OIC Mills Make the IRS Dirty Dozen List

And -- It's about bloody time!

The Internal Revenue Service recently announced its annual "Dirty Dozen" list of tax scams; one of my favorite annual agency reports. This year's edition places special emphasis on "aggressive and evolving schemes related to coronavirus tax relief, including Economic Impact Payments."

The list includes the perennial Dirty Dozen scams - phishing scams, fake charities, IRS impersonators, unscrupulous tax preparers, and social media scams.

It also includes one of my pet peeves - Offer In Compromise (OIC) Mills - I believe for the first time, and long overdue.

You've no doubt heard the advertisements: "<insert name> tax services can settle your IRS issues for pennies on the dollar."

Hidden from view: Tax Resolution Mills are very unlikely to honor this claim, and they charge you an arm and a leg even if they can't.

Truth be told, almost no-one qualifies for pennies on the dollar relief. If you are stone cold broke, have no equity in your assets, and have no realistic prospect of future income, you can expect that kind of relief from tax debt. Being dead also helps and is sometimes a less traumatic option.

Otherwise, relief is dependent on the somewhat subjective graces of a not entirely sympathetic Revenue Agent who assesses "Reasonable Collection Potential" to decide how much, if any, relief to grant. The Service rejects almost two thirds of the OICs it reviews. I was not able to find statistics on the amount of relief they grant on successful applications - but I'd venture based on experience that most settlements are in the 35-65 cents on the dollar range. (Resulting mostly from penalty abatement.)

Oh, and did I mention retainers and fees? Try, exceedingly high! Oddly enough, the fees might be reasonable if the whole operation wasn't a sham. Successful applications involve intense negotiation over a protracted period... averaging six months to a year, and involving multiple representation steps. Good practitioners earn their fee. The scammers just go through the motions, and usually bow out after the first hint of Service reluctance.

To find "good representation" seek out an EA, CPA, or attorney who has completed a rigorous training course like the National Tax Practice Institute's three year representation program or give us a call (BTW: we have completed the NTPI course).

OICs are not DIY projects. The agent will eat you alive (one of the only true statements in the pennies on the dollar ads.)

For the full list and descriptions of the Dirty Dozen, click below. It's fascinating what some people will try to get away with -- and other people will fall for.

https://www.irs.gov/newsroom/irs-unveils-dirty-dozen-list-of-tax-scams-for-2020-americans-urged-to-be-vigilant-to-these-threats-during-the-pandemic-and-its-aftermath

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