IRS Warns US Taxpayers To Beware Of Schemes To Settle Tax Debts

by Leroy Baker, Tax-News.com, New York

05 February 2004

The IRS on Tuesday issued a warning to taxpayers to beware of so-called ‘pennies on the dollar’ schemes promoted by private tax 'experts', who claim large fees for settling taxpayer debts through the ‘Offers in Compromise’ program.

“Some promoters are inappropriately advising indebted taxpayers to file an Offer in Compromise (OIC) application with the IRS,” the tax authority explained in a statement, warning: “This bad advice costs taxpayers money and time.”

An Offer In Compromise is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax debt. The IRS has the authority to settle, or "compromise," federal tax liabilities by accepting less than full payment under certain circumstances.

“This program serves an important purpose for a select group of taxpayers. But we are increasingly concerned about unscrupulous promoters charging excessive fees to taxpayers who have no chance of meeting the program’s requirements,” observed IRS Commissioner Mark W. Everson. “We urge taxpayers not to be duped by high-priced promises,” he added.

According to the Revenue, the OIC may be considered only after other payment options have been exhausted. If taxpayers are unable to pay their taxes in full, there are other payment options, such as monthly installment agreements, that must be explored before an OIC can be submitted.

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