There Is No Such Thing As "Pennies On The Dollar" For Taxpayers
It irritates me when I hear advertising on TV or the radio promising specific results to folks in Charlotte who owe money to the IRS.
One of the most ubiquitous advertising techniques you'll hear over and over is that you can only pay the IRS "pennies on the dollar."
The reason this one irritates me so much is because it doesn't exist.
If you've heard this programme mentioned and are interested about it, it's time to clear the air for all my curious Gastonia pals.
The Reality of "Pennies on the Dollar"
What does it mean when someone says "pennies on the dollar"? It's a nod to the IRS's former Offer in Compromise programme. Essentially, this programme allows qualifying tax debtors to pay the IRS a lesser sum than they owe in order to have their whole tax burden forgiven.
You may hear organisations advertise that they will settle for 20%, 10%, or even less than the amount owing to the IRS. These advertisements, as well as the telemarketers, are attempting to offer you an Offer in Compromise service package. Many of their websites even feature interactive calculators where you can key in how much money you owe the IRS and get a message that says, "You may only have to pay $$$."
Regrettably, these advertisements and internet calculators are complete fabrications.
The IRS designated the expression "pennies on the dollar" as deceptive advertising several years ago. They make it clear to licenced practitioners that using this phrase is against Circular 230. (the tax pro rules that we have to abide by when representing you to the IRS).
However, because the IRS does not have authority over many of the marketing companies that advertise these services, the Federal Trade Commission (FTC) is in charge of keeping an eye out for them. Unfortunately, given the magnitude of other concerns they must address, such as identity theft and con artist schemes, the FTC is overburdened and rarely has the resources to pursue these criminals. In fact, it's been nearly a decade since they've taken any action against these "pennies on the dollar" scams.
Here's what you need to know if you see these websites, Facebook advertisements, TV commercials, or radio adverts: There is no provision in the tax code that allows you to make a payment of a specific percentage of your tax debt. It was never a thing.
The truth is that the amount of your Offer in Compromise settlement is determined by following a very strict formula, which is NOT a secret and is published as a worksheet in IRS Publication 656-B.
In addition, the IRS has an online Offer in Compromise Pre-Qualifier Tool to assist you in determining your eligibility.
According to the IRS calculation, if you have more equity in your assets than your tax liability, you are unlikely to qualify for an Offer in Compromise.
The equity in your house will most likely be the stumbling block to your Offer in Compromise (OIC) qualifying for most Charlotte residents. It might also be the equity in your rental properties, as well as the equity in a collection of antique automobiles, stamps, coins, firearms, paintings, and other collectibles.
If the value of any of those assets exceeds your tax liability, you are ineligible for the OIC programme due to financial reasons.
In a similar line, if you earn a lot of money in Gastonia, you're unlikely to qualify for the OIC programme. The IRS only authorises specified amounts of money per month as "eligible expenses" for rent, auto payments, food, and other expenses. The IRS doesn't care if your lifestyle surpasses these levels; they'll only let you claim the amounts they established.
Depending on how long you anticipate to pay off your OIC, any monthly income you earn over those IRS-defined limits is multiplied by 12 or 24. For example, if you have $3,000 per month left over after accounting for IRS qualified costs and plan to pay the IRS within 5 months of their acceptance of your OIC application, multiply $3,000 by 12, which is $36,000. If your IRS debt is less than this amount, you are not eligible for an OIC.
In some situations, you may be eligible for a 12-month period to make a "lifestyle adjustment" and reduce your living expenses to meet the IRS expense restrictions. This will frequently entail the sale of luxury properties as well as the disposal of toys such as automobiles and yachts. Keep in mind that because these things are all protected by your tax lien, any money from their sale are technically the IRS's property and must be remitted to them. A qualified tax attorney in Charlotte can help you structure these sales so that both you and the IRS benefit.
Be wary of anyone who promises to settle your tax debt for a specific percentage of the total amount owed. That is not and has never been the case. Anyone who tries to sell you on that idea is trying to sell you beachfront property in Kansas, and you should look for help elsewhere.
We'd be delighted to assess your case and determine whether you're eligible for the OIC programme. If not, we can assist you with other resolution programmes that you may be eligible for.
We'd be pleased to assist you if you're ready to put your tax debt behind you. Let's talk:
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