How Much Does Tax Relief Cost?

Do you owe the IRS a significant amount in back taxes or face wage garnishment or other penalties for not paying your federal or state taxes?  If so, a tax relief company may be able to help. Use this guide to get an idea as to what you might pay for tax relief services.

How much different tax relief services cost

The costs for tax relief services generally vary based on how much debt you have, what kind of assistance you’re needing, and the complexity of your tax problems.

Service	Average cost
Discovery/investigation fee	$250 – $750
Offer in compromise	$2,000 – $7,500
Installment agreements	$1,500 – $5,000
Penalty abatement	$250 – $1,000
Innocent spouse relief	$3,500 – $5,000
Currently not collectible	$1,500 – $4,000

Sources: TaxDebtHelp, Optima Tax Relief, and Community Tax

Discovery/investigation fee

The discovery fee is what you’ll pay for the company and its tax professionals to do an initial investigation into your tax debts. It usually runs between $250 and $750, depending on the provider.

Offer in Compromise

An Offer in Compromise is a way of settling your tax debts with a payment lower than your owed balance. You’ll typically pay anywhere from $2,000 to $7,500 to pursue this option.

Installment agreements

An installment agreement lets you pay your unpaid taxes out over time, via monthly payments. You can expect to pay between $1,500 and $5,000 for this service.

Penalty abatement

Penalty abatement can help you stop wage garnishment or avoid other penalties you might be charged due to your tax debts. In order to stop wage garnishment, you’ll have to prove that such an action would create a financial hardship. This service typically costs between $250 and $1,000.

Innocent spouse relief

Innocent spouse relief is a way for former partners to avoid tax penalties due to their ex’s tax return mistakes. Seeking this type of tax assistance usually runs from $3,500 to $5,000.

Currently not collectible

This service designates that you’re currently unable to afford your taxes and cannot face penalties or collections due to your overdue balance. You will typically pay between $1,500 and $4,000 for CNC status.

How tax relief companies structure fees

Not all tax resolution companies charge the same. While some charge flat rates, others ask for hourly fees. Firms also differentiate in when they expect payment.

Depending on which company or tax attorney you go with, you can usually expect one of these payment options:

• Full payment upfront. Be wary of this, as it could be a scam. You’ll want to be sure you’re working with a proven and reputable company before paying anything upfront.
• Partial upfront payments. Some firms require you to pay a portion of your total bill upfront. The rest you will pay once the issue has been resolved.
• Deposits. You might have to pay an initial fee/deposit to secure the company’s services, with the rest of your balance payable upon resolution.
• Payment plans. With a payment plan, you might make a monthly installment payment until your bill is fully settled.

In most cases, you will at least pay a discovery or investigation fee upfront. This fee compensates the company for looking into your tax problems and evaluating whether their tax experts can be of assistance.

The average cost of tax relief companies

The fees you’ll be charged vary widely by tax relief provider. To make sure you’re getting the best deal, always consider at least a few options. You should also ask for a full breakdown of fees so you can accurately compare each company.

Company	Discovery fees	Resolution fees
Community Tax	$250	$1,500 – $4,000
Tax Hardship Center	$495	$3,750
Anthem Tax Services	$250	Not disclosed
Jackson Hewitt	$299	$1,800

Each tax relief company has a unique process for providing tax relief services. Still, you’ll generally start with an initial free consultation that helps the company determine whether you are eligible for their services.

Here’s what the process usually looks like, at a high level:

1. Set up an initial consultation. The initial free consultation is when you’ll go over your tax issues.
2. The company will contact the IRS for your records and analyze your tax problems. They’ll then propose a solution and break down the costs of resolving your debts.
3. Finally, they’ll arrange the resolution, which might include an offer in compromise, an installment agreement, or another alternative.

You’ll receive word when your problem has been resolved and instructions on what you should do moving forward.

Ask the expert

Mike Menninger

CFP®

Before deciding whether to work with a tax relief service, ask the company what it expects to save you and compare that to the savings of doing it yourself.  For example it doesn’t make sense to spend $3,000 in fees to save $2,000 in taxes, or a slim chance of saving $4,000.  Also, consider meeting with more than one service before selecting one.

Is tax relief worth it?

Tax relief services can come with potentially costly fees. If you’re considering seeking assistance, you’ll want to be sure the reward outweighs the cost.

Have a good handle on how much your tax debt is, and make sure you’re clear on the total costs you’ll pay to settle the debt. This calculation can help you determine if the help is worth it. (For example, if the tax firm charges $5,500 but your debts are only $5,000, it’s probably not the right move).

If tax relief services are too pricey, you can work directly with the IRS to settle your debt. Consider these resources to get you started:

• The Federal Trade Commission’s instructions on filing CNC status, setting up an installment plan, and other options
• The IRS Taxpayer Advocate Service for more help.
• The National Association of State Auditors, Comptrollers, and Treasurers is also available to help with state tax issues.

Remember, everyone’s financial situation is different. While a tax relief company may be able to reduce someone else’s tax liability, it may not be able to do the same for you.

Gather as much information from the company as you can before paying any fees to ensure this is the right approach for you.

>> Read More: What is tax relief?