The Tax Resolution Industry

Due to technology advances at the Internal Revenue Service, the IRS is finding nonfilers and late payers like never before in history. Taxpayers and nonfilers are receiving IRS notices that they need help responding to. These notices are being triggered by many things, including:

• Failure to file
• Failure to pay
• Mismatches among 1099s, W-2s, and numbers on the returns
• Reporting round numbers
• Hot button areas, such as charitable contributions, hobby losses, and other sensitive areas
• Mismatches among foreign disclosures and unfiled forms
• Social media and other online comments

In 2019, there were more than 15 million accounts in collection with the IRS and 10 million nonfilers. The Tax Practice Advisor reports that 1 in 3 taxpayers won’t be able to pay their 2019 taxes on time. The ongoing pandemic will exacerbate these numbers for years to come as people struggle with health care bills and long stretches of unemployment, not to mention other disasters like fires and hurricanes.

This is an area in tax which is in great demand, commands premium prices, and generates customer loyalty like never before. My law practice, which focuses on tax representation, has exploded to 22 employees in the last few years, after starting out with one partner and a part-time admin. Most attorneys are not offering this service, so it’s up to CPAs and EAs and tax professionals to step up and fill the market need.

The average fees for a nonfiler far exceed those of even the most complex 1040s.  Let’s say a nonfiler walks into your office with four years of returns that haven’t been done.  You can charge for:

• Bookkeeping catch-up for four years.
• Four years of returns, which might include 1040s, 1120s, sales tax, payroll taxes, and franchise taxes.
• The resolution portion of the service, which commands the highest rates. It’s standard to charge a retainer for this work.
• Continuing compliance in future years.

When I polled my Tax Rep Network clients about the average fees they were charging, they collected roughly $18,000 per nonfiler.  Compare that to the national average to do a 1040: in 2012, it was $345, and in 2017 it had gone down to $261.  At that rate, you need to do nearly 70 1040s – or one nonfiler – to make the same revenue.  We hope you’re charging more per 1040, but even if you are, the fees to handle one nonfiler will still be greater than average 1040 fees.

Building a tax representation practice enables you to:

• Make more while working less
• Have fewer clients and a higher average revenue per client
• Relax more during tax season and not be so stressed
• Bring income and steady work in all year round
• Stop taking low-level clients if you want to
• Get clients from accountants and attorneys who do not know how to handle these types of cases
• Enjoy less competition for clients
• Worry less about your prices and whether they are competitive or not

Getting Started

If you’re curious about how to get started, we can help. As a practicing Tax Attorney since 2000 and an instructor and author on tax representation since 2006, I saw the need to help CPAs and EAs learn this area.  So I started a program exclusively for tax professionals: Tax Rep Network.  I’ve also written a couple of books to help you build a foundation in the tax resolution area.

Find out more about the books here:  https://tgpublish.com/

Find out more about the Tax Rep Network program here:  https://taxrepllc.com/trn-membership/