WASHINGTON – The Internal Revenue Service cautions taxpayers with pending tax bills to contact the IRS directly and not go to unscrupulous tax companies that use local advertising and falsely claim they can resolve unpaid taxes for pennies on the dollar.
“No one can get a better deal for taxpayers than they usually can get for themselves by working directly with the IRS to resolve their tax issues,” IRS Commissioner Chuck Rettig said. “Taxpayers can check online for their best deal, as well as calling a specialized collection line where they can get fast service by using voice and chatbots or opting to speak with a live phone assistor.”
Offer in Compromise “mills” make outlandish claims, usually in local advertising, regarding how they can settle a person’s tax debt for pennies on the dollar, Rettig said. The reality usually is that taxpayers pay the OIC mill a fee to get the same deal they could have gotten on their own by working directly with the IRS, he said.
OIC mills are a problem all year long but tend to be more visible right after the filing season is over and taxpayers are trying to resolve their tax issues perhaps after receiving a balance due notice in the mail, the IRS reported.
For those who feel they need help, many reputable tax professionals are available, and so are important tools that can help people find the right practitioner for their needs. IRS.gov is a good place to start scoping out what to do, Rettig advised.
These “mills” contort the IRS program into something it’s not, he said: misleading people with no chance of meeting the requirements while charging excessive fees, often thousands of dollars.
An “offer,” or OIC, 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. However, some promoters inappropriately advise indebted taxpayers to file an OIC application with the IRS, even though the promoters know the person won’t qualify. This costs honest taxpayers money and time.
Before taxpayers start investing time to do the paperwork necessary to submit an offer, they should check out the IRS’s “Offer in Compromise Pre-Qualifier Tool” to make sure they’re eligible to file one. (Note: even though individuals and businesses can submit an offer, the tool is currently available only to individuals.)
The IRS also created an OIC video playlist that leads taxpayers through a series of steps and forms to help them calculate an appropriate offer based on their assets, income, expenses and future earning potential. These videos can be found at irsvideos.gov/oic.
The IRS reminds taxpayers that under the First Time Penalty Abatement policy taxpayers can go directly to the IRS for administrative relief from a penalty that would otherwise be added to their tax debt.
OIC mills are one example of unscrupulous tax preparers. Taxpayers also should be wary of unscrupulous “ghost” preparers and aggressive promises of manufacturing a bigger refund.
‘Ghost’ preparers
Although most tax preparers are ethical and trustworthy, taxpayers should be wary of preparers who won’t sign tax returns they prepare; these individuals are often referred to as ghost preparers.
For e-filed returns, the “ghost” will prepare the return but refuse to digitally sign as the paid preparer.
By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid Preparer Tax Identification Number. Paid preparers must sign and include their PTIN on the return.
Inflated refunds
Not signing a return is a red flag that the paid preparer may be looking to make a quick profit by promising a big refund or charging fees based on the size of the refund, the IRS warns.
Unscrupulous tax return preparers may also:
Ÿ require payment in cash only and will not provide a receipt.
Ÿ invent income to qualify their clients for tax credits.
Ÿ claim fake deductions to boost the size of the refund.
Ÿ direct refunds into their bank account, not the taxpayer’s account.
The “Choosing a Tax Professional” page on IRS.gov has information about tax preparer credentials and qualifications. The “IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications” can help identify many preparers by type of credential or qualification.
Taxpayers are legally responsible for what appears on their tax return even if it is prepared by someone else.