Each year, the IRS issues a list of the most prevalent scams that put taxpayers’ identities and hard-earned money at risk. Several current scams involve “too good to be true” promises to help taxpayers settle large IRS debts. When a taxpayer owes more tax than they can pay without extreme hardship, the IRS sometimes accepts an offer-in-compromise (OIC). Under an OIC agreement, the taxpayer may settle their tax debt for less than the full amount owed.
However, the IRS warns taxpayers to watch out for “OIC mills,” agencies that churn out stacks of OIC applications, costing the taxpayers they supposedly represent thousands of dollars. Many of these agencies make unrealistic claims in radio, TV and internet ads about settling tax debts for “pennies on the dollar.” Often, a taxpayer gets talked into paying an OIC mill to file an application that the agency knows will be rejected, because the taxpayer does not qualify for the OIC program. Even when the IRS accepts an application from an OIC mill, the excessive fees charged by the agency may still cause the taxpayer great financial harm.
If you are considering an OIC to settle your tax bills, do not believe the hype. Instead, work with a trusted tax professional who can determine whether you qualify for the OIC program, and help you prepare an application with a reasonable chance of being accepted.