IRS Debt

You can hear the commercials on most any syndicated talk radio show in America. The pitch goes something like “Settle Your Debt With The IRS For Pennies on The Dollar”. Is it possible? Yes it is. It happens all the time.  But there are many factors that determine when an IRS debt can be settled.

The method used to settle debt for pennies on the dollar with the IRS is called The Offers in Compromise Program. It is a program offered by the IRS so that honest taxpayers can settle debts that they can not afford to pay. Let me reiterate. The program that can be use to settle debt with the IRS for “Pennies on the Dollar” is called the Offers in Compromise Program. It is designed for honest taxpayers to settle debt that they can not afford to pay.You have to be able to prove that you lack the ability to pay in order to qualify for this program.

Don’t let someone tell you they can settle your debt that is unaware of your ability to pay according to the IRS formula. The IRS has it’s own formula in arriving at whether a person can qualify for an offer and their definition of ability to pay is rarely the same as the taxpayer’s.

Many of the companies that are in the business of soliciting people to settle their IRS debts will make unrealistic statements and guarantees that they can not deliver. The name of the game is to prey on the taxpayers fear of the IRS and to get the taxpayer to pay for services now.  They will even go as far and tell the taxpayer that “You have already proven that your a procrastinator and you don’t need to let this go any further. Your problems are only going to get worse if you don’t make this decision right now”.

This is a pressure tactic to get you to commit your money to them before they have any idea whether they can provide you with any substantial help or not. Don’t get me wrong. If you have past due taxes you do need to get started solving your problems. But if the people you are talking with have not taken the time to learn about your income, your assets, and liabilities they have no idea if you will qualify for the Offers In Compromise program. Be wary of making any monetary commitment to a person that is promising to help but asking you very few questions about your financial status. Chances are they are not going to help you in the end they just want to get your money while you are scared.

When we take on an IRS Problem Resolution Client we usually ask for $500-$1000 to get started in the determination process of whether a taxpayer can qualify for the Offers In Compromise Program. We advise the client that we are making a determination if an Offer is appropriate or if a payment plan is the proper course of action. As well as an estimate of total fees depending on our determination. We require the deposit to pay for our time in assisting the client in gathering and organizing the financial data needed to make a determination on the clients ability to pay according to the IRS. Then we advise the client on our findings and the proper way to proceed with the IRS debt.

Any other methodology has a high chance of being a scam and the people that pressure the taxpayers to get them to commit money are potentially crooks. You should do your homework to determine the reputation of anyone that requires prepayment.  However, those of us who do IRS resolution work would be foolish to perform the work without some payment up front.  We are typically working for clients that are only dealing with their problem because they are being forced to act by the IRS.

Finally, I would never suggest that anyone pursue an offer without professional assistance. Taxpayers have rights and you need someone that knows your rights to protect you. Look for someone that you can trust by getting recommendations from people you personally know or ask for references and check them out before handing over you hard earned dollars.

I originally posted this article on February 2, 2008. I did so because I was dealing with my third client that had been duped by one of these organizations. I did not know that many state Attorney General’s were upset with their marketing message, subsequent failure to perform, and in pursuit of a remedy. I have attached a pdf file of an article produced by Web CPA on June 18, 2008. The group in this article is not the only offender but they are probably the most well known which is probablly why they started with them. It basically supports my article.  You should read it for yourself.

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