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Ads offering to settle tax cases often mislead
David
Leeper
Special to the Times
Last month a man
came to see me about taxes he owes the IRS. The IRS said he owed
about $50,000 in taxes, plus penalties and interest. The man asked
me how much the IRS would settle for if he offered them cash.
I asked him how
much cash he had. He said he had over $100,000 in his checking
account. Puzzled, I asked why he had come to see me. He said he had
been reading the newspaper and TV advertisements about the IRS
settling cases -- called compromising them -- for pennies on the
dollar. He wanted to know how much the IRS would forgive.
Now, step back
and look at his case. He owes $50,000 and has $100,000 in the bank.
What possible incentive would the IRS have to compromise for a lower
amount?
Today, I want to
talk about those ads and the problems they create.
IRS opposition.
Let's begin with the obvious. The IRS hates Offers in Compromise.
The idea of a taxpayer not fully paying taxes just rubs IRS agents
the wrong way. They see themselves as true patriots, raising money
so the U.S. government can fulfill its mission. Our being unable to
pay all our taxes may be sad, but irrelevant. The IRS has the true
bill collector mentality -- you owe it, pay it.
The offer process
has become so convoluted that the U.S. Congress is pressuring the
IRS to liberalize its policies. Congress has actually issued a
written mandate ordering the IRS to make settlements more flexible.
The IRS response was to amend its operating rules to make
settlements less flexible.
Last week the
Taxpayer Advocate issued its written report to Congress. The
Taxpayer Advocate is an independent agency of the U.S. government
given a watchdog role over the IRS. The agency determined that the
IRS was creating artificial barriers to Offers in Compromise and
recommended an investigation.
The point is, the
IRS hates Offers in Compromise.
Misleading ads.
Making this worse is a plethora of misleading advertising promising
huge discounts. Sure, some people can settle their tax debts for
pennies on the dollar, but generally only if they are flat broke and
living at or near the poverty level. The ads falsely lead you to
believe that because someone else made a "great deal," you too can
get one. The truth is you probably can't. Each case is different,
but there is no compromise if the IRS thinks you can pay.
Former IRS
agents. I love this one. Many ads suggest you can get a great
settlement because they have former IRS agents working for them --
agents who know the "inside scoop." The truth is the opposite.
Offers in Compromise are processed out of a national location. The
vast majority of IRS agents who either leave or retire know little
about offers and had nothing to do with processing them.
Deal making.
Finally, these ads all suggest that if we hire the advertiser, they
will go to the IRS and get us "a deal." Unfortunately, this also is
misleading. The IRS will allow a compromise only if we satisfy a
complex set of financial criteria the IRS has developed over the
last 20 years. It is primarily an analysis of your assets and of
your income. There are few "deals" out there.
The most critical
issue in submitting an Offer in Compromise is to select someone to
help you who has had lots of experience compiling these offers. Many
of these cases end up in court. It is essential that your
representative be familiar with the IRS operating manual and the
judicial oversight remedies as many of these cases end up in court.
Also, stay away
from mass production companies employing former IRS agents to do
form filing. Otherwise, you may lose badly needed relief because you
were just another number on their client list.
El Paso
lawyer David Leeper specializes in income- and estate-tax law. He
may be reached at 581-8748, by e-mail at
LLeeper1@elp.rr.com or go online,
www.davidleeper.com
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