Don't Mess With Taxes

Photo by Francisco De Legarreta C. on Unsplash

Owing a big tax bill is a terrible feeling. The only thing worse is not being able to come up with the money to pay Uncle Sam.

The Internal Revenue Service offers some solutions. You can pay over time by setting up an installment plan with the tax agency.

Sometimes, even spreading out payments isn’t enough.

Dealing with a huge tax bill: If your tax debt is so large that you know you’ll never be able to pay it all, you can turn to an Offer in Compromise, or OIC. By submitting an OIC to the IRS, you can settle your tax debt for less than the full amount you owe.

But an OIC isn’t a simple way to shave some dollars off your tax bill. You must make a legitimate offer. And it's not an automatic done deal.

You have to show the IRS, through documentation, why you can’t pay in full what you owe. Or that paying as much as you owe creates a real financial hardship. The IRS then will take a look at your offer, consider your unique set of facts and circumstances, and decide whether to accept your offer.

Some people who could legitimately make an OIC don’t because they find the application process daunting. Others who are intimidated turn to outside help to make an OIC.

But some companies that claim to offer OIC assistance turn out to be tax trouble. And those unhelpful incidents are why the IRS this week issued a warning about potentially costly outside OIC help.

OIC mills make money for operators: Some companies that promise to help taxpayers obtain an OIC deal actually do more harm to the already financially strapped filers.

Unscrupulous OIC mills use aggressive marketing to make false claims of guaranteed settlements for pennies-on-the-dollar, according to the IRS.

Promoters of OIC assistance also often tell prospective targets clients that there’s a limited window of time to resolve their tax debts using the IRS OIC program.

One common feature of questionable OIC operations is that they usually charge excessive fees for a service taxpayers can obtain themselves directly from the IRS.

"Taxpayers should be cautious of aggressive marketing that can mislead them,” said IRS Commissioner Danny Werfel. “Many OIC mills charge steep fees, give false assurances, and can take advantage of taxpayers with empty promises that their tax debt will disappear. The result is often good money paid for bad results.”

Paying a reputable tax professional for help in making an OIC offer is usually a wiser move. Yes, it will cost you, but that pro also can help you get your entire tax life in better order so you don’t find yourself in a future tax debt dilemma.

Not a new taxpayer pitfall: OIC mills are perennials on the IRS' annual Dirty Dozen lists. All these scams and schemes put taxpayers and the tax professional community at risk of losing money, personal information, data and more.

In the most recent Dirty Dozen list, the IRS once again emphasized that while OIC is a real IRS tax debt reduction program, and some companies do offer legitimate help here, qualifying for the reduced payment is not a certainty.

Many taxpayers do not meet the very specific, technical requirements to participate. But by the time victims of OIC mills discover this, they've paid excessive fees to the scamming promoters.

You can find out about the OIC program at the IRS.gov page. You also can examine OIC requirements, and learn if you are eligible to participate, without having to pay for any outside help by using the IRS' free online Offer in Compromise Pre-Qualifier tool.

Tax Felon Friday: Catching OIC (and other) scammers is an IRS priority. You can help the IRS stop scams by not becoming a victim. If the con artists’ schemes don’t work, the stop trying them.

Learn more about avoiding scams or becoming a victim of tax preparation schemes and fraud at the IRS.gov page Abusive tax schemes and abusive tax return preparers.

If you’re targeted, report the abusive tax scheme or a tax return preparer by electronically filing at IRS.gov Form 14242, Report Suspected Abusive Tax Promotions or Preparers.

You also can mail or fax a completed paper Form 14242, Report Suspected Abusive Tax Promotions or Preparers (excerpt shown below), and any supporting material to the IRS.

See more tax forms and more about them at Tax Forms 2024.

   
Fax Form 14242 and other material to (877) 477-9135. Or mail it to —

I hope you never have to report a tax scheme/schemer or bad tax pro. A good way to avoid being in that situation is to be on guard and double-check offers to make your tax life easier or less costly. Some are true, but many more are scams.

You can find more tales of tax scams in the, what else, scam category here on the ol’ blog. You also can catch up on all sorts of tax miscreants at the special Tax Felon Friday page, as well as in the tax crimes category. You'll find this post at the top of that collection right now, so just scroll down for more.

They all have the same underlying message: The tax world can be scary and confusing, so be careful out there!

You also might find these items of interest:

• You have options if you can't pay your tax bill in full
• Dirty Dozen tax scam list for 2023 has old & new schemes
• DoJ touts successes in taking down unscrupulous tax preparers

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