The idea of settling large tax debt for pennies on the dollar may seem too good to be true — but is it? The truth is, sometimes, this is a possibility. There are situations when the Internal Revenue Service (IRS) will accept a payment that is far less than what the taxpayer actually owes and forgive the remaining balance.
Unfortunately, there are also situations when this promise is just a scam.
Why would someone promise a lower tax bill?
Unscrupulous businesses will try to get taxpayers with a large debt to reach out and, for a fee, offer to help them get a deal on their tax bill. You may have seen these types of commercials or heard these types of ads. On the surface, they seem like a great deal. In reality, after fee upon fee, the taxpayer may find out they are not getting a break on their tax bill.
Now, not only does the taxpayer who sought these services still have the original tax bill, but they could also face additional tax penalties and fees for failing to deal with their bill. This is in addition to all the fees paid to the business that promised to get the taxpayer a lower tax bill.
This issue is a serious problem. The IRS has warned about these practices, calling these companies Offer in Compromise mills and placing the issues as one of the top tax scams plaguing US taxpayers.
What should I do if I have large tax debt?
The Offer in Compromise legal tool that is used by these businesses is a real thing. This option is available for some taxpayers, but the requirements to qualify for this form of tax relief are very particular. By reviewing the IRS government website, taxpayers can get an idea of these requirements. This information is free and is often the same information these mills provide after charging excessive fees.
If, upon review of the basic qualifications, you think you may qualify, it is often wise to seek legal counsel for guidance. The attorneys at Goldburd McCone LLP have experience in Offers in Compromise and other forms of tax relief. These tax professionals can review your case and provide guidance on whether to pursue this or other options for tax relief.