Tax settlement firms claim they can drastically reduce or eliminate tax debt for delinquent taxpayers as judged by 🅠the Internal Revenue Service (IRS). Failure to resolve issues such as outstanding tax balances can lead to severe penalties from the IRS, up to and including the seizure of personal or business assets.

But are tax settlement firms the answer? Can they deliver what they promise, or is it b𒀰uyer beware?

What Are Tax Settlement Firms?

You've probably seen the advertisements. Desperate people who owe tens of thousands of dollars to the IRS and have no one to help them. Cue the tax settlement firm, which steps in, and then the tax bill is miraculously reduced by hundreds or thousands of dollars. The clients are elated. But that's television (or radio or social media), and things don't often work that way in reality.

If you're unsure what the tax settlement industry does, think of the 澳洲幸运5开奖号码历史查询:debt settlement business. The two work in the same way to some degree. Most companies specializing in tax settlements claim to have a battery of tax experts who are former IRS employees to go to bat for their clients. In reality, this may be a substantial 澳洲幸运5开奖号码历史查询:misrepresentation in some cases.

There may be a few lawyers and a handful of people in the company who did work for the IRS at some point, but the majority of employees probably haven't. Most of the employees may be minimum-wage customer service representatives.

What Can Tax Settlement Firms Do?

Most tax settlement firms promise to send their experts to the IRS to negotiate on behalf o♔f the client, where they presumably can persuade the agency to accept a much smaller amount—even pennies on the dollar.

In reality, this is virtually impossible to do. The IRS rarely accepts any r🃏eal reduction in the amount of tax owed.

There are several extenuating circumstances under which 澳洲幸运5开奖号码历史查询:Uncle Sam will accept a deal for repayment of back taxes,🐈 including:

• If the taxpayer is experiencing an exceptional circumstance, the payment would cause an economic hardship or be unjust. (This would have to be an extraordinary situation.)
• If the debtor cannot obtain any gainful employment with sufficient income to repay the amount, such as in the instance of a long-term illness or disability.
• If the person owing taxes has absolutely no assets, that could be used in a meaningful way (via 澳洲幸运5开奖号码历史查询:asset seizure) to cover the required tax liability.

The best everyone else ꧑can hope for is an extension ✤of time to pay off their tax debts, typically including additional interest and penalties.

What Is an "Offer in Compromise"?

Tax settlement firms use an IRS procedure known as an 澳洲幸运5开奖号码历史查询:offer in compromise to reduce their clients' tax bills. This is a special agreement that some taxpayers can make with the IRS to settle their tax debts for less than what is owed. The taxpayer must supply detailed information to the IRS about their current assets and liabilities and their projected future income.

Offers in compromise typically take at least a few months to complete ꦍand are more likely than not to achieve nothing. The number of offer-in-compromise applications that are approved is very low.

To get a reduction approved, the taxpayer must prove that the total amount owed is incorrect, the probab🌱ility of being able to pay back the full amount is very low, or paying back the full amoun🐈t will result in extreme financial hardship.

According to , the exceptional circumstance leading to a financial hardship would have to be along the lines of "unplanned events or special circumstances,ꦐ such as serious illness, where paying the full amount or thꦗe minimum offer amount might impair your ability to provide for yourself and your family."

How Much Do Tax Settlement Firms Charge?

Most tax settlement⛦ companies charge their clients an initial fee that can easily run between $3,000 and $6,000, depending on the size of the tax bill and proposed settlement.

In most cases, the fee is non-refundable and quite often happens to match the amount of free cash the client has available. This is generally the amount of money the comp𒆙any says it will save the client in tax payments.

Clients have complained to the Better Business Bureau (BBB) and the 澳洲幸运5开奖号码历史查询:Federal Trade Commission (FTC) that some of these firms have not produced any of the promised results and, in fact, the organization was a scam. Many firms also materially misrepresent their fees to clients, perhaps initially charging them a lower fee before coming back for more once they are deeply involved in the process.

Tax Settlement Firm Success Rates

As stated previously💜, the IRS rejects most offers in compromise it receives each year. The number of clients who get satisfaction from tax settlement companies is negligible, and most are virtually destitute financially.

The vast majority of potential settlement clients need to work out payment plans with the IRS that allow them to clear out their tax balances over time while ke❀eping their assets and their dignity.

You ca🃏n find more information about payment plans o✤n the .

Finding a Legitimate Tax Relief Firm

Several red flags should warn prospective customers who are considering hiring a tax settlement firm. Any firm that promises to drastically reduce a customer's taxes without first getting a detailed financial background on that person may be a scam.

Any tax agent who does not ask a prospective customer why the client owes the IRS money is not conducting the full 澳洲幸运5开奖号码历史查询:due diligence process that would be r⛄equired for a proper𓂃 appeal.

A reputable tax relief firm will first obtain key financial data from potential customers before giving them a realistic assessment of what they can do for a reasonable fixed fee. Prospective client🐻s would be wise to find a local firm that has been in business for several years and has a presence in the community.

Tax Settlement Warnings From the IRS

The IRS is probably the most difficult of all creditors. It has the legal power to seize assets and push forward with extreme collection measures. Many delinquent taxpayers find the IRS much more intimidating than private debt collectors or credit card companies.

Tax preparation firms play heavily upon this fear, promising a lifeline of professional help that can make their problems go away. Don't be fooled by misleading claims from outfits that require substantial up-front payments.

The IRS has issued warning👍s to the publ꧂ic about fraudulent firms.

 offers details of the Offer in Compromise process and describes the collections process. Compare that information to anythi🌊ng a tax settlement firm tells you to ensure you have been given the correct information before you decide to retain the firm.

The Bottom Line

The tax settlement business is fraught with peril. Those who seek assistance with their unpaid tax balances are generally better off hiring a 澳洲幸运5开奖号码历史查询:qualified tax attorney with years of experience in the field.

They should also be prepared to undergo extensive financial analysis and a bureaucratic process that may stretch out for months. Above all, they should be prepared to hear the word "no" from the IRS in the end.