Owe Money to the IRS?  Reduce Your Debt for Pennies on the Dollar

Who hasn’t seen these ads on television claiming that if you owe taxes, the advertiser can settle your debt for pennies on the dollar. Do you believe these ads to be valid?

Every year, the IRS publishes their DIRTY DOZEN list which is basically a list of the top 12 scams with regard to taxes.  This year, in addition to the usual and common ones of IRS impersonators calling you demanding money, identity theft, etc., the IRS has added what they are calling “offer in compromise mills.” 

These “mills” are the advertisers who claim they can reduce your debt with the IRS.  They are akin to the “ambulance chasers” often seen in accident cases.  Are their claims valid?  As to the IRS claims, not very likely. 

So, what do you do if you owe the IRS and can’t pay your obligation?  The best option is to contact the IRS and work directly with them to set up a payment plan.  Contrary to what many people think about the IRS, they are human and will work with you.  Yes, the IRS may use a method called “offer in compromise” but it will be a legitimate offer and you won’t be charged a fee as you would pay these “offer in compromise mills.”  Another option is to consult a tax professional who can provide guidance on how it would be best to proceed. 

IRS.gov has a tool called Offer in Compromise Pre-Qualifier Tool which you can use to see if you qualify for entering into an offer in compromise.  But, it is suggested that even if you don’t pre-qualify, rather than doing nothing, you are better off to contact the IRS or engage the services of a tax professional to assist in helping to get going in the right direction toward resolving your tax liability.  

In a similar fashion, there are ads that are enticing to get you a bigger refund.  These ads are not always trustworthy and should you use one of these preparers and you magically get a refund larger than what you may have expected, recognize that a red flag may be present.  Could your return have invented income to qualify you for tax credits, claim fake deductions to increase the amount of refund or direct a refund into a bank account other than your own?  These could result in an audit of your return and a return of a portion or all of the refund you received with added penalties and interest. 

Be realistic with claims that seem too good to be true.  Do your homework.  And by all means, do not be afraid to call the IRS.  They are here to help you.  They aren’t the bad guys.

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About the Author

Kay Sowa is a paralegal in the Trusts and Estates Group at Capehart & Scatchard, P.A. She is an IRS Enrolled Agent, an Accredited Estate Planner®, and a Certified Trust and Fiduciary Advisor. She oversees the trust and estate administration practice for the firm. She is an accomplished author and lecturer who has frequently spoken on behalf of a number of organizations including the National Business Institute and the Institute of Paralegal Education.

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