Frequently Asked Tax Resolution Questions (FAQs)
A tax‑resolution firm (sometimes called a “tax relief” or “tax debt” firm) is a business that promises to help taxpayers settle or reduce their IRS or state tax debts. Legitimate firms employ attorneys, certified public accountants (CPAs) or enrolled agents (EAs) who can represent taxpayers before the IRS. The IRS explains that attorneys, CPAs and EAs have unlimited representation rights—they may negotiate audits, appeals and collections on behalf of taxpayersirs.gov. Qualified professionals can file for payment plans, prepare offers in compromise (OIC), or request penalty relief.
Yes, the IRS can—and often does—take action to collect unpaid taxes. This may include levying your bank account, garnishing your wages, and seizing Social Security or other types of income.
The IRS primarily communicates by mail when you owe taxes—sometimes it may feel like a new letter arrives every day. This can quickly become overwhelming and confusing. The key is to pay close attention to any response deadlines. Missing one could lead to collection actions. If you're unsure how to respond or feel overwhelmed, it's best to seek guidance from a qualified tax professional.
A Revenue Officer is an IRS civil enforcement agent assigned directly to your case to collect unpaid taxes. Their involvement typically signals a more aggressive approach to pursuing your tax debt. If a Revenue Officer has been assigned to you, it's wise to seek professional help to ensure your rights are protected throughout the process.
For the 2025 tax year, the federal government sets tax brackets that determine how much of your income is taxed at each rate. For individual filers, a 10% tax rate applies to the first portion of income up to $11,925 ($23,850 for married couples filing jointly), while income over $626,350 ($751,600 for married couples filing jointly) is taxed at the top rate of 37%.
When the IRS conducts a business audit, you'll receive a formal letter notifying you of the audit. They may request an in-person interview and will ask for documentation such as receipts, invoices, loan records, and employment-related paperwork. On average, most audits are completed within three to six months.
No. You are not required to hire a private company. The IRS offers programs such as installment agreements, offers in compromise and penalty relief directly to taxpayers.
- Payment plans (installment agreements) – Setting up monthly payment plans with the IRS; individuals owing $50,000 or less and businesses owing $25,000 or less can apply for long‑term payment plans onlineirs.gov. Direct‑debit agreements usually cost $22 to apply online; other payment methods have higher fees, and penalties/interest continue to accrue.
- Offer in Compromise (OIC) – Negotiating a settlement for less than the full amount owed. This program is legitimate but requires strict eligibility; taxpayers must file all required returns, be current on estimated tax payments, not be in bankruptcy and offer an amount equal to the maximum the IRS could reasonably collect. Low‑income applicants may not have to pay the $205 application fee or initial payment.
- Penalty abatement – Requesting removal or reduction of penalties when taxpayers tried to comply with tax laws but couldn’t due to circumstances beyond their control; the IRS offers penalty relief through first‑time abatement, reasonable cause or statutory exceptions.
- Currently Not Collectible (CNC) status – Asking the IRS to temporarily delay collection because paying the debt would create financial hardship; interest and penalties continue and the IRS may file a lien, but collection is suspended.
- Innocent spouse relief – Seeking relief when one spouse is held responsible for taxes caused by the other spouse’s errors on a joint return; the IRS advises requesting this relief as soon as you learn of the problem.
Fees vary widely. Enrolled Agents typically charge around an average of $3,500 to prepare and submit an offer in compromise, while installment‑agreement services are often $450–$2,500 depending on the size of the debt.
Anyone paid to prepare tax returns must have a Preparer Tax Identification Number (PTIN), but only attorneys, CPAs and enrolled agents have unlimited rights to represent taxpayers before the IRS. The IRS advises taxpayers to avoid “ghost” preparers who prepare returns but refuse to sign them. You can verify a professional’s credentials using the IRS directory of federal tax return preparers. In April 2025 the U.S. Department of Justice emphasized that taxpayers should choose preparers carefully and beware of unscrupulous preparers who promise large tax reductions not based on legitimate positions; the DOJ has obtained numerous civil injunctions and criminal convictions against fraudulent preparers.
The IRS warns that some firms heavily advertise the Offer in Compromise program and give the impression that anyone can settle their debt for a tiny fraction of what they owe. The IRS calls these firms “OIC mills.” According to a 2024 IRS Dirty Dozen release, such companies mislead taxpayers, charge steep fees, and often promote the program to individuals who do not meet the eligibility requirements. Commissioner Danny Werfel noted that these mills raise false expectations and exploit vulnerable taxpayers.
- Be skeptical of “pennies on the dollar” promises. Most taxpayers do not qualify for a major reduction in their debt.
- Check credentials. Use the IRS directory to confirm that a preparer is an attorney, CPA or enrolled agentirs.gov. Avoid preparers who will not sign your return or provide their PTIN.
- Don’t pay large up‑front fees. The FTC notes that many tax‑relief companies collect large retainers and monthly fees but fail to deliver. Legitimate professionals often charge flat fees based on the work requiredcrosslawgroup.com.
- Use free IRS tools first. You can check OIC eligibility, apply for payment plans or request penalty relief directly from IRS.gov; this may save you money and avoid unnecessary fees.
- Report scams. The IRS encourages people to report abusive tax schemes and preparers using Form 14242irs.gov. Fraudulent preparers can also face civil injunctions and criminal penalties—dozens of preparers have been enjoined or prosecuted in recent years.
The IRS’s Dirty Dozen list highlights scams that surge during tax season. Key threats include:
- Email and text phishing (“smishing”) – unsolicited messages claim to be from the IRS or a tax agency and lure victims into clicking links or providing personal information.
- Bad social media advice – influencers and promoters spread false information about tax credits and ways to inflate refunds (e.g., misuse of Form W‑2 or nonexistent “self‑employment tax credits”).
- Fake charities and bogus credits – scammers create sham charities or encourage claims for Fuel Tax Credits and Sick/Families‑Leave Credits when taxpayers are not eligible.
- Overstated withholding and fabricated household employment – taxpayers are urged to invent wages and withholding amounts on Forms W‑2 or Form 1099 to obtain large refunds.
- Misleading OIC promotions and ghost preparers – companies exaggerate taxpayers’ eligibility for an OIC and charge heavy fees; ghost preparers file returns without signing them.
- Verify credentials – attorneys must be licensed by state courts, CPAs by state boards, and enrolled agents by the IRS.
- Check for disciplinary issues – research the professional’s license and disciplinary history through your state bar association or accountancy board.
- Avoid high‑pressure sales tactics – reputable professionals will not promise a refund or debt reduction before reviewing your finances. The DOJ warns that unscrupulous preparers make promises of tax reductions not based on legitimate positions and often include false information on returns.
- Ask about fees – get a clear estimate and understand whether fees are hourly, flat or contingent on results. Beware of companies that base fees on the size of your refund or debt reduction.
- File a complaint with the IRS Office of Professional Responsibility if the practitioner is a tax professional.
- Report fraudulent schemes using IRS Form 14242 or contact the IRS Whistleblower Office; these reports can lead to investigations and possible monetary awards.
- Contact the FTC if you suspect consumer fraud; the FTC investigates deceptive practices and can take action against companies that violate consumer protection laws.
- Consult a local attorney or your state’s consumer protection agency for advice on recovering fees from a fraudulent company.
The contract should clearly explain:
- The specific services to be provided (e.g., preparing an OIC, establishing an installment agreement).
- The fees and payment schedule (up‑front versus ongoing).
- Your right to cancel and any refund policy.
- Disclosure that results are not guaranteed—no firm can promise your debt will be reduced.
- A statement that the firm will abide by federal and state law and return your original documents upon request.
First, contact the IRS directly—you may be eligible for a payment plan, temporary collection delay or penalty relief. If you are low‑income, contact an LITC for free or low‑cost representation. Avoid firms that pressure you to sign up quickly or charge large fees. Remember that interest and penalties continue to accrue until you pay your debt, so the sooner you arrange a payment plan or settlement, the better.
Yes. In May 2025, the IRS, state tax agencies and the tax industry launched the Coalition Against Scam and Scheme Threats (CASST) to combat the rising tide of tax scams. The coalition includes more than 60 groups, such as tax software companies and professional associations, and aims to improve information sharing, raise public awareness, and implement new protections by the 2025 filing season. CASST will also focus on stopping ghost preparers and ensuring Electronic Filing Identification Numbers (EFINs) and Preparer Tax Identification Numbers (PTINs) are properly validated. The AICPA joined this coalition and emphasised that new approaches will expand outreach, identify fraudulent returns at filing, and improve infrastructure.