If you owe the IRS some money for back taxes, any program that offers to help reduce that debt probably sounds pretty tempting. But beware of companies that claim they can negotiate your debt down. The IRS calls firms like this “compromise mills” and warns that they can’t deliver what they promise.
While the IRS does have an offer in compromise program, there are very specific requirements as to who is eligible. These crooked companies often charge people thousands in fees, even though there’s no way they’ll qualify for the program.
“We’re increasingly concerned that people having trouble paying their taxes are being duped into misleading claims about settling their tax debts for ‘pennies on the dollar’,” said IRS Commissioner Chuck Rettig. “The IRS urges people to take a few minutes to review information on IRS.gov to see if they might be a good candidate for the program – and avoiding costly promoters who advertise on radio and television.”
Three signs of a scam:
- They promise to settle for pennies on the dollar
- You must act now to qualify
- You need their services to apply
Most of these companies don’t have the ability to do anything more than you can by going to the IRS website and filling out your information.
Your first step is to go to the IRS website and use the Offer in Compromise Pre-Qualifier Tool to see if you qualify for an OIC.
If it’s the first time you’re subject to a tax penalty, you may even be able to apply for First Time Penalty Abatement to waive fees that might otherwise be added to your tax debt.