When it comes to settling back taxes, many taxpayers find an answer by hiring a tax attorney. But how much do they charge, and more important, how much should you pay? In our professional experience, even the most expensive tax attorneys can often not deliver the expected results. Discover in the following article the types of fees you can expect when hiring a tax attorney. Know the fee structures that end up being the most expensive and make the right decision from the start.
From Most Expensive Tax Attorneys To Cheapest – Who Makes The Cut?
Sometimes the most expensive tax attorneys are not necessarily the best. There are, however, options available to those who need a tax attorney that won’t break the bank. The key to finding reasonable rates is to understand the typical fee structures that tax attorneys use. Scroll to the bottom for our solution on the absolute lowest cost way to get an Offer In Compromise with professional help.
Flat Fee Or Hourly Rate – Common Fee Structures & Charges Per Tax Attorney
Depending on which tax attorney you decide to hire, they will present a fee structure in one of two manners. They will either charge a flat fee or apply an hourly rate. Upon an initial examination, many taxpayers shy away from the hourly rate. People prefer to have an upfront amount. An hourly rate gives the sense that a tax attorney can add on time to charge more. But in reality, is a flat fee the better way to go?
The Most Expensive Tax Attorneys Tend To Charge A Flat Fee
Contrary to what may be popular belief, a flat fee structure is usually not the better method of charge. The reason is this. With a relatively straightforward tax debt case, your tax attorney should be able to provide an accurate quote. Because they do these types of cases all the time, they know how long it will take.
Now take, for example, a case that goes forward set on a flat fee. These types of contracts define the exact work of the attorney. If any extra work needs doing, they will often add on arbitrary fees. Tax relief companies also offer some of the most expensive tax attorneys. Not because the attorney is highly paid, but because companies that advertise on radio and television have extremely high customer acquisition costs. Many also charge a flat fee based on the tax debt and often the workload is not more because the tax debt is higher, especially taxpayers with lower income. A case where the debt is $50,000 or $150,000 will be the same amount of work if the client has little income, no assets, and is not in collections yet.
Pros & Cons Of A Flat Fee vs An Hourly Rate
Pros Of A Flat Fee
The obvious benefit of hiring a tax attorney with a flat fee (and no arbitrary fees) is the ability to budget your expenses. Having the knowledge of cost in advance allows some room for adjusting your personal finances.
Cons Of A Flat Fee
Here is where the most expensive tax attorneys can show up. Especially with cases that are more complex. The worst of these circumstances involve a flat fee arrangement that sounds reasonable enough. As the case becomes more demanding or there is a change in the service type (ie: Offer in Compromise to Currently Not Collectible status). The end result can be shockingly unpleasant, to say the least.
Arbitrary fees defeat the argument that a flat fee means no charge for extra work. This was the case with the now closed Roni Deutch law firm. Clients were charged for one service but when it turns out another is required, a new high flat fee was charged. Hourly rate law firms are mostly just transferring over your information to different, but similar forms. The financial analysis and work is very similar if you are submitting for a settlement or a payment plan.
Last, many flat fee firms charge all amounts within 30 days or charge a monthly rate. This locks you in where as you are not locked in like an hourly retainer as explained below. Most tax relief companies charge about 10% of the debt total with minimum fees around $3,000. Tax relief firms charging monthly rates may be charging you a lot for just sitting on your case. When an Offer In Compromise is submitted, it can take anywhere from 4 months to 2 years, sometimes longer with appeals.
Pros Of An Hourly Rate
An hourly rate is almost always the better choice over a tax relief company. There are some instances though where a flat fee attorney might be cheaper. An established tax attorney will provide a fair assessment of your case, including an approximate quote. It’s not likely with a simple case that you’ll pay for extra time. If by chance your case does take longer, hourly rates typically cost less than a number of arbitrary fees. Hourly rate attorneys charge initial retainers, but most are applying that to hourly billed time. You can also see the progress of your case and cancel at anytime, whereas you have already invested heavily in a flat fee.
Cons Of An Hourly Rate
Some tax attorneys are not very quick and if they operate slowly on the computer you might be paying for it. You may find some tax attorneys do not deal in the area of tax you need help in and you end up paying for that attorney to learn. Last, some tax attorneys charge extremely high hourly rates ($750 and up per hour) and it does not make economical sense to hire them.
Examples Of Arbitrary Fees
When a tax relief company or tax attorney accepts a flat fee case, the contract will include specifics about the work to be performed. It is common practice that a different resolution is needed later and another fee is assessed. By this method, a taxpayer can go from a reasonable rate to one of the most expensive tax attorneys by essentially paying double.
Some examples of arbitrary fees include but are not limited to:
- Filing For an Appeal
- Currently Not Collectible filing after a disapproved Offer In Compromise
- Case going on beyond one year and charging annual fees
Costs Of Service – From Least To Most Expensive Tax Attorneys
For taxpayers looking to hire a tax attorney, beforehand knowledge of the going rates is imperative. You also want to be certain that you are indeed hiring a tax attorney. Don’t let tax relief companies trick you into thinking an attorney is fully responsible for your case! Non-law firms are hiring attorneys to work on the case, but if they close the attorney does not continue to work on the case.
Be aware that hourly rates follow a wide range of cost depending on the tax attorney. The lower rates are starting around $300 per hour, while the most expensive tax attorneys charge over $750 per hour. Some firms like ours use Enrolled Agents and CPAs to do informational calls to save you money. Also, we use CallEnQ which reduces the hold time spent with the IRS, in turn reducing your bill.
For hourly cases, most law firms will cost between $2,000 and $7,000 to handle your case in most situations. Offer In Compromises at our firm generally run closer to $3,000 for wage earners and closer to $5,000 for self employed individuals. Our prices are slightly lower than other hourly rate law firms, partly due to the average high typing speed of everyone working at TRP.
Finally, taxpayers who choose a tax relief firm should expect fees to be roughly 10% of their total tax balance, with a minimum fee of about $3,000. Some tax relief firms have yearly fees. The now defunct Tax Resolution Services charged an additional fee of $1,500 per year for cases where a flat fee was assessed. Clients that have hired our firm have stated the quoted fee from Optima Tax Relief was over $10,000.
Use The Tax Resolution Professionals Tax Guide – Free Of Charge!
Most tax firms will advise that it costs nothing to handle your own case. Here at Tax Resolution Professionals, we take that advice a step further. We understand that many taxpayers can’t afford to hire a tax attorney and don’t know how to about it themselves. For this reason, we are happy to provide our readers with a comprehensive tax guide. Free of charge!
The Lowest Cost Option For Professional Tax Resolution Help
Some law firms offer a third option for a solution to tax debt: reviewing your prepared paperwork. This often includes a review of your self prepared paperwork. The attorneys are not on file as your representative, but they review your paperwork and make recommendations. Our firm offers this service and it is the cheapest way to get professional help on dealing with tax debts. The most common thing we review is Offer In Compromises prior to submission. We have people check out our do it yourself Offer In Compromise guide, which also has the forms needed.
Tax Resolution Professionals Handles Cases Of More Complexity
Many tax debt cases that we come across are simple. We understand that most taxpayers don’t realize how easy these cases are to resolve. The process may take a while to complete. The time and energy, however, isn’t as intensive as some advertising is set to make people believe.
For this reason, Tax Resolution Professionals only takes cases where our services are needed. Contact us for a free consultation with one of our tax attorneys. Even if we cannot take your case, we will point you in the right direction!
Final Thoughts On The Most Expensive Tax Attorneys – Not Worth The Cost
We hope that you as a taxpayer leave this article with a better understanding of what it takes to hire a tax attorney either with a law firm or tax relief company. Remember to investigate before making a decision. Do your due diligence and be sure you hire a tax firm or a tax attorney. Non-tax firms have no obligation to complete your case! When it comes down to cost, stay away from the most expensive tax attorneys as you are often paying the cost of expensive advertising. Their value is rarely worth the extra cost.