The truth about “Offer Mills” (and other things no one is telling you about resolving tax debt).

If you are out driving at rush hour and listening to news or talk radio, you’re sure to be besieged by incessant commercials from various “tax relief” outfits, many fronted by well-spoken celebrity spokespeople  offering absolutely instant relief if you owe a taxing authority $10,000 or more. As you are dodging errant cars on the freeway or parkway, you are sure to here encouraging claims of  the benefits of an“offer in compromise” (“OIC”), or “you can wipe your debts away” for “pennies on the dollar”, or “the Fresh Start Program is for a limited time only”. After a lane change, you may even hear that “the IRS has been known to accept as little as 1% of the amount owed and give you a fresh start”.

Sound great? You may not have known that the IRS is as friendly a debtor as your Uncle Harold! FANTASTIC!

(If only it were true).

As the old commercial said, If you like peanut butter, you’ll LOVE Skippy.  With glittering voices ringing out with stellar claims of tax settlements of pennies on the dollar, the awful truth is that less than one-quarter of compromise applications are ever accepted. Truth be told further, offer applications are almostnever fully accepted if the applicant has any liquid or marketable assets whatsoever, regardless of what the Regulations and the Internal Revenue Manual state, as settlement officers are given “discretion” (read: they can do whatever they darn well please), to settle any matter on their own terms. Moreover, most of the commercials barking through your car radio are generated from lead-generation firms that collect client information and sell it to a tax debt relief firm for up to $500 per lead!  Others use the OIC program to grab attention and then direct a taxpayer into a program he or she actually qualifies for, (such as an installment agreement plan), that he or she could easily arrange, without any help whatsoever.

Of course, one cannot be entirely certain if all of the carnival barkers on radio and television are selling false hope and snake oil, but its been more than certain that a number of them have been. Names like “The Tax Lady” Ronnie Lynn Deutsch, Tax Masters, and J.K. Harris in the “Offer Mill” business litter the landscape and have bilked thousands out of millions, with little to no results. My experience with most of these outfits (drawn from my clients who have fled from them) is the first prerequisite in dealing with such an Offer Mill is a large upfront retainer payment (usually in excess of $5,000) is required. With that large chunk of change, the Offer Mill usually puts together a flimsy offer document that by statute and by rule operates to delay tax collection for the better part of one year, until the IRS examiner laughs the document out of the park. The poor client thinks all is wonderful during this initial “quiet period”, until the rejection letter comes back with appeal rights. At that point, the Mill asks for another $5,000, “to go forward”, (more than likely, this type of “going forward” is equivalent to walking out onto the freeway at rush hour).

What is also a matter of great suspicion are the “credentials” of the people actually working these Mills. Most of the Mills have really slick websites featuring people of ostensibly formidable credentials who will go to bat on this matter, all for you.  What taxpayers are NOT told is that the majority of folks involved in this business have no credentials, are bound by no regulations, and are simply churning completed applications out like an assembly line, (thus this type of practice earn the well-deserved name, of “Offer Mill”). Truth be told again, ANY filed offer application (no matter HOW deficient), will stop tax collection, for at least a time.

Now, one of the things that the scammers and Mills will not tell you is that if you have any saleable assets at all during the time of your application, the taxing authorities will place a lien upon them in order to carry out their true mission (which regardless of what you may have been told, kids, is to “protect the revenue”). Once a lien is filed and becomes a matter of public record, a taxpayer is sure to be assaulted by numerous calls and mailed notices offering such dubious offers of “tax relief”. Many of these notices are so carefully crafted, they appear as if they are coming from the taxing agencies themselves, right down to the color of the paper and the typeface, featuring disclaimers so small you need a magnifying glass to see them. (Let me tell you, these “notices” are GOOD…one even faked out my associate the other day!) Also many of the “per-commission” callers calling to solicit business for these shams are often so incoherent, you will win on the odds of their not being able to find their way to order a hamburger at McDonald’s.  One thing is for certain: as economies worsen and debtors increase, this type of evil tax seduction is sure to wax worse and worse.

Now, you might be asking yourself as to why this “industry” is not better regulated on a number of fronts, especially in the realm of consumer protection. Believe me, I have asked myself the same question. Recently, I showed samples of these “tax relief” notices to a horrified Congressional aide in my state. She was absolutely shocked, and referred it to her congressman. But truly, what are the chances of one congressman advancing an “anti-Mill” bill through the House and the Senate and getting universal approval for it? Such a bill would have to advance over cries of “job creation” and “consumer rights” and “free enterprise”, and hoards of slimy lobbies and bought-off legislators. Frankly in my estimation, the chances of any real reform happening in this area are really, not good.

However, all of this leaves the poor tax debtor with a troubling question: If I need competent professional assistance to help me with my tax debt, where do I go? If its me, I would stay entirely away from the outfits that are barking their siren song to you on the car radio, just because the odds are not in your favor of finding a reputable, honest and knowledgeable soul to work with in that part of the universe. In my estimation, the best thing one can do is to interview severallicensed practitioners and to cross-compare the information received. Quickly, a realistic assessment of your situation and a commonality will be ascertainable. Further, I would absolutely run from any one or any thing asking for large amounts of money upfront. A reputable person knows that there are no quick-fixes here, and that there will be a long relationship between you and he, so a payment plan could be easily worked out.

Finally, if one hears anything other than the fact that an OIC is anything but a long, arduous, painful, and difficult process (with less than a 25% chance of success), they are being lied to. As my seventh-grade English teacher would say, “it is simple as that, kids. and just as difficult”. Even so, the tool of the offer in the right hands of a skilled practitioner can go a long way in settling mounds of substantial tax debt.

In closing, if you have any further questions about the IRS Offer program, please do not hesitate to contact me.

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