Toll Free 877-426-3121

 

The Offer in Compromise Scam(i)

 
 

by Mark W, Sullivan, EA

D R Sullivan & Company, CPA PC

May 2011


I receive calls every month from taxpayers bursting with excitement about an official letter they received from the “Administrative Offices” informing them they qualified for a new 2011 IRS settlement program. Most are skeptical of the TV ads where it seems every taxpayer could settle their tax debts for “pennies on the dollar”, but these letters look like official IRS notices and they want my assistance in negotiating the settlement. According to the letter the “Administrative Office”, presumably the IRS proposed settling their tax debt for 90% less than they owe. The catch: They have to respond immediately because this “new” program is only available to a limited number of taxpayers. Relying on my 20 years of experience as both an IRS Revenue Officer and Enrolled Agent I have to inform them it is a scam.


Copy of the letter

 

A few days later I read the following press release from MSCPA Taxation List Service:


SACRAMENTO, Calif.—A state trial court judge April 20 froze the assets of Roni Lynn Deutch, the “Tax Lady,” and ordered her to appear in June on charges that she has shredded millions of documents and failed to refund money owed to clients in violation of a November 2010 injunction in the state attorney general's lawsuit alleging her firm swindles its clients(ii). The AG first sued Deutch in August 2010, seeking $34 million in funds that Deutch allegedly obtained from clients by promising to reduce their tax debts to the Internal Revenue Service. Deutch, who is well known around the country through her late-night television commercials and appearances on news programs, has allegedly used deceptive tactics to take large up-front payments from clients and then provide little or no help in reducing their tax bills, the AG claims in its lawsuit.

 

The licensed tax practitioner community of enrolled agents, attorneys and certified public accounts has complained for years to IRS officials about these scam artists. In 2010 the IRS and Federal Trade Commission responded by passing new regulations that were intended to address the issue of misleading advertising used by purported “tax resolution” firms(iii). Unfortunately, the above “official” notice indicates the scammers have already devised a “work around” to these new rules.


The truth about Offers in Compromise:

  1. The IRS does not pre-approve taxpayers for an Offer in Compromise.

  2. The ability to compromise a tax liability is authorized by Internal Revenue Code Section 7122(a) and, contrary to the TV and direct mail advertising, has been in existence since 1954.

  3. The IRS never limits the number of taxpayers who may qualify for alternative collection methods or policy initiatives, like Offers in Compromise and the voluntary disclosure of foreign bank accounts.

  4. Absent special circumstances, an offer will not be accepted if the IRS believes the liability can be paid in full as a lump sum or through a payment agreementiv.

  5. In 2002 the IRS accepted 23% of the 124,000 Offers in Compromise filed(v).

  6. In 2010 the IRS accepted 24.5% of the 57,000 Offer in Compromise filed(vi).

  7. Accepted Offers represented 2% of the 1.4 million collection cases IRS closed in 2002 and less than 1% of the 2.1 million cases in 2010.

  8. Between 2002 and 2010 there were 690,000 Offers filed, but the IRS average annual acceptance rate remained a constant 25%.

Prudence demands that a taxpayer representative consider all available collection alternatives, including an Offer in Compromise. However, a competent practitioner is obligated by IRS Circular 230(vii) to consider the circumstances unique to a client’s situation, but base their recommendations solely on the facts. Internal Revenue Service issues are serious matters, but retaining effective counsel who understands the procedural realities of IRS collection cases is the best protection against becoming a victim.



  1. The IRS defines an offer in compromise (OIC) an agreement between a taxpayer and the Federal government that settles a tax liability for payment of less than the full amount owed. Absent special circumstances, an offer will not be accepted if the IRS believes the liability can be paid in full as a lump sum or through a payment agreement. (SOI Tax Stats – Delinquent Account Activities – IRS Data Book – 2010)
  2. People v. Roni Deutch, A Professional Tax Corp., Cal. Super. Ct., No. 34-2010-00085933, order to show cause re contempt and order of receiver 4/20/11).
  3. Cir 230 Section § 10.30 Solicitation. (a) Advertising and solicitation restrictions. (1) A practitioner may not, with respect to any Internal Revenue Service matter, in any way use or participate in the use of any form of public communication or private solicitation containing a false, fraudulent, or coercive statement or claim; or a misleading or deceptive statement or claim.
  4. SOI Tax Stats - Delinquent Collection Activities - IRS Data Book Table 16: 2010
  5. SOI Tax Stats - Delinquent Collection Activities - IRS Data Book Table 16: 2002-2010
  6. SOI Tax Stats - Delinquent Collection Activities - IRS Data Book Table 16: 2002-2010
  7. Cir 230 Section § 10.33 Best Practices for Tax Advisors
   

 

 

 

 

 

black infrared 6s louis vuitton outlet jordan 11 legend blue louis vuitton outlet sport blue 6s new jordans 2014 michael kors outlet cheap jordans jordan 6 sport blue black infrared 6s Legend Blue 11s jordan 11 legend blue retro jordans jordan 11 legend blue beats by dre outlet coach factory outlet jordan 11 legend blue louis vuitton outlet louis vuitton outlet cheap louis vuitton jordan 11 legend blue legend blue 11s jordan 6 legend blue 11s louis vuitton outlet legend blue 11s louis vuitton outlet legend blue 11s Legend Blue 11s jordan 6 sport blue jordan 11 louis vuitton outlet black suede foamposites jordan 6 sport blue louis vuitton outlet jordan 6 Legend Blue 11s Legend Blue 11s black infrared 6s Legend Blue 11s