Offer in Compromise Mills on IRS Dirty Dozen Tax Scams 2024
The Internal Revenue Service recently warned taxpayers about aggressive tax relief companies known as Offer in Compromise mills that mislead taxpayers into paying exorbitant fees by falsely claiming they can easily eliminate tax debts. This tax scam has once again been included on the IRS’ annual “Dirty Dozen” list.
The Offer in Compromise (OIC) program is a legitimate IRS initiative that allows some taxpayers to settle their tax debt for less than the full amount owed – if they meet stringent requirements and don’t have the ability to pay in full.
However, the IRS cautions that shady tax relief companies are using deceptive advertising tactics and making inflated promises like resolving tax debts for “pennies on the dollar.”
“These Offer in Compromise mills try to pull in steep fees while raising false expectations and exploiting vulnerable individuals with promises that tax debt can magically disappear,” said IRS Commissioner Danny Werfel. “The program is legitimate, but it’s not for everyone.”
Red Flags of OIC Mills
The IRS warns Americans to be wary of tax scam companies that:
- Make outlandish claims about settling tax debts for a fraction of what you owe
- Aggressively advertise on radio, TV, or other media
- Charge high upfront fees
- Advise filing an OIC application even when it’s clear the taxpayer doesn’t qualify
- Promise to stop all IRS collection activities immediately
What Is an Offer In Compromise?
An Offer in Compromise is a special agreement with the IRS that allows people who owe significant back taxes and meet strict requirements to settle the debt for less than the full amount owed. To qualify for an OIC, you must be unable to pay the full tax liability, or doing so would create a financial hardship.
The IRS examines your assets, equity, income, and expenses to determine if you can pay the full amount. This involves submitting detailed financial information, including Form 656 (Offer in Compromise) and either Form 433-A (for individuals) or Form 433-B (for businesses), along with supporting documentation.
To help protect the public from OIC mills, the taxpayer advocates at TaxRise created a quick Tax Relief Survey to help taxpayers check their likelihood of OIC eligibility.
Risks of Using an Offer in Compromise Mill
While some reputable tax relief companies do exist to help taxpayers properly navigate options like the OIC program, the IRS cautions taxpayers to thoroughly vet any firm before providing sensitive financial information or paying for services.
Using an OIC mill can result in several negative consequences:
- Unnecessary financial loss: Taxpayers may pay thousands of dollars in fees to apply for a program they cannot qualify for.
- Wasted time: The OIC application process can be time-consuming, and if you don’t qualify, you’ll have spent time and money for no benefit.
- Continued accrual of penalties and interest: Submitting an OIC doesn’t stop the accrual of penalties and interest on your tax debt.
- Potential for further IRS actions: The IRS may still file a Notice of Federal Tax Lien to protect their interests.
The OIC Program Is Real – So Are OIC Mills
While the Offer in Compromise is a real IRS program, not everyone will qualify – and legitimate tax professionals will be upfront that an OIC is difficult to obtain approval for. The IRS generally won’t accept an offer if they believe the tax debt can be paid in full through an installment agreement or by liquidating assets. Always approach tax debt resolution with caution and seek advice from qualified, ethical professionals.
Finding a Trustworthy Tax Relief Provider
The IRS acknowledges that for those truly overwhelmed by tax debt, working with a qualified tax expert can provide immense value in understanding options, ensuring full compliance, and negotiating for penalty relief or an acceptable payment plan.
In most states, anyone who prepares tax returns for a fee must be either an attorney, Certified Public Accountant (CPA), or IRS-enrolled agent. Beware of any firms that do not employ these credentialed professionals.
Trustworthy tax relief firms will:
- Provide a free initial consultation
- Clearly explain costs and fees
- Set realistic expectations about outcomes
- Directly employ credentialed tax experts—not simply unqualified sales staff
- Have excellent BBB ratings and memberships with recognized accounting or tax organizations
- Provide case studies about satisfied clients
- Have robust privacy safeguards to protect your sensitive data
Discover if You May Qualify for IRS Relief Programs
While not everyone will qualify for an Offer in Compromise, it is a real IRS program that continues to help American taxpayers every day. If you owe significant tax debt that you truly cannot afford to pay – or doing so would cause a financial hardship – you may want to research your options.
Take our brief Tax Relief Survey to discover if you may qualify for IRS relief programs, including Offer in Compromise. Determinations are not definitive but may provide a framework to better understand your financial situation and likelihood of IRS acceptance.
Don’t allow tax debt to overwhelm you. Take control of your finances by exploring IRS relief programs available to you today. Take the survey.
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