OIC Predatory Firms Charge Exorbitant Fees and Make Exaggerated Claims of Success
Caution: Don’t Fall Victim to an Offer in Compromise (OIC) Scam
Predatory Marketing Techniques Take Advantage of Taxpayers Who Owe the IRS
Due to the prolonged Covid-19 pandemic, many individuals and business owners are facing unprecedented financial challenges.
Individuals may find themselves not being financially able to pay their monthly payment to the IRS and default on their installment agreement, or fail to pay their current year taxes and default on their OIC. Business owners sometimes make the mistake of thinking their cash flow problem is a temporary one and think their cash flows will be better next month. Such thinking often leads the business to not remitting the payroll taxes withheld from their employees’ pays or not timely remitting state sales taxes collected thinking it will make up the difference the following month.
What Is An OIC?
An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles a taxpayer’s tax liabilities for less than the full amount owed.
“FOR LESS THAN THE FULL AMOUNT OWED“
Who would not be interested in settling their taxes for LESS THAN THE FULL AMOUNT OWED? This is why the OIC mills are so successful in selling their OIC services to taxpayers.
Some taxpayers mistakenly believe that all they need to do is make the IRS an offer to pay some amount, and the total tax liability is forgiven.
However, the IRS won’t accept an OIC unless the amount offered by a taxpayer is equal to or greater than the reasonable collection potential (RCP) as computed by the IRS. The RCP is how the IRS measures the taxpayer’s ability to pay. The RCP includes the liquidation value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property. In addition to property, the RCP also includes anticipated future income less certain amounts allowed for basic living expenses. The IRS allowed amounts for basic living expenses are often less than the taxpayer’s actual expenses.
The Dirty Dozen
Each year the IRS publishes its Dirty Dozen tax schemes that taxpayers need to avoid. If you have never reviewed this list, you should do so. This year the IRS added OIC Mills to its list, thus showing that this is an ever-increasing problem for taxpayers.
Unscrupulous OIC Mills
During difficult financial times, the promises of unscrupulous OIC mills sound very appealing. They heavily advertise on radio, cable and television, some of the more expensive forms of marketing. They often claim that they can settle IRS tax debts for pennies on the dollar. This is unfortunate, because generally these OIC mills collect exorbitant fees and often do not get the taxpayer into an OIC. Since it often takes over 12 months for the IRS to review and act upon an OIC, the taxpayer’s IRS debt continues to grow due to the continued assessment of interest and penalties. Thus, the taxpayer can find himself in a worse financial situation for having paid the OIC fees and not getting the OIC accepted. These OIC mills need to charge high fees to cover their radio and television advertising budget.
Desperate taxpayers often fall victim to OIC mills’ misleading media advertisements promising miraculous tax debt relief. For example, these mills monitor public records for IRS tax lien filings and then mail the taxpayers misleading letters that warn of drastic consequences if the taxpayer does not immediately call an “800” number to resolve their tax debt. Some mills send solicitation letters that at first glance closely resemble official IRS notices.
The IRS data statistics for the 12-month period ended September 30, 2019 show that the IRS accepted only about one out of every three OICs submitted (17,890 of 54,225).
Perhaps a more telling statistic is that the IRS accepted over 2.8 million installment agreements during this same period – compared to 17,890 OICs accepted.
There are legitimate tax resolution firms. The challenge is finding a firm that has an excellent tax resolution reputation and the necessary training and experience. Some taxpayers mistakenly assume that their tax professional has the necessary qualifications. Look at your tax professional’s website. If they don’t specialize in solving IRS tax problems, ask them for a referral. A CPA, enrolled agent or attorney who does tax representation work without being qualified to do so, runs afoul of IRS Circular 230.
If your tax professional is unable to recommend such an expert, call the American Society of Tax Problem Solvers at (716) 630-1650 and request 2-3 referrals located near you. We recommend that you deal with a local company where you can meet the persons who will be representing you.
Do your due diligence. Check with the Better Business Bureau and the state attorney general office to see if complaints have been filed against the firm you are considering using.
While you can submit your own OIC without using a tax representative which will save you the representation fee, it is often more expensive to do so. A specialist knows how to negotiate with the IRS and what expenses it will accept and the exceptions to the general rules that the IRS will allow. If you have an experienced tax professional working your case, your offer amount will likely be significantly less than that you would compute.
If you are determined to submit your own OIC, we suggest that you first read “How to Resolve Your IRS Tax Debt Problems”.
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.
About F. Bryan Haarlander, EA, CTRS:
Bryan Haarlander, an Enrolled Agent and a Certified Tax Resolution Specialist, is an affiliate member of the Suburban West Realtors® Association, a member of the American Society of Tax Problem Solvers (ASTPS), PA Society of Tax & Accounting Professionals (PSTAP), the National Society of Accountants (NSA) and the National Association of Tax Professionals (NATP). He is the author of “How to Resolve Your IRS Tax Debt Problems” as well as a book on how to start your own business. He has been practicing in Exton for 19 years. His firm serves clients in the western suburbs of Philadelphia, PA, which includes the cities of Chester Springs, Coatesville, Collegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia, Phoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks, Chester, Delaware, Montgomery and Philadelphia Counties, as well as clients in Delaware, New Jersey, New York and throughout the continental USA.
For individual tax payers, real estate professionals, contractors and other self-employed individuals with IRS tax debt issues or tax planning issues, feel free to contact me at (610) 594-2601 or by email at email@example.com.
Keystone Financial Solutions, Inc. specializes in providing innovative tax planning, tax preparation, and solving IRS tax debt problems. The company’s web site is https://www.keysolutions.us and its telephone number is (610) 594-2601.
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