What are the risks associated with tax debt relief?

Despite their promises, tax settlement services are often expensive, inefficient and high-risk. Alternatively, there are professionals who can help. In addition to IRS payment options, there are for-profit companies that advertise solutions to pay tax debts, but be careful. Alternatively, there are professionals who can help you explore your reimbursement options.

For the IRS to accept an offer, you must file all tax returns due and be up to date with estimated tax payments or withholding. If the IRS considers that your tax debt is “currently uncollectible,” the agency will temporarily suspend collection efforts, which may give you a break. If you pay them an initial fee, which can be thousands of dollars, these companies claim that they can reduce or even eliminate their tax debts and stop collecting back taxes by applying for legitimate IRS programs for difficult situations. If you can't pay your tax debt in full, or if paying it all will cause you financial difficulties, a commitment offer (OIC) may be an option.

Couples who file joint returns are responsible for the taxes they owe, but the IRS can exempt one party from taxes, interest, or penalties if the other couple was at fault for not reporting the taxes owed. The IRS can return your offer to you once it's been processed, if you don't file your tax returns on time, make estimated tax payments, properly adjust your tax withholding, or make federal tax deposits. If you are the victim of a tax debt relief scam, file a complaint with the Alaska Attorney General's Office. If the IRS accepts your offer, but you don't file or pay all your taxes on time for five years after acceptance, the IRS will notify you that your offer is in default and may cancel the offer and you'll owe all of your debt (not the reduced amount of the offer).

Tax relief companies use radio, television and the Internet to advertise aid to struggling taxpayers. Some companies and law firms use false promises and deceptive tactics to take advantage of consumers who desperately need help resolving their back tax debt with the IRS. Once the IRS notifies you that it has accepted your offer and you pay the reduced amount you have accepted, all your tax debt will be resolved if you comply with the terms of the offer agreement. Now that you have a better idea of your debt relief options, you can choose which one will work best for you.

The IRS Office of Professional Responsibility focuses on questionable practices in the tax debt resolution industry. The help options available through the IRS usually include a payment plan or the negotiation of a debt settlement, also known as a commitment offer.

Lorraine Cernota
Lorraine Cernota

General social media junkie. Passionate writer. Infuriatingly humble web maven. General writer. Amateur pop culture specialist.