Problem solvers: How to offer tax resolution services
Tax resolution — appearing before taxation authorities to untangle the knots of a practitioner’s own clients, and sometimes the referred clients of others — seems a natural extension of tax prep.
Some preparers dive into this work, while some do it only for select clients, and some draw the line at a distinct point in what they find can be a complex service offering.
“We don’t offer tax resolution services as a separate service line, but we have done some of this work for clients of the firm,” said Mike Crabtree, CPA, JD, a partner at accounting firm Boulay in Eden Prairie, Minnesota. “We charge our regular hourly rates.”
“We have a robust practice in tax controversy and resolution services,” said G. Scott Haislet, CPA and attorney in Lafayette, California. “I get clients by referral. I don’t take everybody and I’m very candid about [offer in compromise] inquiries (and great likelihood of failure). I’ll only take a client where the expectations are tempered and understood upfront and where I get retainer for fees in the engagement,” Haislet said. “We typically charge by the hour at our usual rates.”
Some preparers just like the idea of resolution services, “one area where I devote a lot of time and resources to help achieve competency and proficiency,” said Morris Armstrong, an Enrolled Agent at Armstrong Financial Strategies, in Cheshire, Connecticut. “It appeals to my nature to be able to help people get out of jams.”
According to the “Tax Resolution Pricing Report 2019” from Canopy, a provider of tools and education for tax and prep practices, the average hourly earnings for some of the most common resolution services was $178.
Advertising bombards the public regarding resolution services — with most of the ads funneling respondents toward call centers that are “basically salespeople trying to get the non-refundable deposit,” said Larry Pon, a CPA and EA at Pon & Associates, in Redwood City, California. “I’ve seen many cases where they string out the client for fees without actually doing anything.”
This is an area EA Twila Midwood of Advanced Tax Centre in Rockledge, Florida, is trying to increase. “We offer resolution services but need to start promoting it more heavily,” she said. “We charge by the hour and the rate is dependent on the type of service. We start with a minimal rate for answering basic CP2000 letters or such.”
According to Canopy, six common resolution services are OICs, penalty abatement, innocent spouse, installment agreement, trust fund recovery, and lien and levy services. Among average hourly earnings, installment agreements ranked lowest at $94, according to the survey. Trust fund recovery was the highest, at $285.
“I do it for clients or their referrals who need it. I charge based on my hourly rate [and] estimate the fee based on the situation,” said Pon, who also holds the U.S. Tax Court Practitioner designation, allowing him, as a non-attorney, to represent clients and file petitions in Tax Court. (To qualify to offer tax resolution, one must be an EA, CPA or tax attorney.)
“Fees range on complexity,” added Chris Hardy, an EA and managing director with Paramount Tax in Georgia. “I quote fees for each stage of the case: X amount for initial transcript review, for completing returns for each year unfiled, for installment agreement, for OIC, for appeal. They can choose how much they want me to do or not do.”
OIC takes most time
Penalty abatement and innocent spouse cases take the least amount of time, averaging 3.7 hours per case; OIC cases take the most amount of time, according to Canopy’s research, averaging 10.3 hours per case. More than a third of respondents who spend more than 15 hours on an OIC case don’t charge more than $1,000.
Genesis Accounting & Mgmt. Services in Lorain, Ohio, does some resolution short of preparing OICs, according to EA Debra James. “We will assist folks in preparing actual returns when SFRs have been done by IRS, we’ll prepare six years back if the taxpayer hasn’t filed, we’ll request abatement of penalties when appropriate and assist with setting up installment agreements,” she said.
“Of course we charge for back years’ preparation, but for current clients we don’t charge for other assistance as I believe it’s all part of the service,” James said. “I choose not to do OICs since I know how long the process is and how unpredictable the outcome. I know many practitioners get paid in advance for this work, and get paid well since it’s likely to drag on. I’d prefer to take on an assignment, know what the outcome is going to be, and be paid appropriately when I deliver. Conversely, I’ve coached some clients through their own OIC preparation since IRS has a very nice how-to package.”
Canopy found that respondents who take on two to five resolution cases per month charge an average of 57 percent more per case than those who take on one or fewer cases per month. Respondents who take on 10 or more cases per month charge an average of $3,096 per case.
Where to look for clients? Referrals, clients — and other sources. “People knock do-it-yourself tax software,” Armstrong said, but “many people who use it seem to come to me for resolution issues.”