IRS: CHECK CAREFULLY BEFORE APPLYING FOR OFFERS IN COMPROMISE
(October 25, 2004)
See our notes on this extremely important subject
WASHINGTON - The Internal Revenue Service today issued a consumer alert advising taxpayers to beware of promoters' claims that tax debts can be settled for "pennies on the dollar" through the Offer in Compromise Program.
Such promoters make money by inappropriately advising indebted taxpayers to file an application for an offer in compromise with the IRS, promising unrealistic results, even when the taxpayers do not meet the requirements of the program. This bad advice costs taxpayers money and time.
Taxpayers may refer promoters who are using the program inappropriately to the IRS's Office of Professional Responsibility for civil sanctions by sending their complaint to: Office of Professional Responsibility (SE:OPR), Internal Revenue Service, 1111 Constitution Avenue N.W., Washington, DC 20224.
An offer in compromise is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax debt. The IRS has the authority to settle, or "compromise," federal tax liabilities by accepting less than full payment under certain circumstances
"This program serves an important purpose. But we do warn taxpayers to watch out for unscrupulous promoters charging excessive fees to taxpayers who have no chance of meeting the program's requirements," said IRS Commissioner Mark W. Everson. "Taxpayers should not be duped by high-priced promises."
Although there are some tax practitioners who promote dubious schemes, most practitioners give quality service to their clients. Taxpayers who need a qualified tax professional to prepare and submit their offer in compromise application form may contact state or local tax professional associations to find enrolled agents, CPAs or attorneys in their geographic area with the education and experience to assist them.
The application package, IRS Form 656, Offer in Compromise, was recently redesigned with new instructions, worksheet and checklist to make it easier for taxpayers to determine if they are eligible for the program and to accurately prepare the necessary forms. The July 2004 revision of the application form also contains a new paid prepare signature block. Taxpayers may wish to reconsider using prepares who hesitate to identify themselves on the form.
An offer in compromise may be considered only after other payment options have been exhausted. If taxpayers are unable to pay their taxes in full, there are other payment options, such as monthly installment agreements, that must be explored before an offer in compromise can be submitted.
Our notes on the topic ...
We think this is long overdue from the IRS, a number of companies have making promises or guarantees of Offer-In-Compromise to taxpayers, when they know the taxpayer would not qualify, these companies do this in order to prey on the taxpayers fears and desire to "hear what they want to hear." Successful Offer-In-Compromises are possible, but it takes experience and dedication to achieve it, and not everyone qualifies.
On the other hand, the IRS isn't a benevolent entity trying to help taxpayer with tax problems. Their job is to collect, and they would prefer if the taxpayer wasn't getting help from a reliable firm. The IRS stands a better chance to collect more dealing directly with taxpayer, good for the IRS, not good for the taxpayer. We have seen a trend where the IRS is freely sending Offer-In-Compromise packets to any taxpayers that hints at payment problems, this benefits the IRS, they are getting inexperienced taxpayers to provide them with collection information. Often the taxpayer gets the Offer denied because of inexperience in filing the Offer-In-Compromise, and the IRS has everything they need to collect.
You can guess what happens next. Hard not be cynical, isn't it?
Tax News & Articles of Interest
Please click on the links below to read the complete story ...
- 8 things your hired Tax Relief Firm should NEVER do (Oct 18, 2005)
- IRS Announces the 2005 Dirty Dozen (Feb 28, 2005)
- IRS, Check Carefully before applying for "Offers In Compromise" (October 25, 2004)
- IRS, Justice Department Note Increase in Tax Enforcement (April 6, 2004)
- IRS Updates the "Dirty Dozen" for 2004: Agency Warns of New Scams (March 1, 2004)
- IRS, States Move Forward in Fight Against Abusive Tax Avoidance (Feb. 10, 2004)
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