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San Mateo, CA: What is worse than paying one of these pennies on the dollar Offer in Compromise rip-off companies? Paying Uncle Sam and being back at square one!
I often rail about these "late night offer in compromise" rip-off companies that promise to settle your tax debt for "pennies on the dollar". They make it sound like the IRS can't wait to take a fraction of the money you owe and simply let remaining debt go. Does that sound right to you?
Of course not. The Offer in Compromise (OIC) program is very much a case-by-case evaluation of your ability to pay your tax debt. Unforeseen circumstances can happen: a death in the family, a failing business, COVID-19 shutdowns, health problems and medical bills, etc. Tax payments don't live in a vacuum--they are part of the overall financial status of an individual or company.
Therefore, in order to settle your TAX OBLIGATION for less that you owe, a reasonable collection potential analysis is done by the IRS AND SHOULD BE DONE BY A TAX PROFESSIONAL REPRESENTING YOU! You should know going into the OIC application process what your chances are of successfully obtaining an OIC. Ultimately, it is up to the IRS to accept or deny your request, but a skilled and experienced tax attorney can give you a pretty good idea of your chances.
Well you say---forget that! Why waste my time! I will just pay one of these companies to apply for an OIC for me. If the IRS says no, they say no and I am only out the LARGE FEE I paid the rip-off company, right?
NOPE.
With your OIC, in addition to the fee you pay the rip-off artists, you pay the IRS also. With your OIC application, you must pay:
- A non-refundable $205 application fee (if the IRS cannot process your OIC application due to errors, this application fee may be refunded).
- Lump Sum Offer: requires you to pay 20% of the offer you submit on your OIC. Therefore, if you are offering to pay $10,000 to satisfy your $100,000 tax debt, you must submit a $2,000 payment with your OIC application or it will be immediately rejected. THIS PAYMENT IS NOT REFUNDABLE and will be used to offset the taxes you continue to owe if the offer is rejected by the IRS.
- Periodic Payment Offer: you must begin making the monthly payments proposed in your OIC to the IRS while the IRS considers your offer. Failure to make those payments is grounds for a rejected offer. It can take MANY MONTHS for the IRS to consider your offer and, like the lump sum, if the IRS rejects your offer, those monthly payments are not returned to you-they are applied to your tax debt.
There are procedures for low-income certified tax payers that alter these rules, but suffice to say these rules will apply to most taxpayers applying for OIC.
The OIC program is a godsend to many taxpayers who find themselves in a hopeless situation due to unforeseen circumstances. To think of the OIC program as a way to skate your way past the IRS while thumbing your nose at them is a mistake. OIC is just one part of IRS collection alternatives that you should explore with the tax attorney who represents you. It might be right for you or it might be a bad choice. Know your options going into the collections arena with the IRS before you jump in.
If you have a question on collection alternative with the IRS OR you are not sure if you owe money to the IRS and need to find out without "kicking the hornet's nest" by calling them, my information is below.
Kevin Rego
Law Office of Kevin Rego
650.933.5222
Law Office of Kevin Rego
