If you're like me, you've seen dozens of TV commercials in recent months for companies that promise they can help you negotiate with the IRS to reduce your back taxes. By citing specific past success stories they not only imply that your tax debt, too, can be nearly wiped out in the process ("pennies on the dollar"), but also that the whole process is relatively simple and painless. With their paid help, of course. (Paid upfront.)
And if you're like me again, you've probably wondered when seeing these commercials over-and-over again whether you've been a sucker for paying your income taxes in full and on time every year. But I've also been skeptical about these claims because these commercials seem so similar in tone to those promising mortgage relief or to negotiate down credit card debt, services that are now known largely as notorious scams.
Well, MSNBC has an article today (that you can read HERE) which analyzes their promises about easy tax relief. "As with many unscrupulous offers, the reason this one is so pervasive is because there is a grain of truth to the claims. Yes, in extreme circumstances, the IRS will settle old debts for a tiny percentage of the outstanding balance. But in most of those cases, the consumer is either near death or completely unemployable and without any valuable assets."
"Firms that advertise tax debt settlement services are selling a legitimate IRS procedure called an 'offer in compromise.' If IRS debt collectors determine that the federal government has no chance of collecting on a tax debt, the agency will consider settling for a lesser amount. But the process is long, drawn out and relatively painful. No one can quickly obtain a 'pennies on the dollar' settlement with the IRS... The agency did not respond to requests to be interviewed for this story. But in 2007, it told CNBC that it rejected nearly three-quarters of the 46,000 settlement offers it received."