The IRS issued a new warning to taxpayers on Sept. 19 about unscrupulous promoters attempting to entice citizens into signing up for expensive tax resolution services.
The promoters claim that their services are “necessary to resolve unpaid taxes owed to the IRS,” according to a Sept. 19 statement from the agency.
They make use of “aggressive marketing to make false claims of guaranteed settlements” or coerce taxpayers by saying that there is a “limited window of time to resolve tax debts through the IRS Offer in Compromise (OIC) program.”
The result is that taxpayers are often left financially drained with no positive outcomes regarding the tax issue.
The OIC program is a legitimate service from the IRS that allows people to settle their tax liabilities for less than the full amount owed. The IRS considers the person’s personal circumstances before making a final decision. If the IRS determines that the individual can afford only the reduced amount, a compromise may be reached.
Exploitative marketers, or what the IRS calls OIC mills, promote their services by highlighting how taxpayers can take advantage of the program and by making false assurances to taxpayers.
“Taxpayers should be cautious of aggressive marketing that can mislead them,” IRS Commissioner Danny Werfel said. “Many OIC mills charge steep fees, give false assurances and can take advantage of taxpayers with empty promises that their tax debt will disappear. The result is often good money paid for bad results.”
The IRS noted that there are currently legitimate companies offering services to assist taxpayers who require help making tax payments.
“However, some companies running OIC mills will heavily advertise their dubious promises to settle taxpayer debt at steep discounts,” the IRS statement reads. “They usually charge excessive fees for a service taxpayers could have obtained themselves directly from the IRS.”
Offer in Compromise Eligibility
The IRS offers a pre-qualifier tool on its website to check a person’s eligibility for a discounted tax credit.According to the agency, individuals become eligible when they have filed all required tax returns, made all required estimated payments, and are not involved in any open bankruptcy situation.
They must also have a valid extension for a current year’s return. Lastly, they must have made tax deposits for the current and past two quarters, if currently working as an employer.
The IRS stated that while some taxpayers will not qualify for the OIC option, most will qualify for an IRS payment plan. Through this option, payments can be made via installments to settle a balance over time.
There are 180-day short-term payment plans for those with a total balance of less than $100,000 in combined tax, penalties, and interest and 72-month-long installment plans for taxpayers with a tax balance of less than $50,000.
The OIC program also offers a periodic payment option.
Qualification details and methods of payment can be found on the IRS website.
“The IRS also reminds taxpayers about the first-time penalty abatement policy, where taxpayers can go directly to the IRS for administrative relief from a penalty that would otherwise be added to their tax debt,” the agency said in the statement.
According to a JP Morgan report published in June, $5.5 billion was lost to tax-fraud schemes last year. The fraudsters appropriated stolen names, birth dates, and Social Security numbers to claim others’ refunds.
To prevent people from fraudulently filing tax returns, the agency asks citizens to set up an identity protection personal identification number.
