October 28th, 2022 in Tax Law
Can I submit an offer to the IRS for pennies on the dollar? You owe the Internal Revenue Service money. Every day you are scared that today the IRS will drain your bank account and you breathe a sign of relief every day this does not happen. You are not sleeping as the weight of your tax problems keep you up at night. Every time you go to the mailbox and see a letter from the IRS, your chest tightens and you are too scared to open it. On the radio you hear an add offering to resolve your problems for “pennies on the dollar” and you are wondering if it is too good to be true.
The simple answer is yes. Many of my clients when I meet them for the first time have heard of these type of scam services. The client incorrectly believes I can pick up the phone and offer the IRS significantly less than what is owed (perhaps ten cents on the dollar) and this will resolve his or her IRS tax liability. Unfortunately, it does not work this way.
The IRS has a special department, called the Offer in Compromise Unit, that handles offer in compromises. There is a formal procedure to submit offers to the IRS for consideration. An offer in compromise is highly personalized as it is based upon their financial situation. Companies offering all taxpayers an offer and payment of pennies on the dollar only offer false hope. Unless and until your financial situation is evaluated to determine the minimum offer amount the IRS would accept, it is impossible to determine whether the taxpayer qualifies for an IRS Offer in Compromise. Many companies take your money and submit an Offer whether or not that is in your best interest. I have seen many Offers in Compromise submitted by such companies that never should have submitted. The taxpayers are in a worse situation than when they started: they now owe the IRS more money because of interest and penalties, the time the IRS can collect has been extended, they have lost the non-refundable processing fees for the Offer paid to the IRS and they are out the several of thousands of dollars paid to resolve their liability.
If an Offer is submitted and it gets rejected, the time which the IRS can collect on the debt is extended. It also increases the penalties and interest which will be charged to the taxpayer. An Offer is a valuable tool which can help taxpayers but there is significant costs to the taxpayer if the Offer is rejected. No one can make any promises without first doing an in-depth analysis of your financial situation. Your financial situation analysis will assist the tax professional to determine what options are available to you to resolve your federal tax liability.
Having a tax professional who is carefully analyzing your situation is crucial in assisting you to resolve your federal tax liability. There are no “one size fits all” solutions to your very personalized situation. Save yourself a lot of money, time and frustration-work with a tax professional who creates a personalized solution for you and your situation.