Settling with the IRS for
“Pennies on the Dollar”
You’ve heard all those late night television and radio ads with various companies, accountants and lawyers claiming that they can settle your back taxes with the IRS for just “pennies on the dollar”. If you’re not skeptical about what these people can do for you, you should be. The fact is, nobody can contact the IRS on your behalf and offer to “make a deal” or “settle” for less than what you owe.
The IRS (and many states) does have a course of action known as the Offer in Compromise program where back taxes, interest and penalties can be settled for less than you owe. However, only a small percentage of people or businesses who owe back taxes will actually qualify for the program and even fewer complete the lengthy process involved.
Most of these late night advertisers collect their fees from you up front before they even know your financial position. Because my ethics are different, I look at your assets, income and expenses first. If I think it is unlikely you will qualify for an Offer in Compromise, I will not submit an application on your behalf, as it will be a waste of time and money for you and furthermore, I will not accept a fee to determine if you qualify.
Estimates vary, but somewhere between 75% and 95% of all Offers in Compromise applications submitted to the IRS are denied every year. Submitting an Offer in Compromise application is also a bit of a “gamble.” The IRS demands a $150 application fee plus 20% of your offer amount up front, before they approve or decline it. You could find yourself in a worse financial situation than before.
If the value of your assets (equity in your home, car, investments, savings accounts, etc.), exceeds what you owe, you will probably not qualify for the program. If the amount of your monthly income minus your reasonable living expenses as determined by the IRS and multiplied by 12 (1 year) exceeds what you owe, you are unlikely to qualify. If a combination of these totals added together exceeds what you owe, you will likely not qualify.
I will, however, explain other options for solving tax debt for dealing with past due federal or state taxes and am happy to file the necessary paperwork on your behalf. The most common option for settling back taxes is arranging an affordable monthly installment plan, either by check or automatic withdrawal. Interest and penalties still accrue on what you owe, but the penalties charged are lower than without the installment plan, and any collection action by the IRS, such as garnishing your wages or seizing your assets, is halted.
Contact us for an appointment today – 646-374-2TAX (2829) or (847)-595-0TAX (0829).