What to expect from a tax representative

If you owe the IRS large sums of money in back taxes, interest and penalties, you may want to consider finding a tax representative to help assist you with this difficult situation. But before you start your search, you should have realistic expectations about what they can and can't do.

While these professionals do have training and a background with tax issues that many of us lack, what they do not have is a magic wand. If a tax representative promises to settle your claim for "pennies on the dollar," you may want to be skeptical and maybe even consider looking for another tax professional.

Instead, here are some things a good tax specialist may help you with:

If you failed to file your tax return for the years in which the IRS says you owe, your tax representative should be able to assist you in filing those returns. Your tax professional will probably attempt to take every deduction or tax credit you are legally able to take. If your professional is able maximize your deductions, it may consequently lower the total amount you owe to the IRS, and could result in a more manageable debt.

If you have already filed your tax returns, you representative may still take want to take a quick look at your old returns to see if you missed significant deductions. He or she will then determine whether or not it is worthwhile to amend your tax return. However, this can be a lengthy and time-consuming process. You and your tax representative should have a fair and honest discussion on whether the time (and potential cost) of amending your return outweighs the savings of filing an amended return.

After trying to lower the amount of taxes you owe, your tax professional will attempt to get you out of tax debt in one of five ways, as set forth by the IRS:

• Installment Agreement: An agreement in which you agree to pay your debt (in full) by making regular payments.
• Offer in Compromise: A petition where you offer to pay a reduced dollar amount. The IRS must agree to accept this offer before it is binding.
• Not currently collectable: If, based on dire financial straits, you are unable to pay, you may ask the IRS to grant you this status.
• Partial payment installment agreement: You agree to pay the IRS over an extended period, and the IRS grants a reduction on the total amount you owe.
• Bankruptcy: Remember, this will put a black mark on your credit report for several years. Further. It may not erase all of your tax debt, as the IRS has very specific rules about tax debt is and isn't cleared by a bankruptcy.

In order to qualify for any of these programs, you will have to fill out a varying amount of forms of a varying degree of complexity. While you can file these forms on your own, you may want to consider consulting a tax representative to assist you with these forms.

While owing the IRS is a daunting prospect, tax professionals can help you through the process. Knowing what to expect from a tax professional will help you maximize your experience.