Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Some Options for Paying the IRS

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Some Options for Paying the IRS

Article excerpt

WASHINGTON - You're deeply in debt to the Internal Revenue Service when you hear a radio ad promising to settle the bill for a fraction of what you owe.

There will be a team of tax experts, some of whom used to work for the IRS, to help you negotiate with the agency, the ad claims. Call for a free consultation.

So you make the call and your heart is thumping with the anticipation that you'll be rescued from most of your tax obligation.

But the "rescue" could cost you thousands of dollars.

What the ad pitch doesn't tell you is that the claim hinges on your being approved for the IRS's Offer in Compromise program, in which the agency agrees to accept less than your full tax payment under certain circumstances.

And you better believe the certain circumstances have to be dire. To qualify, you have to show that you can't pay your full tax liability because it will create a financial hardship. And by hardship, the IRS means just that. It will look at your income and assets to determine your ability to pay.

The IRS says that absent special circumstances, an offer will not be accepted if it believes your debt can be paid in full as a lump sum or through a payment agreement. The IRS generally approves an OIC when the amount offered represents the most it can expect to collect within a reasonable period of time.

Last fiscal year, the agency received 74,000 requests for OICs and accepted 31,000, or about 42 percent. The previous year, only 38 percent were accepted.

The fact is most taxpayers don't get their tax debts settled for pennies on the dollar as touted in the ads, and in many cases the companies don't even follow through and send the necessary paperwork to the IRS requesting participation in the OIC program, the Federal Trade Commission warns in a consumer alert about tax relief companies.

The FTC notes that some taxpayers who have filed complaints said that after signing up with such a company and paying thousands of dollars in upfront fees - money that could have been applied to their tax bills - they were slammed with unauthorized charges to their credit cards or withdrawals from their bank accounts. …

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