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13th January 2011
By Michael Sherman in Taxes
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In 2009, the IRS accepted only 11,000 “Offers In Compromise”. That’s less than 1% of the 15 million delinquent taxpayers.

So why were these 2009 acceptance rates by the IRS so low on submitted Offers?

And why should you be very careful in selecting an IRS Tax Solutions Service who advertises to settle your tax debt for “pennies on the dollar”?

Every taxpayer does have options, including an “Offer In Compromise”, but first you must qualify and very few do. In an article entitled “Beware of offers to reduce tax debt” in the Apr 5, 2010 addition of MSN Money, Jeff Schnepper wrote “(the) IRS will accept 'pennies on the dollar' only if you meet certain criteria. But (tax solutions) companies will take your money even when you don't. We’ve all seen the ads. They promise to settle your tax debt for pennies on the dollar. They don’t tell you how many pennies (one hundred, more than likely). And, they all want their fees up front.”

“These companies are playing the Offer in Compromise (OIC) game. Yes, it’s true that you can settle your tax debt for less than full value. But, there are hoops that you have to jump through that keep getting smaller, and not everybody qualifies.

The IRS will accept an Offer in Compromise only if you meet one of the following requirements:
• There is doubt as to liability.
• There is doubt as to collectability.
• There are equity and hardship factors and the offer would promote effective tax administration.
The IRS is going to look at your assets and cash flow. If you have enough assets or cash flow to settle the debt within 10 years (the normal statute of limitations to collect a tax debt), any compromise offer will be rejected.”

Joe Hill, President of Tax SolutionsTM has been a well known expert in the field of taxation for the last 27 years. His company was the first and is the oldest Tax Solutions Service in the US. Being a field collection officer assigned to the IRS Collection Division in a past life, Hill’s job was to meet with delinquent taxpayers on a face-to-face basis and collect tax for the IRS. And he was very good at his job. Hill worked the cases no one else could close. For many years he led his region in field enforcement actions; enforcement actions that included seizing homes, businesses, autos, equipment, airplanes, boats and any other asset a taxpayer may own to satisfy unpaid taxes.

During his years with the IRS, Hill met with many CPAs and Attorneys who represented taxpayers who owed the IRS. Hill said, “In the vast majority of these cases, the taxpayer’s representative had no idea how to effectively represent and protect their clients. Although the CPA or Attorney may have been excellent in their field, accounting, tax return preparation or income tax law, they had absolutely no idea how to protect their clients when dealing with me and the IRS Collection Division.”

A tax resolution service should offer free consultations to potential clients. Most of the “pennies on the dollar” firms do this. But, According to the BBB, “some (tax services) companies claim they can help consumers reduce the amount of money they owe in taxes or fines to the government. These claims often sound too good to be true and TV ads might include endorsements from customers who state the company worked with the IRS on their behalf and was able to reduce the amount owed to pennies on the dollar. Unfortunately, BBB has heard from consumers who paid thousands of dollars to such companies and were devastated to learn that the company didn’t keep its promise to reduce the amount owed and, in some cases, never even contacted the IRS…If a taxpayer does decide to enlist outside help when dealing with the IRS, he or she should be wary of exaggerated claims… and always check out the business’s report with BBB.”

Hill added, “Taxpayers who submit their own Offer in Compromise (Tax settlement) or their representatives who submit Offers do not have the knowledge and experience to deal with the issues involved in an Offer. Most representatives deal with issues involving the IRS Collection Division once every few years. Our Associates deal with the IRS Collection Division on a daily basis.”

A competent tax resolution firm will review a client’s particular situation and then provide the client with all possible options to deal with their IRS problems. They will explain these options to them, while advising them of the consequences of each option, both good and bad, so they will know the truth on their chance of a successful tax resolution. And they will know if they “qualify” for submission of an “Offer In Compromise” before they pay “thousands of dollars” to unscrupulous companies.

Any type of tax owed to the IRS is eligible for compromise. Personal, corporate or trust income tax, individual or corporate payroll tax, excise tax, estate tax and any type of penalty, including the Trust Fund Recovery Penalty, can all be compromised. But no one should go toe-to-toe with the IRS Collection Division without representation by a knowledgeable, experienced and aggressive tax professional who knows the IRS Collection Division techniques and procedures inside and out, to advice them, protect their rights and represent them. This is paramount to any chance of success with an Offer in Compromise or Installment Agreement (Payment plan).

Correct procedures for submission, prior planning for the Offer before submission, IRS rules, IRS allowances and deviations from the allowances, state law, federal law and even the IRS employees’ personalities all play an equally important part in a successful Offer in Compromise.
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