Be Careful of Dubious Claims to Resolve Tax Liabilities, IRS Warns

IRS warns of 'mills' taking advantage of taxpayers with Offer in Compromise program

Sept. 19, 2024

WASHINGTON — The Internal Revenue Service reminds taxpayers to beware of promoters claiming their services are necessary to resolve unpaid taxes owed to the IRS while charging excessive fees, often with no results.

These unscrupulous “mills” use aggressive marketing to make false claims of guaranteed settlements for “pennies-on-the-dollar,” or will say there's a limited window of time to resolve tax debts through the IRS Offer in Compromise (OIC) program.

“Taxpayers should be cautious of aggressive marketing that can mislead them,” said IRS Commissioner Danny Werfel. “Many OIC mills charge steep fees, give false assurances and can take advantage of taxpayers with empty promises that their tax debt will disappear. The result is often good money paid for bad results.”

An OIC is a legitimate IRS program that allows qualifying taxpayers to work with the IRS to settle a tax debt for less than the full amount owed. It is a possible option for those who are unable to pay their full tax liability, or if doing so creates a financial hardship. In determining eligibility, the IRS considers the taxpayer's unique situation, income and equity in assets. The OIC agreement occurs directly between the taxpayer and the IRS.

Beware of empty promises and steep costs

OIC is a valuable program that helps taxpayers with their federal tax debts, and some companies offer legitimate services to help taxpayers file a request. However, some companies running OIC mills will heavily advertise their dubious promises to settle taxpayer debt at steep discounts. They usually charge excessive fees for a service taxpayers could have obtained themselves directly from the IRS.

OIC mills make a perennial appearance on the IRS' annual Dirty Dozen list of scams and schemes that put taxpayers and the tax professional community at risk of losing money, personal information, data and more.

Learn more about an OIC

The IRS can help taxpayers pursue the Offer in Compromise program on their own, without the help of these unscrupulous OIC mills. IRS.gov is a good first stop for taxpayers facing a tax debt where they can learn more about the OIC program and whether they qualify. While not all taxpayers will meet the technical requirements for an OIC, learning if an individual qualifies is as easy as using the IRS's Offer in Compromise Pre-Qualifier tool. Individual taxpayers may also check their OIC eligibility via Individual Online Account.

The IRS has a new playlist video series on Offer in Compromise to educate on scam awareness.

Other options for payment

While some people will not qualify for an OIC, most taxpayers do qualify for an IRS payment plan (or installment agreement) and can use the online payment agreement (OPA) to set it up to pay off a balance over time. Taxpayers receive immediate notification of whether the IRS has approved their payment plan when they apply online.

Individual taxpayer payment plan options online include:

• Short-term payment plans — For taxpayers who have a total balance less than $100,000 in combined tax, penalties and interest. This plan gives them an extra 180 days to pay the balance in full.

• Long-term payment plan — For taxpayers who have a total balance less than $50,000 in combined tax, penalties and interest. They can make monthly payments for up to 72 months.

More details on payment options and methods of payment can be found on IRS.gov and Tax Topic #202, Tax payment options.

The IRS also reminds taxpayers about the first-time penalty abatement policy, where taxpayers can go directly to the IRS for administrative relief from a penalty that would otherwise be added to their tax debt.

Help the IRS stop scams

To learn more about avoiding scams or becoming a victim of tax preparation schemes and fraud, please see Abusive tax schemes and abusive tax return preparers on IRS.gov.

To report an abusive tax scheme or a tax return preparer, people should use the online Form 14242, Report Suspected Abusive Tax Promotions or Preparers, or mail or fax a completed paper Form 14242, Report Suspected Abusive Tax Promotions or Preparers, and any supporting material to the IRS Lead Development Center in the Office of Promoter Investigations.

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