Every year, millions of Americans have trouble understanding their tax liabilities and end up falling behind on payments. CPAs and enrolled agents are in a prime position to help, and these challenges offer a tremendous business opportunity. And yet most firms and practitioners don't offer tax problem resolution as a dedicated practice area.
Michael Rozbruch, CPA, Certified Tax Resolution Specialist and a pioneer in this sector, has been in the business for 18 years. Here's his take on the market opportunity and five harmful myths that may be keeping you from offering this service.
Myth 1: Tax Resolution Services Aren't Profitable
"When practitioners say tax resolution isn't profitable, they're using the wrong business model," Rozbruch said. "They don't know how to bill for this premium service." Billing by the hour doesn't make sense here because the client won't perceive the value of the work performed.
Focus instead on value pricing, agreeing to an estimated fixed fee based on the perceived value the client receives, plus all the phases of work involved in resolving an IRS tax debt. Clients are usually more than willing to pay premium fees to get their financial life back.
"One of my members had a client come to them with a $3 million IRS tax debt," Rozbruch said. "The practitioner settled the debt with the IRS for $50,000 in exchange for a $100,000 fee. It was worth it to the client to pay a $100,000 fee to walk away from a $3,000,000 IRS tax debt. Who wouldn't? I wonder how many regular hours a practitioner must work to earn $100,000? That's the power of value pricing."
Myth 2: Someone Who Owes Thousands to the IRS Will Never Be Able to Pay My Fees
Just because someone owes the IRS doesn't mean they can't come up with the money to pay your fees. "Someone showing up to a professional's office owing the IRS $250,000 in back taxes is expecting to pay a significant fee and will pay generously for representation."
Once again, Rozbruch recommended a different billing approach than simply trading dollars for hours or being in the "time and effort" business. "Practitioners should adopt a value pricing flat fee billing model that ensures each engagement is fully paid before the settlement of the client's case."
Myth 3: Now That I Have a Successful Practice, I Don't Need to Consider Adding IRS Representation Work
The tax and accounting industries are going through dramatic changes with the introduction of artificial intelligence. Tasks like tax preparation may soon be handled by "bots" instead of humans.
According to Rozbruch, "This will further commoditize the service lines that have traditionally been the 'bread and butter' for many practitioners. But tax resolution won't be automated any time soon because it involves so much human contact, like negotiating with the IRS on both the administrative and appellate levels." By adding this service now, you'll be ready when your other services lines take a hit.
Besides the intrinsic value of adding another lucrative niche service to your practice, IRS representation can lead to a number of other revenue streams (like life, health, disability and elder care insurance) because placement of these products can actually help your client achieve a better outcome with the IRS.
Myth 4: I Can't Competeith National Firms Constantly Advertising on Late-Night TV and Radio
Tax resolution services are typically marketed by national firms running TV commercials late at night. This can make it seem like local CPAs and tax practitioners can't compete. But according to Rozbruch, it's just the opposite. "National companies don't compete with you so much as help you by creating public awareness that practitioners can help with these types of problems. The majority of people would overwhelmingly prefer to work with a local CPA, enrolled agent or attorney than some large, impersonal national firm staffed with sales people."
Myth 5: There Isn't Enough Demand in My Area
"There are currently over 14 million people (and the number increases every year) from Maine to Hawaii who owe billions to the IRS who are in desperate need of your help," Rozbruch said. "One in fifty U.S. taxpayers has a problem big enough to warrant representation." People with IRS problems come from all walks of life, from doctors to truck drivers. They live in big metropolitan and rural areas. Businesses that may run into trouble with the IRS include retailers, restaurants, manufacturers, internet companies, service companies, distributors and professional practices.
On October 24, 2017, Rozbruch will be holding a free webinar for tax professionals: "Effective Strategies for Adding Tax Resolution to Your Tax or Accounting Practice." If you'd like to learn more about this new lucrative business opportunity, click here to register.
This article provides general information, and should not be construed as specific legal, HR, financial, insurance, tax or accounting advice. As with all matters of a legal or human resources nature, you should consult with your own legal counsel and human resources professionals. ADP shall not be liable for any direct, indirect, special, consequential, incidental, punitive or exemplary damages in connection with the use by you or anyone of the information provided herein.
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