While watching the boob tube the other day, I saw a commercial for a widely popular “tax relief” or “tax advocacy” program that is available in many states for those who owe taxes. The premise is simple—if you owe the IRS money for unpaid taxes, this business works on your behalf to lower the amount of money you owe. These type of services are not free and charge a fee or retainer to you for their “expertise”. While this looks good on TV (and paper), it’s not exactly accurate and is a borderline scam.
Don’t fall for the banana in the tailpipe.
I know a lot about this subject because I have worked for a large tax resolution firm in the past as both an Associate and a Lead Resolution Agent—most of the services these companies provide can be done by YOU for nothing.
Offers in Compromise:
An Offer in Compromise or OIC is when you submit your income and expenses into the IRS so they can see on paper that you cannot afford to pay back the amount you owe. The IRS OIC form is Form 656 and can be found online on their official site and filled out by you. You do not have to pay to use the form, and all of the information needed in the form is data that you have. Why pay someone (who will prolong the process to drain and require more retainer), when you can do this yourself?
When the tax debt is caused by a spouse and is not tied to you, you can file for Innocent Spouse relief directly to the innocent spouse. You do not have to go through a service to file for Innocent Spouse, just contact the IRS directly to file for the relief.
When you want to abate or lower the amount you owe, you can submit a Penalty Abatement to the IRS directly. Again, you do not have to go through a special service to have this done.
Tax relief services do not guarantee they can lower your taxes. So paying them money you do not have in order to settle a matter that may not be settled is a waste of money and time. Why go through a middle man when you can do it yourself? If you are comfortable doing it yourself, then research, Google examples, and do the work.
I have seen many people go into even more debt trying to settle their tax matters using a tax resolution service. It’s a sad situation, and I don’t want anyone to feel they have to go through paying thousands of dollars (the average retainer for a company like this is $750.00 just for them to work with you. An OIC can take a tax resolution firm 4 months to complete—you will have drained your retainer than then paid three times that amount before it’s all said and done).
Be smart and learn how to get your tax matter settled on your own. Say no to tax relief and resolution firms.