Tax Debt Relief – avoiding scams

We’ve all seen the ads on TV. “Got trouble with the IRS? Our professional counselors — many of them former IRS agents — can fix it for you. Call now.” Turns out that it’s not so easy. According to the Wall Street Journal, the largest IRS “fix-it” company (JK Harris, with revenues in excess of $100 million) has been accused by the Attorneys General of a group of states of taking advantage of people who paid for tax assistance and did not get it. They have recently agreed to offer refunds to people who were not helped. And they are not the only such company that has been the subject of such complaints.

The fact is that the IRS has become a tough negotiator over tax debt relief, and you can probably do just as well, more cheaply, by talking to them yourself — or hiring a lawyer or accountant you know to do it for you. Before you do that, it’s good to understand your options.

What everyone wants is a deal. They want to pay only some of their tax debt. This is called an “offer in compromise” by the IRS, and it is very hard to get. In 2007, 46,000 offers were submitted. The IRS accepted only 12,000. You have to prove to the IRS that there is essentially no way you can ever come up with the money you owe.

The most common settlement is an installment agreement. The IRS did 3 million of these in 2007. Basically you pay everything you owe over ten years. If the IRS agrees that you cannot reasonable pay the whole amount in that time, they may give you a partial payment option. But don’t count on it.

Delayed Payment is another option. The IRS will agree to this if you are in temporary financial hardship and they think that your condition will improve in future. But interest and penalties accrue while the IRS waits for its money.

The IRS has its own internal taxpayer advocacy organization and you could contact them if you are having trouble. It’s called the “IRS Taxpayer Advocate Service.” It’s always better to go directly to the source – for tax debt relief talk to the IRS directly.

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