The Internal Revenue Service (IRS) has recently raised the alarm over unscrupulous entities exploiting taxpayers through unnecessary services that impose "excessive fees."
These entities, often referred to as "mills," are known to manipulate taxpayers into resolving their tax debts via the IRS Offer in Compromise program, a legitimate government initiative that enables qualifying taxpayers to settle their tax debts for less than the full amount owed.
According to Newsweek, these mills employ "aggressive" marketing strategies, making false claims of guaranteed settlements. In reality, these services are not required, and the mills can levy high fees. The IRS has emphasized that the Offer in Compromise agreements are made directly between the taxpayer and the IRS, eliminating the need for third-party involvement.
"Taxpayers should be cautious of aggressive marketing that can mislead them," warned IRS commissioner Danny Werfel. "Many OIC mills charge steep fees, give false assurances and can take advantage of taxpayers with empty promises that their tax debt will disappear. The result is often good money paid for bad results."
The Offer in Compromise is one of several avenues available to taxpayers with outstanding tax debts who are financially strained. The IRS assesses an application based on the taxpayer's ability to pay, income, expenses, and asset equity. However, there are several prerequisites for qualifying, including not being in open bankruptcy proceedings and having an active extension to file tax returns.
For those who may not meet the requirements for an Offer in Compromise, the IRS provides other options for taxpayers grappling with their tax obligations. These include long- and short-term payment plans for individuals. Short-term payment plans are available for taxpayers with a total balance of less than $100,000 in combined tax, penalties, and interest, offering the debtor an additional 180 days to pay the balance in full. Meanwhile, long-term payment plans cater to taxpayers with a total balance of less than $50,000 in combined tax, penalties, and interest, allowing qualified taxpayers to make monthly payments for up to 72 months.
The IRS is no stranger to issuing warnings about scams that could rob taxpayers of their hard-earned money. Earlier this year, the IRS cautioned about a variety of scams using "fear and deceit to exploit" elderly Americans. These fraudsters impersonate IRS agents, targeting "unsuspecting individuals," particularly senior citizens, tricking them into "making immediate payments through unorthodox methods such as gift cards or wire transfers under the pretense of resolving fictitious tax liabilities or securing false refunds."
Since 2002, the IRS has been publishing the annual Dirty Dozen campaign, a list of 12 common scams that taxpayers and professionals should be wary of. Over the years, Offer in Compromise mills have repeatedly made appearances on these lists, underscoring the need for taxpayers to stay vigilant and informed.
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