The IRS’ offer in compromise program allows taxpayers to resolve their back taxes by making an offer that is lower than the total amount owed. If the IRS approves the offer, it agrees to accept that amount as payment in full. The process of submitting an offer in compromise can be confusing, so some taxpayers choose to hire a tax attorney to assist with the preparation and filing. However, using an attorney for this service can be expensive. The attorney fees for an offer in compromise vary, but here’s what you can expect to pay for.
Before your attorney submits anything on your behalf, he or she must work with you to understand your reasons for submitting an offer in compromise. An experienced tax attorney will know whether your situation qualifies you for this back tax assistance program. Those going through active bankruptcy proceedings or who are behind on their tax filings will not qualify. If you don’t qualify because your tax filings are not up-to-date, a tax attorney might begin by collecting your documentation and filing these forms for you.
After determining that you qualify and identifying the reasons for submitting an offer in compromise, a tax attorney will start to compile the required paperwork and documentation. When submitting this offer, you must include detailed financial records, including bank statements, assets, and income records. Your attorney will request these documents and make sure everything is complete and in order before submitting.
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When individual taxpayers submit their own offers in compromise, they might forget to include certain required documentation or mistakenly leave something off the form. In this case, the IRS might reject the offer or the error could slow the process, which can already take up to two years. Working with an attorney can reduce the risk of errors, which is one of the reasons taxpayers choose to hire a lawyer for this purpose.
The IRS has up to two years to respond to an offer in compromise. Some taxpayers can qualify for an expedited review process, although they must meet the criteria:
If you do not qualify for the expedited review option, you could be waiting up to 24 months to receive an answer. In the case that the IRS rejects your offer in compromise, you could be subject to any interest and fines that accumulated during that period. For many people, the frustration of waiting and wondering can be too much to bear. Hiring a tax attorney can be beneficial because this professional can follow up with the IRS to make sure your offer is under review and accepted in a timely manner.
Experienced tax attorneys know who to call at the IRS, often relying on local agents with whom they have relationships. An attorney can also make sure all communications go through their office, rather than leaving you to negotiate or follow up on your own. If you want to get your offer in compromise reviewed and responded to quickly but you don’t meet the requirements for an expedited case, hiring a lawyer can help.
The IRS might reject your offer in compromise, leaving you with two main options. You can accept the rejection and look for another way to pay back the taxes you owe, such as through an installment plan. The second option is to appeal the rejection. You do have the right to appeal to the tax court, although it must be handled by a tax attorney. This individual will file the appeal documentation on your behalf and attend your tax hearing.
The attorney will also present all the steps you have taken, as well as additional information showing why you are unable to pay back the full amount of back taxes. In the event your offer is rejected, having an experienced tax lawyer can help persuade the court to reconsider your arguments.
The IRS might also request additional information about your case or require you to supply more documentation. When a lawyer is involved in the process, any communications from the IRS can come through the lawyer’s office rather than directly to you. These requests and letters can be overwhelming, and they often have strict deadlines that you must meet to avoid having your offer rejected on the basis of a lack of information.
Some tax attorneys charge an hourly rate, while others offer flat-rate pricing for specific services or requests. The hourly rate depends on the attorney’s level of experience, location, and even the reputation of the firm. Most tax attorneys charge between $200 and $450 per hour for tax services. If you choose a lawyer who charges an hourly rate, you might have to pay an additional retainer fee to handle any ongoing issues that might come up with your case.
Lawyers who offer flat-rate pricing often charge between $3,500 and $6,500 to prepare, submit, and follow up on an offer in compromise. When you pay a flat rate, the attorney will handle all aspects of that task for an agreed-upon price. As long as the scope of the work doesn’t change, you shouldn’t be responsible for any additional fees, with the exception of those you must pay to the IRS.
The cost of hiring a tax attorney might be beyond what you can afford, but it’s certainly not your only option for resolving back taxes. Visit Solvable to find resources that can help you free yourself from financial debt, including owed taxes. Learn more about whether you need representation in U.S. Tax Court and how to go about the process of resolving your back taxes.