Don't Fall for Tax Companies' Promises of an Offer in Compromise, but Don't Let the IRS Trick You Either

The IRS releases its "Dirty Dozen" most common tax scams every year and basically every year they warn taxpayers about Offer in Compromise “mills” who will take your money and promise you the world only to leave you with nothing…

And then they promptly try to trick you into calling the IRS yourself so THEY can be the ones to take your money and leave you with nothing.

Let’s talk about it:

An Offer in Compromise or "OIC", is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax debt for only a portion of the total amount owed. The IRS has the authority to settle, or "compromise," federal tax liabilities by accepting less than full payment under certain circumstances.

However, a ton of tax companies are fraudulently advising indebted taxpayers to file an OIC application with the IRS, even though they know the person won't qualify.

The IRS warns time and time again that taxpayers need to be cautious of Offer in Compromise “mills” where unscrupulous companies tell you that you’ll qualify for an Offer in Compromise where you’ll pay ten cents on the dollar, there’s a limited window of time to resolve tax debts through the OIC, and they charge you high fees and take your money even when it becomes clear that you don’t qualify.

These "mills" contort the IRS program into something it's not — misleading people with no chance of meeting the requirements while charging excessive fees, often thousands (often more than ten thousand) of dollars.

The IRS is one thousand percent correct.

There are national tax firms out there who like to yell about the new “Fresh Start” agreement that allows you to settle your tax debts for next to nothing compared to what you owe by taking advantage of the Offer in Compromise.

Don’t believe them.

The reality is, MOST people do not qualify for an Offer in Compromise, MOST people’s Offer in Compromise is rejected, and the Fresh Start agreement is over a decade old.

When you get a card in the mail that says they can resolve your tax debt for 12% of what you owe…it’s not true.

These companies have zero idea as to how they can resolve your tax issues without reviewing your specific circumstances.

Anyone who says they can is lying.

But Don't Trust the IRS Either

Here’s the thing: the IRS warns you not to trust these Offer “mills” only to tell you to trust the IRS!

"No one can get a better deal for taxpayers, than they can usually get for themselves by working directly with the IRS to resolve their tax issues," said IRS Commissioner Chuck Rettig. "Taxpayers can check online for their best deal, as well as calling a specialized collection line where they can get fast service by using voice and chat bots or opting to speak with a live phone assistor."

WOW.

The IRS recommends forgetting about a potential Offer in Compromise opportunity and instead calling the IRS collections line without representation?!?!

I don’t know which advice is worse, the fraudulent tax firms telling taxpayers that they qualify for an Offer in Compromise without having any idea whether they actually do or the IRS brass telling taxpayers to call the IRS collections line without professional representation.

The IRS is not your friend.

It's the most powerful collection agency on the planet.

The collections unit of the IRS has only one goal.

And it's to get money from you.

That’s it.

That’s the whole point of the collections unit!

People DO Qualify for the Offer in Compromise Program

Not only should taxpayers not call the IRS by themselves, but it's totally irresponsible for the IRS to tell taxpayers to disregard the OIC program just because there’s fraudulent tax firms out there.

The reality is some people DO qualify for an Offer in Compromise.

And they end up with amazing results.

I’ve resolved 100+ IRS tax debts anywhere from $10k to $100k+ for a payment of $100 - $200 and even more for 10 - 20% of the total debt owed.

You read that right.

It happens and it’s amazing and it’s real.

Few people qualify, but that doesn’t mean you shouldn’t look into whether YOU do.

It's terrible advice to completely look over the Offer in Compromise program and instead call IRS collections.

The Best Way to Handle an IRS Tax Debt

Before I tell my clients how to resolve their tax debt, I do a Tax Debt Investigation and Analysis. I advise them the best way to resolve their tax debt based on the specifics of their tax debt, a review of their finances, and an analysis of both, along with their specific circumstances.

Only THEN do I advise them on how to resolve their tax debt to make sure it's done in a way that's most favorable to them.

Bottom line: If you owe taxes, don't fall for tricks from dishonest tax companies trying to get you to pay them a lot of money for a resolution that you might or might not qualify for, but they certainly don't know whether you do, or from the IRS telling you to call them yourself so the collections unit can trample your rights and take your money.

Instead, understand what your resolution options are and make a decision about how to resolve your tax debt from there.

All Things Considered:

As a tax professional or taxpayer, have you ever called the IRS yourself?

What was your experience like?

Have you talked to one of these nationwide irrationally confident tax companies?

What was their advice?

Did your client get screwed?