 internal revenue service IRS tax news companies who promise to eliminate tax debt sometimes leave taxpayers high and dry because to believe that guy you must have been high and obviously the scammer didn't leave you with any more beer money hence the term high and dry actually that's probably not where the term comes from honestly I would think you would be worse off having been left high and wet because high mountains are like cold and if you were both really high and really wet you'd freeze so you can just thank your lucky stars you were left high and dry instead of high and wet my lucky stars name is Julia thank you Julia but now that I think about it they most likely use the term high and dry simply because it rhymes I propose to the IRS committee replacing the term high and dry with the phrase wet and upset far more accurate when people hear the term high and dry they're more likely to picture a mountain climber who successfully climbed his way to the top resulting in him being high dry and happy and that would mess up the whole high IRS headline possibly promoting companies who promise to eliminate taxes they're like hey that comp that company promised to completely eliminate my taxes we climbed that mountain together resulting in us celebrating at the top high and dry baby that's the way we do it IRS tax tip 2022-103 July 7th 2022 as the old same goes when something sounds too good to be true it probably is taxpayers without standing tax bills might be tempted by businesses who advertise and offer to help them reduce their tax debt these businesses often called offer and compromise mills make huge claims about reducing unpaid taxes for pennies on the dollar unfortunately these companies sometimes don't deliver and charge large fees so if you hear a commercial saying if your tax debt is over this about or something like that then we can help you out they're typically alluding to the tool of an offer and compromise which is a legitimate tool but only applicable in certain situations it's also not the only tool that might be used if there's like an outstanding tax debt you'd have to take it basically on a case-by-case basis but this is the one that typically would be alluded to now the first thing you kind of want to note is obviously who are you doing business with and that can be hard to tell when you look at like a commercial for example because that commercial might just be an advertising company that is generating leads and then it's going to be selling those leads to various firms so the person that you're actually contacting then might not be an actual the actual company that's going to be working on your offer and compromise and if they're a large advertising firm they're probably going to take a big chunk of profit in that and just in that kind of part of the transaction to which could lead to basically higher fees for it so you want to know who you're who you're working with you'd like to be working with your CPA firm if you could although a lot of CPA firms and tax preparers may not you know specialize in the offer and compromise but they might be able to recommend you to someone directly instead of going through like a like an advertising lead generating kind of process which would be more likely you would think to increase the fees also note that this offer and compromise is laid out pretty explicitly on the iris website so you might still need kind of help to gather the data and stuff like that but if you want to get a general idea of what it actually is before you so that you can be an informed customer just like you'd like to be an informed person when you're working on your taxes or buying a home or any other any other kind of thing and it's laid out pretty clearly on the irs website so an offer and compromise with the irs can help some taxpayers who can't pay their tax bill so someone has a big tax bill and they're thinking about this offer and compromise they can click here and they can they can see what it entails note that the basic fundamentals of it would be that it has to be a situation where we're both the person who's owed the money and the person who owes the money are both better off meaning the irs has to kind of you can imagine them needing to be better off in the offer and compromise how could the irs possibly be better off by lowering your tax debt well if they determine that you there's no possible way that you're going to pay it I mean if you if you owe like $30,000 and you're no longer working you're retired you know and and basically your life expectancy is not that long for example you might be in a situation where the irs it would be more likely or more advantageous to them to basically lower the tax set at that point in time right because they don't expect to be paid so you can imagine what they would want to in order to prove that they would want personal financial statements they would want what's your balance sheet what's your income statement give me your bank account statement for example let's see your last transactions what are your monthly expenses if you're living in a really expensive house and you have are driving around a hundred thousand dollar car or something like that it's less it's a lot less likely the irs is going to say oh yeah you just you know you deserve us to eliminate this tax debt that is here because you could probably pay it if you really want it to you right it's going to that's the kind of thing that you would imagine an offer and compromise to be now note that the other kind of thing where area that people often get in trouble is they go from a w2 business and they start working as a sole proprietor and then they don't report their taxes and and the irs just builds them based on 1099s that were received for the business now the issue there is that the irs is billing the people on gross income instead of net income because they only have the the top line that the 1099s and all your expenses for the business would be deductible but because you didn't file the taxes if this was the case if someone didn't file the taxes then they didn't get the deductions so in that case you might be able to substantially lower the and and that happens a lot with like if you're like a construction company and you're like you know your profit margins are not that big right there and and you have a lot of these costs that you didn't report then that could lower the the tax bill a lot so that's the other thing the other big one that you kind of want to keep in mind if someone says hey i got the irs is telling me i owe them this ton of money well you know what's the structure is it a business structure did you not file did you have deductions that you didn't take and then and then if that's the case then you can go into the offer and compromise okay so in an offer and compromise is an agreement between a taxpayer and the irs that settles a tax debt for less than the full amount owed so the offer program gives eligible taxpayers a path toward paying off their debt when they otherwise couldn't or would face financial hardship the oic offer and compromise mills that are dishonest take advantage of taxpayers lack of knowledge to make a quick buck the oic mills urge people to hire their company to file an oic application even though the taxpayer won't qualify so notice you should be able to get a pretty good idea if someone would qualify for an offer and compromise you know you know from a from a few questions right you know how what's the nature of your tax debt and uh and then and then what's the nature of your current financial position right if you're driving around a hundred thousand dollar cars you've got a lot of assets if your income is fairly steady and you could pay off the debt but you but you're not then then it's less likely that you that they're going to take the offer and compromise you could still file for one so the iris is basically saying here that they're getting people firing filing offer and compromises they clearly have no no ability to to go through and what happens is then they collect money they file the offer and compromise the iris then rejects it that whole process could take months you know it could take a long time for that to go through and so they just so they'll just kind of keep you on the hook until it doesn't and finally it doesn't go through and what you end up getting at the end of the day is just going to be a a payment plan that's going to be set up which which you know that's fine if that's all you can do but you that you could you know you could have done that a lot of cheaper cost if you could have determined that you didn't need you wouldn't be qualified for an offer and compromise up front so they often charge big fees to prepare applications that they know the irs will deny this unfair practice waste taxpayers time and money taxpayers who do qualify for an OIC can get the same deal working directly with the irs without the extra fee so it is kind of complicated to do an offer and compromise but you know if you want to put in the time and look at it i would at least look at it to get an idea of it go to your cpa that you trust and and possibly get help and guidance there but they got it pretty laid out so you can you can do it on your own if you want the OIC mills that are dishonest are a problem all year long but they step up their advertising after the filing season ends when taxpayers are trying to resolve their tax issues so here's what taxpayers considering an OIC should know individual taxpayers can you the irs's official i'm sorry offer and compromise free qualifier tool there's a link to that here so you could check it out to see if they are eligible when a taxpayer is ready to apply they can watch the OIC video playlist there's a link to that here that will lead them through the steps and forms to calculate an applicant an appropriate offer based on their assets income expenses future earnings potential so there you're basically trying to say hey look i can't pay the debt uh be based on my financial conditions i would like to lower it and that's kind of the offer right so now you're saying could you lower it and they're going to approve it or not approve it so taxpayers can make an offer based on their true ability to pay applying does not guarantee that an irs will accept the taxpayers offer so it's an offer right so they can accept it or deny it and again if if your financial conditions look good if you're a young person and you're you're healthy and uh and even if you know and you have some assets right you're less likely that the iris is going to say well i think you can pay off the debt right in that situation more it's more likely that they're not going to accept your offer like could you eliminate my tax debt you know i'm a 25 year old driving around in my hundred thousand dollar car you know i'm doing great but i just don't want to pay my that's probably not going to worry so it's got to be a situation where you know you would you know any case finding reputable tax help people who want help from a reputable tax professional can review choosing a tax professional page on irs.gov to find information about tax preparer credentials and qualifications they can then use irs directory of federal tax return preparers with credentials and select qualifications to find a preparer by type of credential or qualification there's a link to that more information at the links below there's an offer and compromise offer and compromise pre-qualifier tool offer and compromise irs videos the form 656 offer and compromise there's links to all that stuff here it really is you know they got a lot of stuff on it if you want to research that topic specialty kind of area so a lot of tax preparers aren't aren't as adapt at that area because a lot of CPA firms for example deal with higher income individuals less likely to come across an offer and compromise but it's pretty it's it's laid out out here on the the iris website pretty good