By Dennis Seid/NEMS Daily Journal
It’s tax season and everybody’s after your money, including the IRS.
You’ve likely seen commercials with companies touting their ability to settle with the IRS “for pennies on the dollar.”
It’s certainly tempting to see if you can reduce your tax burden – legally, of course.
According to the commercials, if you you owe a lot, these companies can help you.
And these firms also have made plenty of money by convincing taxpayers that they can help them.
What these companies are pushing for is what the IRS calls an Order In Compromise, or OIC.
An OIC is an agreement between the IRS and a taxpayer so that the taxpayer can make good on a tax debt. If the taxpayer can prove that the tax is unfair or inequitable, or would create economic hardship, the IRS may settle, or compromise federal tax obligations for less than what’s owed.
But an OIC is not easy to get: More than three-quarters of the cases brought before the IRS are rejected.
The IRS says an OIC will be accepted if the amount offered is equal to or greater than the reasonable collection potential. In other words, the IRS wants as much of your money as it can. So you better be in really bad shape with little ability to pay up if you think you can get an OIC.
These tax relief companies may not admit it, but they are trying to set up an OIC for you. Two major problems here:
n The companies charge customers a fee for the service that the IRS will do for free.
n The companies don’t always do what they say they’ll do, perhaps because they know how difficult it is to get an OIC. That has led to complaints from taxpayers who say their burden only got worse.
Warning in 2004
What these companies are pulling is nothing new.
In February 2004, the IRS issued a consumer alert advising taxpayers to beware of these claims to settle tax burden for a mere fraction of what was owed.
The warning said the OIC is a program that “serves an important purpose for a select group of taxpayers. But we are increasingly concerned about unscrupulous promoters charging excessive fees to taxpayers who have no chance of meeting the program’s requirements. We urge taxpayers not to be duped by high-priced promises.”
A better way to handle your tax burden is to pay the IRS in installments. This, too, is a free service provided by the IRS, which accepts about 3 million of these arrangements each year.
Taxpayers’ debt isn’t reduced or eliminated, but it does allow them to pay their taxes over time. An accountant or tax attorney might come in handy, but stay away from those bogus tax relief agencies.
And if you do get that installment plan worked out, don’t miss a payment, or the IRS may ask for full payment.
So, the lesson is this: Tax relief IS just one call away. And it’s going to be the IRS, like it or not.
Contact Dennis Seid at (601) 353-3119 or email@example.com.