It’s easy in that you probably don’t have to do anything. It’s difficult in that you might be anxious to get a response from the IRS. Depending on what you’re waiting on, you should be prepared for the IRS to take a while to process whatever you filed and send you a response. It might take this long because:
- The IRS is overworked, with large backlogs and understaffed offices (very common).
- Your submission is complex and takes more effort and resources at the IRS to review. A good example of this is an OIC, which can easily take a year to decide (although if the IRS doesn’t decide within two years, your OIC is automatically accepted).
For issues where time is of the essence (like a wage garnishment), you can expect a faster response from the IRS. But even if it only takes a few days or weeks to hear back, the waiting can still be nerve-wracking.
A good tax professional helps with the waiting in several ways:
- Ensuring your filing or submission to the IRS is correct,
- Reducing the chances of rejection and having to start again,
- Knowing when and how to follow up with the IRS to ensure they’re processing and reviewing things appropriately,
- Escalating your case within the IRS where and when necessary.
Step 7: Tax Resolution
This represents the completion of your tax resolution plan and will vary widely based on what you were trying to accomplish. If you were trying to get rid of a tax lien, you might wait for the IRS to file IRS Form 668(Z), Certificate of Release of Federal Tax Lien.
If you want to set up a payment plan and stop IRS collection enforcement actions, you’ll need to be making your monthly payments in full and on time. There might be other requirements and obligations placed on you, such as filing all necessary tax returns and otherwise staying compliant with your federal tax obligations.
Your tax professional might have little involvement at this point in the process and may only step in if something goes wrong. For instance, if the IRS hasn’t lifted a bank levy as promised, your tax pro may have to reach out to the IRS to see what’s going on.
Obtain IRS Representation Today
Hiring a tax professional is a big deal. Not only does it require you to divulge a significant amount of personal financial information, but it also puts your financial future in someone else’s hands. Then there’s also the fact that you have to pay someone for this tax help, which can be hard to do when you’re already struggling financially.
Besides the skills and experience to deal with the IRS, the biggest advantages of hiring a tax resolution pro is the peace of mind they provide and making sure you’re not missing anything. To learn more about finding someone to help you deal with the IRS, contact the Damiens Law Firm. We offer free consultations, which you can schedule today by contacting us.
How IRS Representation Actually Works FAQs
How exactly do I benefit when I hire a tax pro to represent me before the IRS?
Hiring a tax professional to handle your case doesn’t guarantee an ideal or perfect outcome, but it does significantly increase your chances of being in a better situation than if you handled your tax problem by yourself. There are also “soft” benefits, such as peace of mind and convenience.
Below is a chart that summarizes some of the benefits you can expect when you hire a tax resolution professional to represent you before the IRS.
|
Concern or Requirement |
The DIY Approach |
How Hiring a Tax Professional Helps |
|
Obtaining Tax Transcripts |
You create an online account or submit a request by mail. |
Your tax professional downloads your tax transcripts for you. |
|
Understanding Tax Transcripts |
You use online searches or social media to ask questions, increasing the risk of incorrect answers. |
Your tax professional quickly analyzes your tax transcripts to identify any time-sensitive issues and develop a clear strategy. |
|
Calling the IRS |
You have to spend hours on hold and risk getting disconnected or not having the right info. |
Your tax professional waits on hold for you. They know exactly what to ask or tell the IRS. |
|
Filling Out Forms and Filing Them |
You have to obtain the necessary forms yourself, figure out how to properly complete them, identify the proper method of submission, and follow up to confirm receipt. |
Your tax professional already knows how to fill out and file these forms and will follow up to confirm their receipt. |
|
Responding to IRS Collection actions |
You spend time figuring out if you can respond to the collection enforcement action and if you can, the best way to do so. |
Your tax pro knows how urgent a particular collection action is and what the appropriate response should be. |
|
Settlement Negotiations |
You negotiate with the IRS by yourself. |
Your tax pro negotiates with the IRS for you and knows the intricacies of whom to talk with and what to say to get the best terms. |
|
Anticipating What Happens Next |
You have to guess about what the IRS will do next. |
Your tax pro knows how these types of cases progress and what you can proactively do to improve your chances of obtaining a favorable resolution. |
|
Tax Resolution or Settlement Confirmation |
You have to wait for a response from the IRS to figure out if your tax case has been resolved, or spend additional time calling the IRS to obtain this confirmation more quickly. |
Your tax professional will follow up with the IRS to find out if and when your IRS tax matter has been resolved and let you know. |
What if I can’t afford to hire a tax pro?
If you can’t afford to pay for tax assistance, then you’ll have to handle your tax case alone. Despite this, it’s still worth your time to at least schedule an initial consultation. These are often free and can help you get started on addressing your tax issue. Additionally, if the economic benefits of hiring a tax pro are outweighed by the costs of hiring them, most tax professionals will let you know, helping you avoid wasting your money.
How do I find the right tax pro for me?
You’ll need to do some research online to find tax resolution firms that handle your particular issue. To avoid scammers or less-than-honest individuals out there, you can look for recognized credentials, such as a bar license (for attorneys), an accounting license (for CPAs), or verified enrolled agent status.
Also, try to avoid outfits that have generic-sounding names, don’t identify specific individuals that make up their tax team, or make too-good-to-be-true promises about your situation before a thorough financial review.
Sources
https://www.irs.gov/forms-pubs/about-form-8821
https://www.irs.gov/forms-pubs/about-form-2848
https://www.irs.gov/individuals/about-tax-transcripts
https://www.irs.gov/individuals/transcript-types-for-individuals-and-ways-to-order-them
https://www.irs.gov/businesses/small-businesses-self-employed/temporarily-delay-the-collection-process
https://www.irs.gov/irm/part5/irm_05-012-008
