One way to get out of debt with the IRS seems to have attracted more abuse than any otherâ€¦
This method has become downright controversial â€“ so much so that the IRS made changes to the â€œrulesâ€ regarding this debt relief method for both taxpayers and tax relief specialistsâ€¦
So what is it about the Offer-In-Compromise thatâ€™s attracted so much attention?
When President Clinton signed into law the IRS Restructuring and Reform Act of 1998, it opened the door for taxpayers to potentially have crushing tax debt actually forgiven by the IRS.
According to the Act, a taxpayer could make settlement proposals to the IRS and â€œplead their caseâ€ that they could not otherwise pay the debt by making an â€œOffer-in-Compromiseâ€.
Also, according to the Act, while an OIC offer is pending (and 30 days beyond if rejected), the taxpayerâ€™s property could not be seized.
Although there were (and still are) other ways of paying down the debt with the IRS, this was the only method that had the potential of having a portion of the debt forgiven entirely, until 2005.
In 2005, the IRS implemented the Partial Payment Installment Agreement option, which is also a way that a taxpayer may be able to negotiate with the IRS to pay less than the full debt owed.
Needless to say, if a person could possibly have the option of having their tax debt erased completely â€“ itâ€™s going to attract a lot of attention…and abuse.
All of a sudden, late night TV became filled with commercials from â€œOffers-In-Compromise millsâ€ promising troubled taxpayers the chance to â€œpay pennies on the dollar to the IRSâ€.
These scams usually just fill out the OIC paperwork, and send it to the IRS regardless if a client meets the criteria for being accepted or not. Either way, the â€œmillsâ€ get their moneyâ€¦even if the client never had much of a chance of being accepted.
Not only has this practice created huge numbers of people getting ripped-off, it may have caused an actual reduction in Offers-in-CompromiseÂ which are actually being accepted by the IRS.