Post Content

“Brand new tax relief program!  If you owe more than $10,000, call us!  We know industry secrets and have a 97% success rate—you’ll only have to pay the IRS 8-10% of what you owe.”

This time of year, we are flooded with ads assuring us that no matter how much we might owe in back
taxes,  some advertiser – usually sporting gray hair or glasses, for that distinguished look – promises he will make it all go away for cents on the dollar. While most of us are skeptical about such claims when we hear them on the TV or radio, they may seem more legitimate if we get a letter from an official-looking company, or an e-mail from someone who copies a government logo. 

We called one such company, which advertises on television.  In addition to hearing the above claims, we were told that “this is a tax law firm,” and “this program has been around for years, but the President expanded it to help more people.” 

MP900316868While some of this is partly true, we believe it is misleading.  A lawyer probably is not going to be handling your offer, more likely a CPA.  Two of the names on a “Power of Attorney and Declaration of Representative” form we were sent to fill out are not lawyers in the state in which the company says it is located.  Although Congress, not “the President,” expanded the program in 2006, it was to help unemployed taxpayers, not to generally allow people to pay less in taxes.  Those changes required most filers to include a partial payment with their offer. 

More troubling to us was the inconsistency surrounding the company.  While one company name was provided in the advertisement, another company name was used in the paperwork we received in response to our call.

The thing that concerned us most was the requirement to pay $1,000 up front to review the services, if any, this program could offer us.  It was through persistence that we were able to avoid this fee.

There are legitimate ways to settle a tax debt.  The Internal Revenue Service’s “Offer in Compromise” program is the only way for you to settle your tax debt for less than what you owe.  The program has been in place, with some variations, since 1954.  The IRS defines an Offer in Compromise as an agreement between a taxpayer and the Federal government that settles a tax liability for less than the full amount owed. 

According to the IRS Form 656 Booklet, “the offer program provides eligible taxpayers with a path toward paying off their debt and getting a ‘fresh start’.” The ultimate goal is a compromise that suits the best interests of both the taxpayer and the IRS.

To be considered, generally you must make an appropriate offer based on what the IRS considers your true ability to pay. Submitting an offer application does not ensure that the IRS will accept your offer.  It begins a process of evaluation and verification by the IRS, taking into consideration any special circumstances that might affect your ability to pay.

Generally, the IRS will not accept an offer if you can pay your tax debt in full through an installment agreement or a lump sum.  While the IRS does not limit the number of offers it reviews, only about 25% of the offers made each year qualify for the program.

Here are some tips to help you avoid a tax relief scam:

  • Before you call anyone to help if you owe back taxes, call the IRS at 1-800-829-3676 for a copy of IRS Form 656 Booklet, or get it online here. You may be able to fill out the forms yourself – the IRS has made the instructions clear and useful.
  • File all tax returns you are legally required to file, make all required estimated tax payments for the current year, and make all required federal tax deposits for the current quarter if you are a business owner with employees. You cannot file an offer if you are in bankruptcy.
  • Penalties and interest will continue to accrue during the offer evaluation process. Unless you qualify as a low-income taxpayer, you will need to pay the $150 application fee to file your offer.  If the Offer in Compromise is not appropriate for you, you may still be able arrange for an installment agreement to pay what you owe, but you will probably need to consult with a tax professional to help you take such a step.

Written By:

Recent Posts

Buying a car on Craigslist? Know who you are buying from! posted on Apr 21

Buying a car on Craigslist? Know who you are buying from!

  Consumers often consider buying from a private seller as an alternative to buying from a used car dealer. An increasingly common scam involves dealers posing as private sellers and posting vehicles under the “for sale by-owner” section of Craigslist.  This practice is also known   …Continue Reading Buying a car on Craigslist? Know who you are buying from!

Bringing Down the Hammer on Bad Contractors posted on Apr 19

Bringing Down the Hammer on Bad Contractors

  Massachusetts law requires any contractor performing certain home improvement work to an existing, one-to-four unit, owner-occupied home to register as a Home Improvement Contractor with the Office of Consumer Affairs and Business Regulation. The law regulates the practices of home improvement contractors and provides   …Continue Reading Bringing Down the Hammer on Bad Contractors

Overdraft Protections posted on Apr 18

Overdraft Protections

  Budget slip-ups are easily made but they can be embarrassing when they result in a debit card or ATM transaction rejection. That’s why many consumers rely on the overdraft protections provided by their financial institution. As this is Financial Literacy Month, the Division of   …Continue Reading Overdraft Protections