From a client who had a large capital gains tax bill:

Kerry,

WHAT ABOUT "AMERICAN TAX RELIEF" 1-800-TAXHELP and those types of TV/websites??
Thanks. 

My reply:

Those companies that advertise an ability to settle IRS debts for pennies on the dollar are scam artists.  They charge advance fees and then do nothing.  Do an internet search and you will find a never ending list of people with complaints about these companies.

What they are pretending they can do is utilize the IRS's Offer In Compromise program.  This is an actual IRS program, which I have used in past years for some clients.  However, it was always very difficult to have an offer accepted and has been tightened up even more in the past few years.  In fact, IRS just instituted a new policy a few weeks ago that it knows will discourage OICs.  They are requiring a nonrefundable 20% down payment with each offer.  Until now, there was never a requirement to submit any actual money with the offer.

OICs are generally most appropriate in cases where the outstanding tax debt is so large that, given the taxpayer's net worth and earnings potential, it would literally be impossible to pay it off in the person's lifetime.  By proving severe financial hardship and low expectations of future income, such as with health issues, IRS will occasionally allow an account to be settled for less than full value.  I don't see that as appropriate in your case because IRS would demand a full listing off all of your assets and debts, and if there is a positive net worth, they will expect at least that much to be offered.

Let me know if you have any other questions.

Kerry

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 8/06/2006 03:58:00 PM Send this post: