Most everyone has seen television and other ads for tax settlement or tax relief businesses. People portrayed as clients may talk about how they owed the IRS hundreds of thousands of dollars in back taxes that got negotiated down to just a few hundred dollars.
Certainly, it’s crucial for a taxpayer to resolve any issues they have regarding a balance the IRS says is due or overdue. Not resolving the matter properly can lead to interest and penalties being charged and possibly liens and even seizures of assets.
How these businesses work
Many (but not all) of these tax settlement businesses are legitimate. Even the legitimate ones can charge a flat or hourly fee or take a percentage of the amount owed for their services. They should be honest with prospective clients about whether they can provide any meaningful help to them
They don’t get some kind of unique deal from the IRS. Often, they seek an offer in compromise (OIC), which is an IRS process that can take months. An OIC isn’t always accepted. The IRS will review required documentation from the taxpayer of their assets and liabilities and extenuating circumstances like inability to work to determine their ability to pay.
The bottom line is that these businesses still have to follow IRS procedures and rules, and most taxpayers don’t get a significant reduction in their tax debt unless there have been errors, fraud by a spouse filing jointly or there are simply no assets to take.
A more reliable alternative
Rather than having to worry about whether a tax settlement business is legitimate, the people assigned to a case are experienced and the amount charged is worth the money saved, the website Investopedia advises, “a qualified tax attorney is probably a safer bet.”
An experienced legal representative can explore all options for resolving a tax dispute or debt and work to minimize costly and unnecessary penalties and consequences.