Can CTEC Tax Preparers Do Tax Problem Resolution Work?

By Andy Frye

The tax problem resolution market is BOOMING.  As more and more taxpayers have gone from W-2 to 1099, more and more taxpayers have fallen behind on their taxes.  Statistics show that approximately 14 million taxpayers are in collections with IRS as we speak–those folks could really use some professional help right about now.

Fees for tax problem resolution engagements frequently fall into the $3,000 – $5,000 range.

Can a CTEC tax preparer help clients and make money in this lucrative field of Tax Problem Resolution without having your EA or CPA license?  That’s a question we’ve been getting from some of our Members since we formed a strategic alliance with Michael Rozbruch, the nation’s top trainer in the area of Tax Problem Resolution.  Some Members have even emailed me saying, “Why are you sending me info about tax problem resolution?  I can’t do that, I’m not an EA!”

But, wait a second, are these assumptions that you can’t offer tax problem resolution services without an EA or CPA license actually true?

Let’s explore that question in this blog post: can a CTEC tax preparer do tax problem resolution work without an EA or CPA license…

Understanding What Your Credential Means

Let’s start by making sure that we all have a firm understanding of what the various registrations mean in the eyes of the IRS when it comes to fixing tax problems for clients.

CTEC tax preparer does not mean anything to the IRS.  It’s a state designation.

If you have your Annual Filing Season Program (AFSP) credential from the IRS, however, you have what’s called “limited representation rights.”  You can represent clients whose tax returns you have prepared and signed, at certain levels of the IRS. 

The Pronto Tax School 20 hour CTEC & IRS course meets AFSP standards for CTEC tax preparers and yes we do report hours to both CTEC and IRS.  So, most preparers who have been doing our course each year do have their AFSP in place (as long as YOU registered with IRS as an AFSP participant, that is).

AFSP means, then, that yes you can do some Tax Problem Resolution work for your own clients. That alone may justify getting some training in tax problem resolution.

If you chose not to register for the AFSP credential with IRS and only have your CTEC registration in place, yes it’s true, your ability to perform tax problem resolution services will be quite minimal.  You won’t be able to take a Power of Attorney for a client or do any significant level of tax problem resolution work.

News Flash: Doing All the Work Yourself Is Not the Only Way to Make Money

One thing we realize as we study successful people is that it’s not necessary, or even advisable, to make money only through your own efforts.  Once you can start making money with other people, your earning potential grows.  This is the “mindset” that it will require for a CTEC tax preparer to take advantage of the Tax Problem Resolution opportunity.

With this mindset in mind, let’s look at your situation and see if there’s an opportunity for you to make money, without actually doing all the work yourself.

A) Many CTEC tax preparers have thriving client databases and strong networks of community connections.

B) Some percentage of the clients in your database and/or your community currently need, or will at some point need, Tax Problem Resolution Services, such as:

  • Installment Agreements
  • Penalty Abatements
  • Offers in Compromise
  • IRS Collections Negotiations

C) There are a growing number of Tax Problem Resolution specialists, who actually don’t WANT to “steal” your tax preparation clients, they just want to do more Tax Problem Resolution work.

I guess you could say then that creating an opportunity in the Tax Problem Resolution field is as easy as A, B, C…

A) Evaluate Your Client Database

A couple crucial numbers will tell you whether or not your client group is a good fit for Tax Problem Resolution services:

  • How many clients owed money to IRS at tax time?
  • What percentage of clients have self-employment income?  (They’re the most common tax debtors.)

You can also use “anecdotal” indicators like how many times a client or potential client has asked you if it’s “real” about the TV and radio commercials talking about settling your tax debt for pennies on the dollar.  (If I had a nickel for every time I heard that phrase…)

This evaluation of your client database should take about 20 minutes and will tell you whether or not Tax Problem Resolution could be a low hanging fruit in your tax career, that you could grab and eat if you so desire.

B) Get Basic Training

If the evaluation of your current clients looks promising, it’s time to make sure you’re educated enough to help.  Being involved with people’s IRS problems is not a joke.  It should not be taken lightly and ignorance is definitely not bliss.

Even if you’re not going to do the work yourself, you’ll need to have some understanding of how Tax Problem Resolution works, and what the solutions look like.  This way, you don’t refer your clients to people who overpromise and underdeliver, and make you look bad. 

In my opinion, this is the main risk of getting into this territory as a CTEC tax preparer, is that you’ll refer to an unprofessional professional who takes your client’s money and doesn’t solve your client’s problem; there are some unscrupulous folks out there who use people’s fear of the IRS to rip people off.

In order to prevent that from happening to your clients, you’ll need to know the basics of how the IRS tax problem resolution process works.  You can start by taking a read through Publication 594: The IRS Collections Process, which if you haven’t perused it before, is sure to be an eye-opener. 

You’ll then need to augment your basic knowledge with some tax problem resolution training that discusses not only the technical side of the work, but how to deal with this type of client, too, which is absolutely critical that you approach it the right way.

I would strongly not recommend hiring an employee, or referring an outside specialist, to do tax problem resolution until you yourself have some understanding of the process.

C) Connect with a Reputable Tax Problem Resolution Specialist (or Two or Three)

As the Tax Problem Resolution has continued to explode with opportunity, more and more EAs and CPAs have chosen to specialize in Tax Problem Resolution.  This once “shady” business has gone mainstream.  This has led to increased professionalism.

Organizations like Michael Rozbruch’s Tax & Business Solutions Academy and Larry Lawler’s American Society of Tax Problem Solvers can provide a degree of “filtering” in terms of choosing someone reputable who’s worthy of your referral(s).

You can contact one of these organizations and I bet they’d be happy to provide you with some info about local professionals in your area.  Many tax problem specialists also are able to work remotely via email, scanning, and faxing.

You could either hire an EA or CPA on an ‘as needed’ basis to work for your business, or have the EA or CPA act as a independent contractor vendor to whom you refer business.

How to Get Paid from Tax Problem Resolution Work Without Having an EA or CPA License

Now then let’s cut to the chase, how do you make money from the referral, without doing anything unethical?

This is the most common and accepted way:

Coordinate a deal so that you do the tax preparation involved in the cases you refer.  Most cases involve unfiled tax returns, amended returns, or some other tax prep work. 

If there’s no tax prep, there are other ways you can do some basic admin work and get paid quite well for it, such as helping a self-employed taxpayer to fill out his or her monthly expenses and sending that over to the tax resolution specialist.

“I expect to do at least $500 worth of work on every case that I send, while working no more than two hours total,” is a pretty straightforward way to put it.

By doing some work to earn your fee, you also learn about what the tax problem specialist is doing, in case you ever want to do it yourself or just to keep an eye out for your client’s best interests.

Be up front and transparent because not all EAs or CPAs will be open to this type of arrangement.

Some are open to it though.  The key is to be upfront and treat the other professional like you’d like to be treated.  I know Cynthia Fuentes in our West LA office, who is our tax problem resolution specialist on staff, has worked as a teammate to other Pronto Tax School Members and she can be reached at 310-577-7530.

Some CTEC tax pros who refer this type of business charge a marketing fee to the professional they’re referring, kind of like a “per lead” fee, but that is kind of questionable in terms of ethics.  Some CPA state boards don’t allow these type of “kickbacks.”  We cannot recommend that approach.

Another method of compensation, if you have an office location, would be to rent out a desk or part of the office to a tax problem resolution specialist, and charge higher than normal being that you’re going to work together and provide some leads.

Or, again, you could always just hire the EA or CPA to work for you directly–there’s no rule about you owning a business that has EAs and CPAs working for a CTEC preparer.

Just remember that, when done right, tax problem resolution is first and foremost about helping clients who really and truly need help.  Do NOT get greedy.  Greed ruins everything.

Always keep the best interests of your clients first in your mind because that is the most valuable treasure of any tax professional.

If any EA or CPA tax problem resolution specialists are reading this, should you be reaching out to local CTEC tax preparers about this kind of mutually beneficial alliance?

Only if you want to get more tax problem resolution work…

Defining the Parameters

If you are the one with the client relationships, you have leverage when speaking with EAs or CPAs, even despite any credential snobbery certain EAs and CPAs may throw your way.

Use that leverage to lay out some clear parameters and make sure any arrangement works for your clients and works for you.

You’ll want to make it clear to any specialist, for instance, that you expect them to NOT do tax preparation for your clients because that’s your specialty and these are your clients.  Again though, many people who are truly specialists in this area don’t even want to do tax preparation.  They’re making too much money on the representation side to even bother filling out 1040s.

You might find, in fact, that you could have an opportunity to do tax preparation work for the tax problem resolution specialist’s clients, as a subcontractor.  Consider asking your potential tax problem resolution alliance, when the time is right:

“Once I’m able to show you that I can send you good referrals, what would I need to do in order to start doing some tax preparation work for your clients, so that you can focus on the tax problem resolution side?”

Many tax problem specialists will be receptive to this kind of thinking.

In the process of helping your client, then, you might just help yourself grow your own earnings by getting more work from the professional to whom you’re referring work.

Another Option: Become an EA

If this “out of the box” way to think about the Tax Problem Resolution Opportunity seems a bit too indirect for you, you could always just skip the middleman and become an EA.

It’s not like the EA test is some impossible mountain to climb.

Many of our CTEC tax preparer Pronto Tax School Members could pass Part I of the EA exam (Individual Taxation) in their sleep.  Our Basic Income Tax 60 Hour CTEC Course covers most of the issues on Part I of the EA exam.

Part II: Businesses might be a concern for you if you’ve only been doing 1040s.  But now, Pronto Tax School has you covered there, with the new Business Tax Verified Training Program with CPA Adam Shay.

Part III: Practices and Procedures might also present a challenge if you haven’t been doing tax problem resolution work.  Get some tax problem resolution training and that, too, is a challenge you can surmount pretty easily.

Whether you choose to become an EA or CPA, or you don’t, I personally think that tax problem resolution is an area of work where every tax professional can find some opportunity.  The market is booming and it’s a natural fit to your existing tax prep work.  Yes you may need to be a bit more enterprising if you’re a CTEC preparer but really now, any of us “little guys” who want to earn well these days needs to be creative and enterprising.

Hopefully this blog post has spurred some thoughts in your mind.  Or at the very least answered the question of why I would send you info about free tax problem resolution training to our CTEC tax preparer list. 

If you haven’t already done so, I recommend that you check out Michael Rozbruch’s free tax problem resolution training, and learn a little more about how this profitable niche works.

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Let's Make Sure We Direct You to the Right
Training for Your Needs!

Please click the button below for your primary tax credential.

Not sure which credential applies to your situation?  Click here to reach our support team and we'll help you decide.