IRS Exposes the Futility of "Pennies on the Dollar!"

Offer in Compromise statistics provided by the IRS prove the near impossibility of taxpayers negotiating with the IRS and paying only pennies on the dollar. The IRS has even issued statements specifically warning citizens to be wary of these ads.
July 17, 2009 - PRLog -- The advertisements populate late night TV.   Attractive suburbanite families grinning ear-to-ear because they paid the IRS only "pennies on the dollar."  Examples are given:  This family owed $75,000 and paid only $4,600.   Another couple owed $225,000 in back taxes and settled an Offer in Compromise (OIC) with the IRS for only $7,512.   What these slick commercials do not include are pictures of the other not-so-happy families who shelled out $5,000 or more plus countless hours of effort and energy only to have their Offer in Compromise turned down by the IRS.  

The truth is that IRS statistics show that in 2008 only 43,989 OICs were considered by the IRS, nationwide, and the IRS accepted 24% of the OICs considered.   Since California represents 11% of the U.S. population we can estimate that even with all that TV advertising only about 4,800 Offers were considered by the IRS from California.   What is more disheartening is that only about 1,142 were accepted by the IRS for a population of 36,000,000 Californians.  

Worse yet are the even sadder faces of those who paid their money and no Offer was ever even submitted.   How do these companies get away with such deceptive advertising?   "They don't always get away with it," according to Jim Demetriou, a former IRS collections manager who is currently an Enrolled Agent and partner at Demetriou, Montano and Associates.   "The Attorney General of the State of Texas was joined by 17 other state's AG's who went after J.K. Harris, one of the companies who used to produce these commercials.   According to the complaint, J.K. Harris charged upfront to assist clients in pursuing an Offer in Compromise without actually determining if consumers qualified for an OIC or even when knowing that consumers, in fact, didn't qualify.   In many cases, J.K. Harris did not even send an OIC to the IRS to assist consumers as promised, but still refused to give those consumers their money back."

J.K. Harris settled these suits by paying a hefty fine and agreeing to stop the illegal and unethical practices.   So how is it that these new commercials continue to be produced and aired?   According to Demetriou, "The State of California was not one of the states in the lawsuit.  J.K. Harris has wisely stopped using these deceptive ads even in California, but others continue to dupe the public."

The IRS even recognizes these ads to be improper and issued this statement way back in 2004:

IR-2004-130, October 25, 2004  - WASHINGTON - The Internal Revenue Service today issued a consumer alert advising taxpayers to beware of promoters' claims that tax debts can be settled for "pennies on the dollar " through the Offer in Compromise Program.   Such promoters make money by inappropriately advising indebted  taxpayers to file an application for an Offer in Compromise with the IRS, promising unrealistic results, even when the taxpayers do not meet the requirements of the program.   This bad advice costs taxpayers money and time... "[The Offer in Compromise] program serves an important purpose.   But we do warn taxpayers to watch out for unscrupulous promoters charging excessive fees to taxpayers who have no chance of meeting the program's requirements," said IRS Commissioner Mark W. Everson, "Taxpayers should not be duped by high-priced promises."...  

"We hear about these cases all the time at Demetriou, Montano and Associates," says Demetriou.   If you owe $20,000, $150,000 or more to the IRS and collectors are calling you, attempting to levy your wages and bank accounts, the commercials are pretty alluring.   But, the last thing a taxpayer needs at this point in his life is to spend $5,000 he doesn't have and wait two years to get no results.   The sad thing is that of all the OICs actually considered by the IRS, more than 75% are rejected."

The IRS campaign seems to be working, at least to some degree.   The number of  Offer in Compromises submitted has been dropping rapidly.   The requirements are stringent and require that a taxpayer has no current or future ability to pay the taxes in full over the next 10 years.   If there is property or other assets, any equity increases the size of the Offer.   The IRS then looks at income vs expenses to see about future payments.   Many taxpayers are shocked to see how little the IRS allows them to live on before they accept an Offer.

With the success of the lawsuit against J.K. Harris, you would think that California State Attorney General Jerry Brown might be more aggressive in pursuing the companies who continue to mislead California citizens.   He would have the statistics and statements from the IRS as proof.

Demetriou also offers hope to folks who have fallen behind on their taxes:   "There are many tax consultants in California who will hear the client's problem at no charge.   At Demetriou, Montano, and Associates that initial free consultation takes less than an hour.   We might find that an Offer in Compromise is the appropriate solution, but the truth is, that is the rare occasion.   Most of the time our job is to get the IRS to stop the phone calls and garnishments while we negotiate a resolution that a client can handle.    We stop wage and bank levies while we negotiate reasonable payment plans, one to three year suspensions, or some other acceptable resolution ... one that the taxpayer can afford.   If a tax liability is old enough, it can sometimes be eliminated with a bankruptcy.   In these difficult times there are many more Californians facing tax problems and they should NOT let it get worse by ignoring it.   Find a reputable and local Enrolled Agent to help you work things out with the IRS."

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Demetriou, Montano, and Associates has been helping private individuals and small business owners solve IRS tax problems since 1989. The company specializes in helping file delinquent returns, negotiate settlements, remove liens and levies, and work out payment arrangements in cases involving $20,000 or more.
A major source of clients for this company is tax lawyers and accountants who know that former IRS collection managers have the special expertise needed to resolve cases expeditiously and with maximum benefit to the taxpayer.
The company has offices in Newport Beach and Santa Monica.
Source:Randy Kirk & Associates
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Tags:Tax Problem Resolution, Tax Problems, Los Angeles, Santa Monica, Newport Beach, Offer In Compromise, Pennies On Dollar
Industry:Finance, Legal, Media
Location:Los Angeles - California - United States
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