Wednesday, May 2, 2012

Warning - Tax Resolution Scams

You see a lot of advertising on TV for tax settlements and stopping of enforcement actions.  You need to be VERY careful about these.  Most are scams that, while what they say is technically true, you will end up worse off for having spent thousands of dollars.  Most of these services are one trick ponies who help you request an Offer in Compromise (OIC).  This is where you offer the IRS less money than you owe.

The problem is that the VAST majority are disapproved.  You have to prove that you essentially will never be able to pay the money.  While your offer is being considered, the IRS will generally suspend collection, garnishes and levies.  But they come back full force months later when they deny the OIC.  You also may have reset some statutes of limitations.  You also won't get a refund from the people you paid thousands to help you apply.

Before paying anyone ANYTHING to get involved, talk to several reputable CPA's Enrolled Agents or other tax professionals about your issues.  Most will at least talk to you about the issues for free.  If you decide an OIC is warranted, work with an overall tax expert, preferably someone local.  You probably have some great CPA's or EA's in your area who will be far more helpful than some TV scam artist.

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