Tax Relief Firms – Is it a Law Firm, Accounting Firm, Or Something Else?

The tax relief industry has experienced significant change over the past several years. As the economy worsened and Americans faced increased financial pressures, many people and businesses sought relief from the strain by not paying their taxes. In response, an enormous number of tax companies started sprouting up to absorb the unprecedented demand for tax services. Tax gurus on late-night TV and radio advertise, they’ll “settle your tax debt for pennies on the dollar.” Despite being tax geeks ourselves, we couldn’t make sense of which tax companies are good and which are bad.

Tax Relief Firms – Choosing the Right One For You

Under the broad umbrella of “tax relief firms,” there are three types of professional firms: Law firms, CPA Firms, and Hybrids. The first two types are self-explanatory, and since there’s really no industry-standard name for the latter category, calling them a “hybrid” is probably acceptable. But which of the three categories is right for you?

Law Firms

As you know, a law firm is made up of ONLY lawyers. A law firm may employ assistants, like paralegals, but a tax attorney is ALWAYS the person ultimately responsible for any tax work performed. All tax attorneys employed by a law firm are subject to the ethics rules and disciplinary action of their state bar. A tax attorney may generally represent any client in any state on any U.S. federal income tax matter.

The pros to employing a law firm are that you can feel comfortable that (i) an attorney is the one ultimately responsible for your tax matter, (ii) you have a clear method to file grievances (i.e., with the sate bar) if the attorney screws up, and (iii) lawyers are subject to strict ethics rules so they should work according to the highest of standards. The cons are that law firms generally are more expensive than the other two types of tax firms. Additionally, some law firms (or attorneys) do not focus solely (or even primarily) on tax related work, so they may lack some of the skill and expertise needed to fight the IRS. Just ask your attorney what other types of work he or she performs, and that will give you a sense of whether tax (and specifically, tax relief) is his or her specialty.

CPA Firms

At CPA firms, you will obviously find CPAs (i.e., certified accountants), but you may also find tax attorneys. Like law firms, it’s nice to know that at CPA firms, there is a professional behind the scenes who is ultimately responsible for any tax work performed on your behalf. The pros and cons of CPA firms are similar to those of law firms, except the method of reporting grievances with CPAs isn’t as well defined (but exists nonetheless) as it is for attorneys. CPA firms are generally a little less expensive than law firms.

“Hybrid Firms”

The hybrid firms include tax relief firms that are not law firms or CPA firms. Tax relief firms in this category employ a mix of tax professionals, including tax attorneys, CPAs, and so-called “Enrolled Agents.” Enrolled Agents are tax professionals certified by the IRS. They are neither attorneys nor CPAs, but are tax professionals that the IRS has concluded (either through examination or experience) that they are qualified to represent taxpayers before the IRS.

Many tax relief firms fit in the “hybrid” category. Lots of the tax firms that advertise on the internet and radio are made up of tax attorneys, CPAs and enrolled agents and thus are hybrid tax relief firms. The pros are that these companies generally charge less for tax relief work and are very good at performing tax services and working with IRS since tax controversy work is their specialty. The cons are that unlike law firms and CPA firms, these hybrid firms are largely unregulated, so there’s no clear channel (like, for example, the state bar for attorneys) to file grievances. Since they are unregulated, many of the hybrid firms are just plain bad and if they rip a client off, there’s little recourse, except the traditional routes of going to the BBB or other quasi-regulatory bodies.

Tax Relief Firms – Is it a law firm, a CPA firm, or a hybrid?

Here’s how you can determine whether a certain tax relief firm is a law firm, a CPA firm, or a hybrid firm. First, don’t assume anything just because an attorney or CPA works at the tax firm. As explained above, this is meaningless. Second (and the most obvious), just ask! A tax relief firm should have little problem telling you how it’s organized.

Tax Law Changes: The 2010 Tax Relief and Job Creation Act

The news has recently been abuzz with the new tax legislation passed by Congress and approved by the President. This newsletter will explain in more detail a substantial portion of the content of the recently passed tax legislation and how the new relief provisions may affect you.

On December 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the Act). The Act extends the Bush era tax cuts, temporarily extends unemployment insurance benefits, and includes other temporary business and individual tax incentives. However, the Act does not include any revenue offsets.

The Joint Committee on Taxation staff estimates that the Act will deliver $801 billion of tax and $56 billion of direct spending benefits over 10 years.

Summary of the Act’s Provisions

•Extension of the current individual income tax rates for two years through 2012.

•Extension of a higher alternate minimum tax (AMT) exemption and allowance of nonrefundable personal credits against the AMT for 2010 and 2011

•Temporary estate tax relief with an exemption of $5 million per person and rates up to 35 percent with an election out for 2010.

•Extension of 50 percent bonus depreciation through 2012 and a 100 percent expensing allowance for property placed in service after September 8, 2010, through 2011.

•A one-year reduction in the employee’s share of the social security tax from 6.2 percent to 4.2 percent.

•Extension through 2011 of provisions that expired at the end of 2010 including the research and experimentation credit and the section 1603 credit providing grants for energy property in lieu of production or investment tax credits.


Individual Tax Rates

The Act extends all individual rates at 10, 15, 28, 33, and 35 percent for two years, through December 31, 2012. After the sunset of these tax rate extensions, the top individual tax rate will rise to 39.6 percent.

The top individual tax rate in 2013 does not include the rate increases enacted by the Patient Protection and Affordable Care Act of 2010. This increase includes an additional 0.9 percent Medicare Hospital insurance tax on self-employed individuals and employees and an unearned income Medicare contribution of 3.8 percent on certain investment income.

Capital Gains / Dividends

During 2010, qualified capital gains and dividends were taxed at a maximum rate of 15 percent (zero percent for taxpayers in the 10 and 15 percent income tax brackets). The Act continues this treatment for two years, through December 31, 2012. Additionally, the rates on qualified dividends will remain at 15 percent over the next two years. Qualified dividends are dividends received from a domestic corporation or a qualified foreign corporation.

Itemized Deduction Limitation

The Act extends full repeal of the Pease limitation, through December 31, 2012. The Pease limitation reduces the total amount of a higher-income individual’s otherwise allowable deductions.

Marriage Penalty Relief

Previously, some two-earner couples experienced a “marriage penalty” meaning their joint tax liability was greater than the sum of their separate individual tax liabilities (computed as if they were single). The marriage penalty relief is an increase in the basic standard deduction for a married couple filing a joint return to twice the amount for a single individual and an expansion in the 15 percent bracket for joint filers to twice that of single filers. The Act extends this current marriage penalty relief for two years, through December 31, 2012.

Child Tax Credit

The Act extends through 2012 the child tax credit modifications made by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the American Recovery and Reinvestment Act of 2009 (ARRA). Under EGGTRA, the credit was increased from $500 to $1,000, taxpayers were allowed to claim the credit fully against the AMT, and families with fewer than three children were allowed to claim the credit. Under ARRA, the threshold for claiming the refundable credit was reduced to $3,000 of earned income.

Alternative Minimum Tax Relief

The Act provides an AMT “patch” intended to prevent the AMT from encroaching on middle income taxpayers by providing higher exemption amounts and other targeted relief for 2010 and 2011. The Act increases the exemption amounts for 2010 to $47,450 for individual taxpayers, $72,450 for married taxpayers filing jointly and surviving spouses, and $36,225 for married couples filing separately.

Payroll Tax Cut

The Act includes a new temporary reduction of the Social Security payroll tax for wage earners and self-employed individuals. As a result, the 6.2 percent and 12.4 percent rates applicable under current law to wage earners and self-employed individuals are reduced, respectively, to 4.2 and 10.4 percent for 2011. Employees will receive the benefit of the payroll tax holiday through reduced withholdings. Self-employed individuals can reflect the reduced rates in their estimated tax payments.

Planning Considerations

With the retention of the tax cuts, tax planning methods used by taxpayers during past years will largely remain the same. Tax planning will focus on the individual’s specific circumstances rather than issues related to changing income tax rates.

Those with substantial investment income can now make decisions about rebalancing investment portfolios with confidence about the tax impact of earning dividend income or capital appreciation. Because the tax rates are set for the next two years, other tax planning issues such as acceleration of income or deferral of deductions become less relevant in the short term. This may all change when the tax extensions expire in 2 years.

Business Incentives

Bonus Depreciation

The Act boosts 50 percent bonus depreciation to 100 percent for qualified investments made after September 8, 2010, and before January 1, 2012. The Act also makes 50 percent bonus depreciation available for qualified property placed in service after December 31, 2011, and before January 1, 2013. Certain long-lived property and transportation property is eligible for 100 percent expensing if placed in service before January 1, 2013.

The Act provides for another temporary election to claim a refundable credit in lieu of bonus depreciation for property placed in service during 2011 and 2012. This election allows corporations to monetize a portion of their AMT credit (if originally generated in taxable years beginning before 2006) in lieu of claiming bonus depreciation.

State Tax Implications

Taxpayers operating in states that do not follow the federal bonus depreciation rules will face increases in the complexity of state tax returns and provision and will have to maintain detailed recordkeeping so that state and federal differences can be reconciled.

Section 179 Limitation

The Small Business Jobs Act of 2010 increased the section 179 dollar and investment limits to $500,000 and $2 million, respectively, for 2010 and 2011.

The Act provides an additional year of increased section 179 expensing, but at lower levels than those in effect for 2010 and 2011. For tax years beginning in 2012, the limitation is raised to $125,000, and the reduction begins at $500,000. Those amounts will return to $25,000 and $200,000, respectively, after 2012.

Disclaimer Required by IRS Rules of Practice: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

This publication is intended for general information purposes. It does not constitute legal advice. The reader should consult with knowledgeable legal counsel to determine how applicable laws apply to specific situations. Articles in this publication are based on the most current information available at the time they were written. Since it is possible that the law and other circumstances may have changed since this publication, please call us to discuss any actions you may be considering as a result of reading an article.

IRS Tax Relief Attorneys Are Available Online To Assist You Today

One of the few things in the world that can strike immediate discontent into people’s heart is the IRS. However, many people owe extensive back taxes to the IRS for a variety of reasons, which is why you will want to contact a team of IRS tax relief attorneys to help you, if you are in a similar situation. The IRS is capable of levying your bank account, but the best IRS tax relief attorney will be able to get your bank levy released, returned the money and force them to reconsider their audit. After negotiations, in many cases, a professional tax attorney will be able to reduce your back taxes significantly. In addition to living in your bank account, though, the IRS has the capacity to seize vehicles, other assets and even your tax return, which is why you will want to contact an experienced tax attorney to assist you.

Many people receive IRS notices, and are flooded with memories of extensive unwarrantable IRS tax stories they have heard from others, whether friends, family or even on television. However, IRS tax relief is possible, but you must contact a professional tax attorney quickly to assist you. The tax laws in the US are extremely complicated and are virtually endless, so it seems, which is why you need a tax attorney to take the reins for you, and help you take action against the IRS. They can help you to eliminate IRS tax penalties, prevent wage garnishments as well as help you with IRS audits. Expert tax lawyers will help you deal with your IRS tax debt, to allow you some tax relief. Some examples of how you can take advantage of tax relief is that you can offer to pay your back taxes to the IRS at a fraction of what you owe, and potentially have that amount accepted by them, thus eliminating your tax debt issues.

However, if the IRS does not agree to this offer, you will be able to make a down payment or monthly payments to them, while your next offers being considered. This will be applied to your tax amount, and when you successfully submit an “offer in compromise”, you will extend the time period of the IRS has to collect your back taxes. In many cases, if you do not have professional that understands this process, such as a tax attorney, you will not receive the extra time you need to pay the IRS back, before they began seizure of your assets and your money.

In addition to this, it can provide you with an extension of your tax collection period, or even file for a Chapter 7 bankruptcy. Although only a professional tax lawyer will be able to help you evaluate your specific financial situation and help you develop the proper IRS tax settlement process for your specific situation, if you are looking for any type of IRS tax relief, you need to contact a professional and experienced tax attorney to assist you. Tax situations are extremely complicated and scary; you will want to find the most trusted name in tax relief available today, by checking out the Internet, where you can find a tax attorney quickly and easily.