The Best Tax Debt Relief Services of 2020

By
Andrew Martins
,
business.com writer
| Updated
Jun 05, 2020
Image Credit: Ridofranz / Getty Images

Update: We've updated this page to include information on how tax debt relief services are providing help to those impacted by the coronavirus pandemic.

Your costs may increase, your shipping partner may go out of service, and your equipment may experience some hiccups, so sometimes you have to get creative as a small business owner. A little creativity can go a long way, but there's one aspect of running a business that you should absolutely, under no circumstances, ever try getting cute with – your taxes. If you do, you run the risk of breaking local, state or federal laws and potentially getting buried under a heap of tax debt.

February 2020: Though it was formally signed into law in 2017, some of the provisions of the Tax Cuts and Jobs Act only recently went into effect at the state level. On January 1, 35 states experienced major tax changes, including reductions in individual income tax rates, decreases in corporate income and capital stock taxes, and changes to estate taxes, to name a few. In particular, 13 states made changes to their sales taxes, with most of the focus landing on remote and online sellers. Individuals in Ohio and Vermont should also be aware that the former increased its earned income tax credit while the latter changed its state tax capital gains rules by instilling a hard cap on what percentage of those gains can be excluded from general income. Check your state's tax code for new changes.

Best Picks

Tax Defense Partners
Tax Defense Partners
Best Tax Relief Service for Low-Debt Situations

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It doesn't matter how small your company is or what industry you're in – if you're selling a service or good in the United States, the Internal Revenue Service (IRS) will collect taxes. You'd think the process would be simple for individuals and business owners alike, but the U.S. tax code is a historically complex piece of legislation where one misstep could result in you owing thousands of dollars to the government.

If you've run afoul of the IRS and recently received a letter claiming you owe money, it's understandable to be scared, but there are ways to address the problem. Though the IRS will eventually get its money back from one or multiple forms of restitution, you can team up with a tax debt relief service to solve the problem in a way that doesn't ruin your personal and professional life.

Keep in mind that if you do not meet the IRS's criteria to negotiate for certain tax debt relief options, then you won't be able to get help from any of the following tax debt relief services. For those that do, however, we went through an extensive research process to determine the best tax debt relief services for businesses with various needs.

To read more about the companies we selected as our best picks, continue to our Reviews section. If none of these companies seem like a good fit for you, however, read our reviews of other services and check out other tax debt relief options available to you.

Pricing

When the IRS starts sending letters warning that you or your company owe taxes to the government, it takes approximately 30 days before they begin garnishing paychecks and levying bank accounts (and other assets). While it may seem like time is on your side, the longer you wait to address a tax issue with the IRS, the more likely those liens, levies and garnishments will become a reality.

When you hire a tax debt relief company, a team of lawyers, certified public accountants (CPA), enrolled agents, or a combination of the three, will work directly with the IRS to negotiate your situation.

The best tax debt relief companies will begin by investigating your case to determine where the debt is coming from and your eligibility for certain programs. No matter which company you choose, all of them charge for their initial investigation, though some companies fold this fee into their overall cost. In addition, some companies charge a retainer for their law team, which generally helps pay for the overall service. Each of our top picks charges a flat fee for their work on a case-by-case basis; the more involved the case, the more you will be charged. You should also expect to sign a contract with the tax debt relief company before services are rendered.

Despite what most tax debt relief advertisements claim, legitimate tax debt relief firms cannot promise any significant relief with the IRS. As mentioned before, the IRS has strict eligibility requirements for renegotiating your tax debt.

While you may want to enter into an offer-in-compromise (OIC) agreement with the IRS, which will allow you to settle for a lower amount than what you owe, you may not be eligible for an OIC if you can pay the full tax liability. What tax debt relief companies can do in that instance is advocate on your behalf to establish an installment agreement with the federal government.

What to Expect in 2020

As we get closer to the deadline for individuals and businesses to file their income taxes for the previous year, it's very likely you have already begun seeing tax debt relief commercials on TV and hearing them on the radio.

One aspect that you may not have considered is how much of an impact the 2020 general election could have on the tax system as a whole. For example, 2016 saw the election of Donald Trump to the White House, ushering in a swath of changes to the American tax system dubbed the Tax Cuts and Jobs Act of 2017. Though the legislation dealt more with a series of tax cuts that totaled more than $1.5 trillion, it changed a number of deductions that may have impacted your taxes on a personal or professional level.

As Trump sets to face off with whoever breaks through on the Democratic side, the difference in how each party plans to tax the public will be on display. Democratic front-runners Joe Biden, Elizabeth Warren and Bernie Sanders all have similar views in some aspects and completely conflicting views in others. Warren and Sanders want to take a more drastic approach to debt forgiveness, with plans to ax student loan debt from the ledger, for example. We expect all small business owners will be paying attention to the election and its impact on taxes in 2020.

March 2020: Over the last few weeks, the entire planet has had to adjust to life as governments around the world attempt to contain the novel coronavirus, or COVID-19. With thousands of people losing their jobs nearly overnight, the federal government has implemented measures to help taxpayers.

On March 21, the Treasury Department and the IRS announced that it was pushing back the tax filing deadline from April 15 to July 15, 2020. As a result, federal income tax payments that were due in April are being pushed back without any penalties or interest being charged to the individual taxpayer. Officials said the deferment applies to everyone, including "individuals, trusts and estates, corporations and other non-corporate tax filers as well as those who pay self-employment tax."

The IRS urged taxpayers expecting refunds to file as soon as possible, with IRS Commissioner Chuck Rettig stressing that "filing electronically with direct deposit is the quickest way to get refunds."

"Although we are curtailing some operations during this period, the IRS is continuing with mission-critical operations to support the nation, and that includes accepting tax returns and sending refunds," Rettig said. "As a federal agency vital to the overall operations of our country, we ask for your personal support, your understanding – and your patience."

Under the Families First Coronavirus Response Act, the Treasury Department, IRS, and Department of Labor also announced that small and midsize businesses can take advantage of a pair of refundable payroll tax credits. The credits, officials said, were created to "immediately and fully reimburse them, dollar for dollar, for the cost of providing coronavirus-related leave to their employees."

Under the act, employees can receive up to 80 hours of paid sick leave, as well as paid child care leave when schools are closed or there are no child care providers to help out. Employers will receive full coverage for that paid leave under the act, including health insurance costs, with zero payroll tax liability. Self-employed individuals will get an equal credit.

Companies with fewer than 50 workers are also exempt from existing requirements "to provide leave [to employees] to care for a child whose school is closed, or child care [that] is unavailable in cases where the viability of the business is threatened," according to the IRS.

The Department of Labor issued a temporary nonenforcement policy, allowing employers some time to comply with the new measures. "Under this policy, Labor will not bring an enforcement action against any employer for violations of the act so long as the employer has acted reasonably and in good faith to comply with the act," officials wrote. "Labor will instead focus on compliance assistance during the 30-day period."

April 2020: Along with the delay in the federal tax filing deadline, Congress passed a $2 trillion stimulus package to help various aspects of the U.S. economy deal with the ongoing disruption caused by COVID-19. Dubbed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the bill established the Paycheck Protection Program to provide $350 billion in forgivable SBA loans to keep people employed and receiving paychecks during the crisis. If your small business is one of the lucky ones to receive funding before the program ran dry, you should know that those funds are not going to contribute to your tax debt.

The funding was offered by the government in a bid to deal with the downshifting economy, potential loss of wages and the general financial malaise that's fallen upon the country as a result of the coronavirus. To ensure those funds do the most good possible for small businesses, the CARES Act exempts the loans from taxation once they are forgiven. Canceled debt, or forgiven loans, are usually considered a form of income and taxed accordingly. If your business meets the forgiveness requirements attached to the loan, you will not have to pay taxes on those funds.

If you have tax debt and want to use the PPP funds to help pay that down, that's completely allowed under Section 1102 of the CARES Act, which states the money can be used to pay "interest on any other debt obligations that were incurred before the covered period." While that's good news for your tax debt, it may cause problems when it comes time for the PPP loan to be forgiven. According to Section 1106 of the act, such interest payments are not included in the list of items eligible for forgiveness.

May 2020: As the country continues to deal with the COVID-19 pandemic, those with tax debt should know that they were also considered for relief in the People First Initiative. According to the IRS, the tax filing deadline extension also impacted offers in compromise (OICs).

Under the People First Initiative, taxpayers with pending OIC applications have until the new tax filing deadline of July 15 to provide more supporting information to the IRS. The government agency also is refraining from closing pending OIC requests before the deadline "without the taxpayer's consent."

In addition to a temporary moratorium on pending OIC requests until July 15, the IRS is giving taxpayers with tax debt the ability to suspend their payments on any accepted OICs until the July filing deadline. While this will be a help for many, such deferments will accrue law interest on unpaid balances.

June 2020: Adding to the list of tax debt relief companies offering their services to individuals affected by the COVID-19 pandemic, Benefit Tax Solutions is offering a free tax consultation. According to a recent press release, the company is offering the consultations "to taxpayers in need of tax relief or tax filing help."

According to the company, the initial consultation is free, but the actual service comes at a cost. Exactly how much the fee will end up being depends on each individual case.

Along with the free consultations, Benefit Tax Solutions is having its tax experts help people manage any coronavirus-related tax issues. For instance, they can help people file their taxes before the extended July 15 deadline and answer businesses' and self-employed individuals' questions on filing past-due tax returns.

Reviews

Here are all of our reviews for tax debt relief services, including our best picks and five other companies to consider.

Should You Settle Your Tax Debt Yourself?

The U.S. tax code, comprised of nearly 74,000 pages, has often been considered one of the most byzantine pieces of legislation in the country. With so many tax laws to navigate when dealing with the IRS, it may just make sense to hire a tax debt relief company regardless of how much or little you owe. While these companies are staffed with experts that know the inner workings of the IRS, individuals acting on their own behalf can still reach agreements with the government for free and without representation.

Started back in 2008 and expanded in 2012, the IRS Fresh Start Initiative is a government program that gives individuals and business owners with up to $50,000 in back taxes a chance to resolve their debt directly with the IRS. Through the program, tax debtors can establish a payment plan with the IRS, spreading out repayment over time, rather than all at once. How much you would repay each month is based on your current income and the net value of your liquid assets. For individuals with tax debt problems who have been unemployed more than 30 days, the program allows taxpayers to request a six-month filing extension, and the IRS will forgive penalties.

The Fresh Start Initiative also gives individuals the option to enter into an OIC agreement to settle the debt for less than the tax originally owed. In order to be approved for an OIC, you must prove you cannot pay the full amount owed and that the settlement amount you are offering is greater than the funds the agency is able to collect.

Along with the Fresh Start Initiative, the IRS also offers its Taxpayer Advocate Service. This program is open to anyone living in the U.S. and is free to use. If you have tried to settle matters with the IRS by yourself and have come up empty, the Taxpayer Advocate Service will provide representation to work with the IRS, similar to the services tax debt relief companies provide.

Whether either of these DIY options is right for you depends on your individual case. If the amount of money you'll owe to a tax debt relief company is more than your initial debt, look into the aforementioned options and contact the IRS.

Types of Tax Debt Relief Options

When evaluating which tax debt relief company to use, consider how you want to deal with the IRS. In addition to OIC and payment plan options, most companies provide various other avenues for tax debt forgiveness. Those options include:

Innocent Spouse Relief. Most couples who get married in the United States file a joint tax return with the IRS. While that filing status generally comes with some benefits to the couple, it can also bring on some liability for either individual. Certain cases, such as when a spouse fails to properly report income or claims incorrect deductions or credits, can cause financial harm to the other individual. Innocent spouse relief helps protect an individual from their spouse's mistakes.

Separation of Liability Relief. Most tax debt relief companies can help divorcees deal with the financial sins of the other. In this instance, the IRS allows for "the separate allocation of additional tax owed" between the two individuals. Both parties must either be legally separated from or not living with each other to qualify for this type of relief. Further, you are responsible for the amount of tax allocated to you.

Equitable Relief. When neither Innocent Spouse Relief or Separation of Liability Relief is applicable for anything not properly reported to the IRS on a joint return, you can try to seek Equitable Relief. To be considered for this option, the issue must be attributable to your spouse. According to the IRS, you may also qualify for this option "if the amount of tax reported is correct on your joint return, but the tax wasn't paid with the return."

Currently Not Collectible (CNC). If you are financially unable to repay your tax debt, you may qualify for Currently Not Collectible status. Rather than an absolution of your tax liability, CNC is more of a reprieve from the IRS' collection efforts. Under this agreement, you will stop receiving letters and the phone calls will stop while you get things back under control. To qualify, you must prove your financial hardship to the IRS. You will do that by sharing your financial information with the government, including any savings accounts or other potential assets. Without any assets to repay the debt, the IRS will need to document your average monthly income and living expenses in order to determine if an installment agreement would be better. You may also be required to file a financial statement and potentially prove your income and expenses. Further, the IRS limits your monthly expenses. Any tax refunds will go directly toward paying back your debt, and you will likely get penalized with a federal tax lien if your debt is over $10,000. If you become able to repay your debt, you will lose CNC status. If, however, your financial situation remains the same for 10 years, the IRS will write off your debt.

Federal Tax Lien/Levy Assistance. If you've failed to pay your taxes and ignored the problem for some time, chances are you have been threatened with or been the subject of tax liens or levies. Levies and liens are the federal government's way of ensuring it gets the money owed to them. If you are hit with a tax levy, the IRS can garnish your wages, withdraw funds from your bank accounts, garnish your Social Security and seize your property, though the last option is usually for the most egregious tax dodgers. Tax liens, however, originate from overdue property taxes or failing to pay your taxes. Liens generally affect real estate and personal property, more than your bank account. If you have a tax lien, your credit score will take a hit and your ability to get a loan or refinance your home will be severely hampered, among other issues. Tax debt relief companies negotiate with the IRS to lift levies or liens while you get everything in order.

Penalty Relief. If you can't pay the penalties leveled against you from the IRS, some tax debt relief outfits will work to have those fees reduced or removed. Penalties can be incurred if you fail to file your taxes, don't pay your taxes in a timely manner or don't deposit your taxes before the deadline.

Audit Representation and Tax Preparation. If you or your business are being audited, most tax debt relief companies will provide legal representation. Additionally, some tax debt relief companies offer a tax preparation service aimed at ensuring you do not run afoul with the IRS again.

Tax Debt Relief FAQs

How can you tell if a tax debt relief company is legit?

When it comes to figuring out whether a tax debt relief company is worth your time and won't lead to more problems in the future, time is your friend. For years, the Federal Trade Commission has worked to root out fraudulent tax debt relief companies. The longer a company has been in operation, the less likely that it's a fraud.

It's also beneficial to look up the company's rating with the Better Business Bureau. There, you can see how a company fares in the industry, as well as any complaints leveled against it by consumers.

Do you want to settle your tax debt in full?

The answer to this question depends largely on your individual financial situation. If you can pay in full, the IRS will make sure you do. They will make that determination taking into account your monthly income, your assets and other factors. If you can't pay it in full in one payment, reaching out to a tax debt relief company to negotiate a payment plan with the IRS could be the way to go.

In certain cases, a tax debt relief service will negotiate with the IRS to settle your debt for a smaller amount. This process, known as the offer in compromise (OIC), is a very specific solution that comes with many requirements. If you do not meet those requirements, you will not be approved for an OIC.

Can you negotiate with IRS about your debt?

Depending on your situation and the amount owed, it is possible to negotiate directly with the IRS. Some tax debt relief companies will suggest you handle it yourself instead of using their services, since their costs could exceed what you owe to the government. In those cases, we found that a representative will at least point you in the right direction.

Since the U.S. tax code is so cumbersome, it may be in your best interest to hire a tax debt relief company to negotiate in your stead. Only certified public accountants, enrolled agents and tax attorneys are able to represent you in front of the IRS.

How far back can the IRS collect unfiled taxes?

The IRS has a long memory when it comes to the money you owe them. Generally, the IRS has three years to audit you and determine whether more taxes are owed. If the IRS feels you have committed fraud or other criminal tax activities, the statute of limitations for audits can be extended. If the IRS believes you reported underreported more than 25 percent of your gross income, or if the same amount was underreported in an estate or gifts given in a year, the IRS can audit you within six years.

If you are found to owe taxes to the IRS, they have 10 years to collect any unpaid taxes.

Avoiding Tax Debt Scams

The tax debt relief industry has had issues with fraudulent companies in the past. Some companies claim to be able to settle a tax debt for "pennies on the dollar" or warn that certain services are available only for a limited time. Some companies make offers in their advertising materials that sound too good to be true, claiming that they can get your tax debt completely wiped from your records. Frankly, those offers usually sound too good to be true because they are.

As you do your research, do not share any personal information or pay any money until you are absolutely certain the company is legitimate. You can do that by asking questions of the service and learning more about the team who will represent you before the IRS.

Almost every company offers a free consultation. You will either speak to a representative over the phone or through live chat on the company's website. After answering some brief screener questions, you will likely be handed over to a tax professional who will attempt to answer your questions.

Once you are speaking with a knowledgeable representative, ask what the company can offer you and how long they've been working with the IRS. Find out what qualifications the company's tax professionals have. Seek out companies that have been in business for longer periods of time. Companies with tax attorneys, certified public accountants and enrolled agents on staff should also be higher on your list for consideration, since those individuals are the only ones who are legally able to represent you before the IRS.

If the company you're speaking with is on the up and up, they will answer your questions with no reservations and without requiring an agreement up front.

Common Tax Debt Relief Services Questions & Answers

Have a tax debt relief service question of your own?

Hi Shania. There are a few different taxes to consider. Federal and State taxes, and how you pay for those will depend on your business form, ie Sole Proprietor, Partnership, Corporation, S-Corp..etc. I will speak on Sole Proprietor as it is by far the easiest and cheapest form you can choose and I am assuming you are in business for yourself which is also a whole lot cheaper than having partners. Typically the first tax you will pay will be the fee for registering your Doing Business AS...

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I think the first thing you need to determine is if you are an independent contractor in which case he will give you a 1099 or if he considers you to be working under the table (paid in cash basically). If he is considering you to be working under the table, basically filing taxes on that income will trigger some problems but working under the table is also illegal. Now if he is considering you to be an independent contractor then he will give you a 1099 and you will file a schedule C plus...

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#1 Get legal advice from someone in your jurisdiction. The answer is going to depend a great deal on: Corporate structure: corporation, LLC, partnership, etc. (and how those are treated under your laws) Any/all agreements in place, including compensation for your time. Whether the debt has been signed off personally or only in company name. The main lesson you should take from this: corporate structure is important, and it's important that it be in writing, including termination...

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