DIY vs. Full-Service Professional Help For Tax Debt
Owing back taxes or skipping filings can feel overwhelming, and the problem won’t go away on its own. Left unchecked, it can snowball into expensive penalties, wage garnishment, property liens or in extreme cases, criminal charges.
So, can you handle it yourself, or should you call in professional help? It depends. For small debts or straightforward issues, you may be able to call the IRS yourself and work out a payment plan.
But, if your debt is larger or you’ve missed several years of filings, a tax relief service can step in, deal with the complexities of the IRS for you and help get you back on track.
When full-service professional help makes sense
Consider these situations where enlisting the help of a tax resolution expert might be the way to go.
Complex or large tax debts
If you owe a lot — usually $10,000 or more — you’re likely attracting fines as well as interest charges that can pile up fast. A company like TaxRise may be able to negotiate a payment plan or even reduce what you owe.
It also helps to have a pro on your side if you haven’t filed for a few years. Missed returns can block you from mortgages, loans or federal student aid. TaxRise’s team of enrolled agents, CPAs and tax attorneys can help you sort through the tangle of past returns and get you caught up.
Risks of liens or garnishments
The IRS can and will enforce certain actions, like wage garnishment, bank account levies or a tax lien if you have a large tax liability, ignore written notices and haven’t made an attempt to settle your debt. A tax relief service may be able to intervene on your behalf to halt those types of proceedings and come up with a solution.
Navigating IRS programs
The IRS is notoriously complicated, with rules that change practically every year. Even if your tax situation isn’t overly complicated, a service like TaxRise can guide you through your options and handle communication with the IRS, easing stress and helping you avoid costly mistakes.
How it works: Example with TaxRise
This is basically how it works: You call a provider like TaxRise to set up a free initial consultation. During the consultation, you’ll provide specific details about your case and find out if you’re eligible. If you choose to move forward, you’ll pay a small fee for an investigation and analysis of your situation. TaxRise requests your transcripts from the IRS to further evaluate your situation.
At this point, you’ll need to decide again if you want to continue. Next, its team of tax professionals, including CPAs and Enrolled Agents, creates a customized plan to reduce or resolve your tax debt. They’ll handle all the phone calls and paperwork, present your case to the IRS and keep you updated through the process.
When DIY tax debt relief might make sense
While there are compelling reasons to seek professional tax relief help, it can be expensive and isn’t always the right move. Here are a few situations where it might make more sense to handle it yourself.
Simple cases
If all you’ve done is miscalculated your taxes or perhaps made another error, you may be able to easily clear it up with a phone call to the IRS. Or if you’re capable of paying your bill in full, or within a few months, you probably don’t need any outside help.
You don’t qualify
You may be surprised that you have to qualify for a tax resolution company, but it’s true. Typically, you’ll need to owe at least $10,000. You may also need to demonstrate a significant hardship, such as job loss, divorce, major illness or a death in the family.
Confidence with IRS paperwork
If you have previous experience dealing with various tax situations and IRS forms, you may be confident that you can handle the paperwork without any assistance.
Willingness to negotiate
A DIY approach could work if you feel you can present your case in an organized and logical manner. You’ll also need patience and perseverance if your situation can’t be resolved quickly.
DIY vs. full-service tax debt relief: A side-by-side comparison
| Factor | DIY Tax Relief | Full-Service Professional Help |
|---|---|---|
| Upfront cost | None | Free initial consultation, followed by a $375 to $500 investigation and evaluation |
| Time investment | Months to years, depending on the severity | Months to years, depending on the severity |
| Risk of mistakes | High | Low |
| Best for | Low debt and/or simple tax situations | Larger tax debts and/or more complicated cases |
Pros and cons of professional help
While DIY can certainly save you money, a full-service provider like TaxRise could save you time and stress and possibly reduce your debt more effectively. But before you decide, consider both the benefits and drawbacks of hiring a tax relief firm.
Pros
- Expert guidance
- Potential to reduce your tax liability
- Avoid serious IRS consequences
Cons
- Fees can be expensive
- Can’t guarantee a lower tax bill
- The process can be lengthy
Pros and cons of DIY tax debt relief
Dealing with the IRS can be tricky, but if your situation isn’t too complicated, you might be able to do it yourself. Mull over the pluses and minuses of tackling the IRS on your own.
Pros
- Low-cost option
- Personal control over your finances
Cons
- Higher chance of making a mistake
- Potentially more stress
- May not qualify for a tax debt reduction
How much does professional tax debt relief cost?
How much it costs largely depends on how much you owe and the complexity of your case, but you could spend anywhere from $1,000 to $50,000 or more. The investigation phase is typically a flat fee.
TaxRise, for example, charges around $375 to $500 for the discovery phase, which follows the free initial consultation. After that, most tax relief firms charge based on a percentage of your debt, which can vary depending on the complexity of your case.
How to choose between DIY and professional help
Follow these steps to help you decide which move is best for your situation.
- Assess your debt. Figure out exactly how much you owe the IRS and if you agree with that number. For example, if you think the amount in question is wrong, you might need a pro like TaxRise.
- Check IRS programs you might qualify for. Look into IRS repayment plans, the deferred plan (also known as “currently not collectible”), or an Offer in Compromise (OIC) to see what makes sense for you. A straightforward installment plan can be fairly easy to set up on your own, whereas an OIC is much more complicated.
- Determine your comfort level. Be honest with yourself about how comfortable you feel managing complex paperwork, tax law and negotiating with the IRS.
- Compare costs. If you take the DIY approach, you’ll only have to pay IRS fees and penalties. A tax resolution firm, on the other hand, is expensive and could cost you thousands of dollars on top of your tax debt.
- Consider a consultation. If you owe a lot or your situation is complicated, an initial consultation with a company like TaxRise is free, and there is no obligation to commit to anything further. It’ll give you an opportunity to explain your situation and get some free advice from a tax professional before committing.
Risks of ignoring your tax debt
The reality is, you can’t avoid your tax debt forever. It doesn’t go away, and the consequences of not paying can get more severe over time. Here’s what can happen:
- Penalties and interest are added to your tax debt balance
- You could get sent to collections
- Levies on bank accounts or wages
- Federal tax lien on property
- Damage to credit
- IRS could take any refunds you’re owed
- Passport could be denied or revoked
In extreme cases, such as illegal tax evasion or fraud, you could face steep fines and criminal charges, but that’s not common for typical cases of unpaid tax debt.
Bottom line
Deciding between a DIY approach and full-service professional help to deal with your tax debt can be a tough choice. But it ultimately comes down to the size of your debt, the complexity of the case and your confidence in managing interactions with the IRS.
Doing it yourself is a perfectly viable option for small debts and simple cases. However, a full-service provider such as TaxRise could be a strong choice for larger debts or more complicated tax situations.
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