 Internal Revenue Service IRS tax news. Dirty dozen. IRS urges anyone having trouble paying their taxes to avoid anyone claiming they can settle tax debt for pennies on the dollar known as OIC or Offer In Compromise Mills. I've never understood that term pennies on the dollar as if it's a bad thing. I mean if someone owes me a hundred dollars and they give me the dollars along with some pennies on top of the dollars, I'm okay with that. The pennies aren't worth much but maybe they're being used as like a paperweight so the dollars don't blow away. And what's with this dirty dozen tax scammer gang? Instead of scaring us about the dirty dozen gang, if the IRS did their job they could cut the dirty dozen gang down. Honestly even take it out just a couple of them would turn the dirty dozen into a terrified ten turning the tables on the dirty dozen. And from there it would be even easier to make them into a sackless seven followed by a feckless four and finally just a whiny one. Whining because one is the loneliest number. Okay here we go. IR 2022-119 June 7 2022 Washington. As the sixth item on the 2022 quote dirty dozen end quote scams warning list the Internal Revenue Service today caution taxpayers with pending tax bills to contact the IRS directly and not go to unscrupulous tax companies that use local advertising and falsely claiming they can resolve unpaid taxes for pennies on the dollar. So you might see advertisements that say if your tax bill is over a certain threshold say $10,000 or something come to us and they're at least alluding to the ability to lower the tax bill and they're at least alluding to to do that usually the offer and compromise or although there might be other techniques that could lower the tax bill in some cases as well. The offer and compromise is a real thing but the problem is one of the problems with these what they're calling the mills the OIC mills are that oftentimes they're targeting people that are vulnerable people because if you have a very large tax bill you're feeling kind of vulnerable and somewhat desperate possibly to try to lower the bill at that point in time and also they're often going through basically advertising companies. So oftentimes you might have the advertising companies that are actually targeting the ads towards these groups of individuals who aren't the actual firms right and then they might be then giving the leads their lead sources that are then going to the actual different firms and so one that could be costly because the advertisements can be costly that the prices they charge might be high and you don't know who the in person that you're going to be working with is in that system. So what you would like to do generally is basically do your own research first first go to the iris website look at your own circumstances and then there's a lot of information on the offer and compromise the other thing that people often get into tax problems with is like their sole proprietor and they get a bunch of 1099s and they just don't file their tax returns and because they don't file the tax returns the iris only knows about their income they don't know about the expenses that they have had. So they get a tax bill that's way out of proportion because they get taxed on the income rather than the expenses. So in that case you might actually have to tell the iris hey look I had expenses here and then so that's another kind of the two common things that can get the tax bill out of control and then the other tool is this offer and compromise and then if you do talk to someone for help from there you'd like to go to someone that you know the actual firm directly with the firm rather than going through an advertisement lead generation thing because then you don't know where you're going and you're probably going to have higher costs than you otherwise would because those advertising companies take a big chunk out of the out of it. So in any case quote no one can get a better deal for taxpayers than they can usually get for themselves by working directly with the IRS to resolve their tax issues in quote said IRS Commissioner Chuck Reddick. Now I'm not totally certain on that personally actually I mean if you had a representative that that knew what they were doing in the areas of offering compromise and lowering debt that have people that have large debts then that could be good. The problem is if you're dealing with something that is a mill that then they're going to have an absorbent it costs to do that. So that would mean in my perspective you would certainly want to do your own research in terms of the offering compromise and whether or not you've reported your taxes or not look at your options yourself and then make sure that when you're looking into someone if you're looking for help with that that you're doing your research on it quote taxpayers can check online for their best deal as well as calling a specialized collection line where they can get fast service by using the voice and chat bots or opting to speak with a live phone a sister in quote so offer and compromise. So here's the major tool that these kind of I guess the mills are are kind of alluding to. So the offering compromise mills make outlandish claims usually in local advertising regarding how they can settle a person's tax debt for pennies on the dollar. So the reality usually is the taxpayers pay the OIC mill a fee to get the same deal they could have gotten on their own by working directly with the IRS. So the offering compromise itself. I mean it's kind of complicated but it's all there. So you do. You can look at everything on the offer and compromise. The problem is the offering compromise is only going to be applicable for certain kind of situations. So oftentimes if you go into like what they're saying a mill kind of situation they'll check out to see if you would get the offer and compromise. If you don't qualify for the offer and compromise then you might end up with just basically a payment plan which which you know if that's if that's the end result you could easily set up a payment plan yourself possibly. So and what would qualify for an offer and compromise usually if your tax debt is below. I mean if you don't have the capacity to pay the tax debt and you can see this would be similar to any kind of lender borrower kind of situation the IRS is basically saying you owe us money due to the taxes. If you're saying I don't have any money I don't have the money to pay it and it's unlikely that I'm going to get the money in the future. It would be beneficial for both sides of that transaction to try to come to an agreement where you could pay the money. So that's that's when the offer and compromise might come into play. And that would mean that what would you have to do. Well you would think you'd have to give the IRS basically financial statements and tell them where you stand now your balance sheet what kind of assets and liabilities you have and your income threshold and your potential income thresholds in the future. So if you have a tax debt for example and you're driving around in a hundred thousand dollar car and living in a you know million dollar house or something like that and saying you can't pay the fifteen thousand dollar tax bill that's probably not going to work for the offering compromise because they're going to say right there you know they're going to have to say that you can't pay the bill. So that's kind of the gist of the offering compromise. So the IRS has compiled the annual dirty dozen list for more than 20 years as a way of altering taxpayers alerting taxpayers and tax professional community about scams and schemes. The list is not a legal document or a literal listing of agency enforcement priorities. It is designed to raise awareness among a variety of audiences that may not always be aware of developments involving tax administration. OIC males offering compromise males are a problem all year long but tend to be more visible right after the filing season is over and taxpayers are trying to resolve their tax issues perhaps after receiving a balanced do notice in the mail. So clearly the thing that helps you know a lot of basically tax professionals in general and clearly the IRS mills is the enforcement mechanism of the IRS because the fact that the IRS is intimidating. And when you get a tax bill saying you owe us a bunch of money we want you to respond in a certain time frame. People panic at that point which is kind of the point of the IRS's letter and then you might look for assistance on that if you think that the mills or a tax professional can basically lower the amount. What you'd like to do is go to a legit CPA firm possibly and talk to them about it. But the problem there is a lot of times tax professionals don't really specialize in the offer and compromise process a lot of times. So it is kind of a specialty type of area. But they can probably give you at least some guidance on that. But many case for those who feel they need help there are many reputable tax professionals available and there are important tools they can help people find the right practitioner for their needs. So obviously if you talk to your tax preparer that would be the place to go if you have one a lot of people are doing taxes online possibly or with with other kind of resources. But you know talking to a CPA firm or something like that might be a good place to at least get some idea and maybe a better kind of reference tool to find the right person to handle the right problem. So IRS dot gov is a good place to start scoping out what to do. These quote mills and quote contort the IRS program into something is not misleading people with a chance of meeting the requirements while charging excessive fees often thousands of dollars. So that's of course the problem because the mills are charging a big fee to go through the filing process for the offer and compromise which again if you really look at the offer and compromise it's fairly they're getting quite good on the IRS that kind of laying out the requirements for the offer and compromise. So it's pretty much right there. Although again it's still kind of confusing for a lot of people but you can do your research on the IRS website and offer or OIC as an agreement between the taxpayer and the IRS that results the taxpayers tax debt. The IRS has the authority to settle or compromise federal tax liabilities by accepting less than full payment under certain circumstances. So that's where the offer and compromise is kind of a legitimate thing. Right. Because that means they're going to they're going to settle the tax debt for something other than what the tax debt was. But there has to be specific circumstances on why they would do that. And usually those circumstances are those that both parties IRS and the taxpayer benefit. Why. Because the taxpayer can't pay the debt like they're not likely to be able to pay them. And that's generally the idea. So however some promoters are inappropriately advertising indebted taxpayers to file an OIC application with the IRS even though the promoters know the persons won't qualify. So this is where the kind of scammy stuff comes in. Because if someone you should be able to find out fairly quickly whether or not the offer and compromise is likely to have any kind of chance of going through. So again if if if your income is fairly good if you're a young person you have a lot of income potential in the future and you're driving and you have assets and so on that are significant even if you have a significant tax bill not likely the offer and compromise is going to go through. Because again it's usually there because the IRS has determined that you're not going to be able to pay the tax bill. And you can get to that assessment. You would think with a pretty you know pretty quick assessment. So obviously if they're pulling people in dangling the offer and compromise filing the paperwork for the offer and compromise when they know that you're not going to qualify for the offer and compromise from a fairly short discussion then you know that's not good that's that's that's nefarious kind of scammy stuff. So this costs honest taxpayers money and time before taxpayers start investing time to do the paperwork necessary to submit the offer they'll want to check out the IRS's official offer and compromise pre-qualifier tool. So there's a link to that tool here to make sure they're eligible to file one. Note even though individuals and businesses can submit an offer the tool is currently only available to individuals. The IRS also created an OIC offer and compromise video playlist that leads taxpayers through a series of steps and forms to help them calculate an appropriate offer based on their assets income expenses and future earning potential. Find these helpful easy to navigate videos on IRS dot gov forward slash OIC the IRS reminds taxpayers that under the first time penalty abatement policy taxpayers can go directly to the IRS for administrative relief from a penalty that would otherwise be added to their tax debt. So you might be able to abate because the first time abatement penalty a tax bill that you that you would otherwise pay. So OIC mills are one example of unscrupulous tax preparers taxpayers should be wary of unscrupulous quote ghost in quote preparers and aggressive promises of manufacturing a bigger refund. So anytime you're talking to a tax professional and they're saying I'm going to I'm going to get you this huge refund or something like that. That's usually not good because you can because the whole idea of the taxes isn't really to get a huge refund is to pay as little as taxes as possible. If you do the good planning involved then you're going to have less money that you're going to pay throughout the year kind of thing. But in the case ghost preparers although most tax preparers are ethical and trustworthy taxpayers should be wary of preparers who won't sign the tax returns they prepare often referred to as ghost preparers for e file returns the quote ghost in quote will prepare the return but refused to digitally sign as the paid preparer. So that doesn't look like a good sign if you're paying the person for the preparer and they're not willing to sign their own return that might mean that they're going to be disappearing next year when the IRS possibly audits the return and says the whole thing is messed up in your refunds ridiculous and what were you thinking kind of thing and that's what you want to avoid. So by law anyone who has paid to prepare or assist in preparing federal tax returns must have a valid preparer tax identification number no one has a P 10 paid preparers must sign and include their P 10 on the return inflated refunds not signing a return is a red flag that the paid preparer may be looking to make a quick profit by promising a big refund or charging fees based on the size of the refund. So this is the difference between like a scammer and a legitimate business. A legitimate business is typically here to stay. They're typically proud to sign their returns. They want to sign the returns build the reputation and being a solid area for for a good time and erupt and be reputable right. A scam is the person that goes from town to town. And if they're if they're basically saying they're going to have a huge refund and they do scrupulous things to get a huge refund and then they charge you a portion of that huge refund. Don't be surprised if that tax preparer isn't there when you get the tax letter from the IRS saying hey some of the stuff you put on here looks not correct. Could you give us some more verification you're going to say where's my tax preparer. Well he's in the other town now scamming somewhere else because that's the that's the difference between scams and a business. So unscrupulous tax return preparers may also require payment payments in cash only and will not provide a receipt invent income to qualify their clients for tax credits. That's going to be going up these days because these tax credits there's refundable credits like earned income tax credit are becoming significant quite significant right claim fake deductions to boost the size of the refund direct refunds into their bank account not to the taxpayers account. Now if they tell you yeah I'm just going to get your refund in the my account is like wait a second what that doesn't seem so choose wisely wisely the choosing choosing a tax professional page there's a link to that it's on irs.gov irs.gov has information about tax preparer credentials and qualifications. The IRS directory of federal tax return preparers there's a link to that here with credentials and selected qualifications can help identify many preparers by type of or credential qualification. Taxpayers are legally responsible for what's on their tax return even if it is prepared by someone else.