Using IRS and state tax lien filings is one of the most common methods for getting new tax clients. It also happens to be one of the most effective. A few hundred million dollars of tax resolution services alone are sold each and every year in the United States simply by marketing to federal tax lien lists, which are available directly from your local county clerk and recorder, specialty list brokerages, and credit bureaus. The presence of a lien signifies an obvious problem for the taxpayer — a problem you can help solve.
I would advise reading through this tutorial thoroughly. It covers a lot of ground, and introduces marketing concepts you may or may not be familiar with. This tutorial in itself is a complete marketing plan for generating $1 million a year in client fees. It’s also a fairly thorough introduction to direct mail and telemarketing for lead generation purposes.
The Big Picture Idea
There are a couple of core concepts I want to cover before we get into the nitty-gritty how to portion of this tutorial.
First, as a tax practitioner (or any professional service provider, for that matter), you need to realize one very important, fundamental concept: You are a CPA, tax attorney, or Enrolled Agent SECOND, and a sales and marketing professional FIRST. This is a very radical concept to most people, no matter what their line of work. But the bottom line reality is that if you are in a small firm or in private practice, then you need CLIENTS in order to pay the rent and put food on the table. In order to get clients, you have to do marketing (word of mouth and referrals are still “doing marketing”) and be a salesperson. You may call it an “initial consultation”, but in reality that initial consultation is your opportunity to show a prospective client why they should retain your services instead of somebody else’s, otherwise you don’t make a living. Because of that, you ARE a sales professional, whether you think of yourself as one or not.
Core concept number two is really just a corollary to the first one: If you want current clients to keep coming back and want to grow your practice with new clients, then you MUST MARKET YOURSELF — there is no way around this. Zero. Zilch. None. You HAVE to engage in marketing. You may not think you have to, but trust me: Telling your friends and family that you are looking for new tax clients *is* marketing in it’s most basic form. Putting a coupon in the Money Mailer envelope during tax season is marketing. Sending “thank you” cards to your past clients is marketing.
There are a gazillion ways to market your tax practice to get new clients, and in the future we will cover more of that sort of stuff on this blog, actually, so come back regularly to look for new articles on marketing your practice. For the rest of this post, however, I’m going to focus on the two major things you can do with Federal tax lien data to find new clients.
What Services You Can Offer Tax Debtors
Along with the question of how to market using tax liens, we also often get asked WHY you would want to market your services to tax debtors. Here are just a few of the services you can offer these people and businesses:
- Collections representation services — the most commonly thought of service to offer tax debtors
- Tax return preparation — most folks with a tax lien also have, on average, 3 years worth of missing 1040 or 941s
- Payroll services — businesses with 941 liabilities most definitely need a payroll service provider!
- Bookkeeping — most businesses with tax debt don’t keep very good books, which tends to aggravate their tax issues
- Accounting — the majority of small businesses with tax debt cannot produce a P&L or balance sheet to a Revenue Officer when required to do so
- QuickBooks setup — getting set up on Quickbooks could help these businesses a LOT, and the IRS is more and more often demanding Quickbooks backup files as part of their collections investigations
- Bankruptcy representation — Individuals and businesses with massive tax liabilities probably have other creditors they can’t pay also, and bankruptcy may be an option for some of them to consider
These are just a few examples off the top of my head — I’m sure there are more.
Now, let’s look at HOW to use tax lien data for marketing.
Tax liens generally include the following information:
- Business or Individual name
- Full mailing address
- Lien filing date
- Lien amount
- Tax type
Early on, my entire marketing system was built around the concept of getting Federal tax lien data as soon as it is filed. I did not wait for full processing and posting of the IRS Form 668(Y) image by the particular county or state the lien was filed in. A lot of data can be obtained in a preliminary first-post format by the recording government entity. Because of this, we can’t always obtain the tax type, lien amount, or even the full street address for a lien.
As such, when you purchase leads that include the full address, you can use those for direct mail campaigns. The address on the lien is the last known address that the IRS had for the person or business when the lien was filed.
Direct mail consists of anything you can send to somebody’s address. This includes flyers, coupons, letters, postcards, Priority Mail packages, boxes, etc. For purposes of getting tax clients, the two most common items of direct mail are a standard letter in a #10 business envelope and the good old fashioned postcard.
When sending letters in envelopes, you can increase the number of those letters that get opened by doing a couple things. One is to hand write the address on the envelope — this will increase open rates dramatically. The other good idea is to send what is called “lumpy mail” — put something in the envelope that makes it bulge. Common examples are marketing specialties such as pens, keychains, pocket ice scrapers, refrigerator magnets with local sports team schedules, hard candy, etc.
The content of a letter should, in general, point out a problem (having a tax lien filed against you is generally a problem!), explain how you can help fix it, and then tell the reader what action you want them to take. This last part is the piece that most people miss: They fail to ask for prospect’s business. Whether in print, over the phone, or face to face, more sales are lost because the business is never asked for than any other reason.
In letters and postcards, it’s a good idea to use an attention-grabbing headline at the top of the letter that gets the attention of the reader. It’s important that you realize the purpose of the headline, also, which is not to sell them anything, but to get them to KEEP READING. That’s the sole purpose of a headline.
Another best practice is to never send just one mailing. Sequential mailings consisting of three to twelve messages work best. Choose tax liens that fit your ideal client profile, and mail to them in a recurring sequence. This is the single best way to improve your overall response rate when mailing to a cold list.
I personally like postcards over letters for initial contact for a number of reasons. First, the message is right there — you don’t have to do anything to get them to open it. Second, postcards are usually half to one-third the price of sending letters, so you can send more of them for the same budget.
A quick word about response rates. In the direct mail world, obtaining a 1% response rate is considered good, and a 2% response rate is considered awesome. For our purposes, a response would generally be a phone call back to you. While these numbers seem low to some people, they’re what you need to expect for a good mailing piece to a targeted list (which tax liens are quite targeted). I only point this out so that you do not become disappointed with the results you see, but rather know ahead of time what you should expect. Even one half of one percent is acceptable, particularly when large fees are involved, such as in 1120/1065 preparation, full service accounting retainers, bankruptcy representation fees, and tax resolution service fees.
The large, nation-wide tax resolution firms tend to obtain their clients either through massive TV and radio advertising expenditures, or through telemarketing. Telemarketing is a tested and proven method for generating tax clients, particularly in the tax problem resolution side of things.
Telemarketing, despite it’s reputation and the fact that most people despise it at some level, offers numerous advantages over other forms of marketing. First of all, telemarketing can be extremely cost effective. You can hire an assistant to make calls for you to offer consultations for $8 per hour, and that person can easily dial 50 people per hour. Reaching 50 people by sending letters at 44 cents in postage each, will cost you $22, plus the cost of paper, ink or toner, and the time to fold, insert, address, stamp, send.
Second, telemarketing is the single most direct way to reach out to somebody. Most people are conditioned to answer the phone whenever it rings, and many of the businesses that you call will have somebody there who actually gets paid to answer the phone, it’s simply part of (or entirely) their job. Because of this, the telephone provides a direct connection to the person you need to speak to — the decision maker that can sign your service agreement and write you a retainer check. This direct access is ONLY possible via the telephone and physically walking in — no other form of marketing gives you this. Email, mail, FedEx, newspaper advertising, radio, TV, etc., are all highly effective media for reaching prospects, but the telephone gives you direct and immediate access to the person you need to discuss your solution to their problem with at the very first pass.
Third, despite the general negative attitude in our society towards the practice of telemarketing, the fact of the matter is that it is still one of the most highly effective forms of marketing that exists. There is only one explanation as to why politicians purposefully excluded themselves from the rules of the Do Not Call list: Because telemarketing gets them votes and campaign contributions. Telemarketing raises billions of dollars in campaign contributions around the nation every two years, and raises even more billions of dollars in non-profit funding every year, as well. They do it simply because it works. It’s the same reason that many large tax resolution firms rely on telemarketing to the exclusion of all other forms of marketing: Because it generates literally tens of millions of dollars in new client service fees nationwide every month. Yes, TENS of MILLIONS of dollars monthly, just for tax liability resolution services. I have no idea what level the number reaches for return preparation, payroll services, accounting, bankruptcy, and other related services, but it’s probably even more.
There are a number of different ways to go about setting up a telemarketing system for your services. First, be sure that when you purchase tax lien data that you enable the option to include phone numbers in your selection criteria. This will give you leads that match all your other search criteria, but include only those that have a phone number available. You can also obtain liens without phone numbers, and run them through third-party phone append services, which can be found by a quick Google search.
Some tax practitioners will call leads themselves, while others will have either another member of their staff, such as an assistant, make the calls, or even hire one or more people specifically for that job. You can pay telemarketers a straight hourly wage, purely commission, or some combination of the two. You can find independent contractors in most cities that are professional appointment setters that work from home, or you can hire them as employees or temps that work from your office. You can even hire a call center company that will do the telemarketing for you (just do a Google search for this service if you’re interested). At the simplest level, you can even find people on Fiverr that will do blocks of cold calls for you. How you do this is really dependent on what you are comfortable with, what your budget is like, and how much free time you have.
What is your telemarketer offering over the phone? Your telemarketers should never offer licensed representation services — this is a violation of IRS regulations if they are not licensed themselves. Just as in direct mail marketing, always offer your prospects some sort of “widget”. What I would actually encourage you to offer is something like a special report, a book, an invitation to free seminar or webinar, or something of that nature. You will drastically increase response, and have a better pool of qualified prospects to work with. Remember that the real goal of your direct mail, telemarketing, and other lead generation efforts is exactly that: To convert a raw list of tax liens (referred to in marketing as a “cold list”) into leads. That’s the sole goal of lead generation marketing, aka “prospecting”.
A basic phone call might go like this: “Hello, my name is ____ calling from ______. The reason for my call is that we recently received notice that a Federal tax lien had been filed against you/your business, and I’m just calling to offer a free ________ (special report about removing tax liens, webinar on resolving IRS problems, etc.).
A word about the Telemarketing Sales Rule, the Do Not Call List, and IRS solicitation rules: Be sure to discuss with your attorney what you plan to do with telemarketing so that you don’t run afoul of the TSR, the DNC, the FTC, the IRS, and other acronyms. We are not lawyers, and cannot provide legal advice in this arena. Based on my own research into this, here is my current understanding of some of the general rules:
- If you are calling individuals, you must scrub your telephone numbers against the Do Not Call list. You must obtain a SAN number from donotcall.gov in order to do this, and it does require a fee. Even if you use a web service or another company to do the DNC scrubbing for you, you must provide them with your SAN; it is illegal to just use theirs, and they will make you very aware of this.
- In 2010, the FTC made changes to the Telemarketing Sales Rule regarding collection of fees for debt resolution services offered to consumers. At the current time, the FTC is saying that tax resolution services are subject to that rule, but as of the time of this being written there is a temporary exclusion of tax resolution from this new rule. It is my understanding that other accounting services are not subject to that rule, but again, check with your attorney on this one
- It is my understanding that these regulations don’t apply when you’re calling businesses, but again, check with your lawyer on it just to be sure.
- It is also your responsibility to comply with Circular 230 and IRS Revenue Procedure 81-38, Section 8, which bars the telephone solicitation of licensed representation services by unlicensed people.
Let me emphasize that last point: Unlicensed telemarketers should never solicit licensed services over the telephone — it is a direct violation of Federal regulations. If they get somebody on the phone that wants a consultation right there on the phone, that call should be transferred immediately to a licensed EA, CPA, or attorney. If you happen to be an “industry person” reading this, particularly an unlicensed “closer”, you need to be aware that direct telephone solicitation of licensed representation services is illegal, and can have severe consequences.
The vast majority of large, national tax resolution firms use commissioned openers and hard sell closers to sell representation services. In these firms, the initial consultation is usually done by an individual that is neither qualified to offer tax advice, nor licensed to legally do so. Over the past two years, the FTC and various state attorney generals have been cracking down on these companies, shutting down a number of the larger bad apples. People are being personally fined millions of dollars for violations, and several are also serving lengthy prison sentences. Just don’t do it.
I hope that this tutorial, while lengthy, has been beneficial. The information included here is stuff that some marketing gurus would charge you hundreds, if not thousands, of dollars for in seminars and courses. When actually applied, you can have a steady stream of new clients coming in all the time, and you can literally make millions of dollars using these strategies.