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IR-2004-130, October 25, 2004
WASHINGTON — The Internal Revenue Service
today issued a consumer alert advising taxpayers
to beware of promoters’ claims that tax debts
can be settled for “pennies on the dollar”
through the Offer in Compromise Program.
Such promoters make money by inappropriately
advising indebted taxpayers to file an application
for an offer in compromise with the IRS, promising
unrealistic results, even when the taxpayers do
not meet the requirements of the program. This bad
advice costs taxpayers money and time.
Taxpayers may refer promoters who are using the
program inappropriately to the IRS’s Office of
Professional Responsibility for civil sanctions by
sending their complaint to: Office of Professional
Responsibility (SE:OPR), Internal Revenue Service,
1111 Constitution Avenue N.W., Washington, DC
20224.
An offer in compromise is an agreement between
a taxpayer and the IRS that resolves the
taxpayer's tax debt. The IRS has the authority to
settle, or "compromise," federal tax
liabilities by accepting less than full payment
under certain circumstances.
“This program serves an important purpose.
But we do warn taxpayers to watch out for
unscrupulous promoters charging excessive fees to
taxpayers who have no chance of meeting the
program’s requirements,” said IRS Commissioner
Mark W. Everson. “Taxpayers should not be duped
by high-priced promises.”
Although there are some tax practitioners who
promote dubious schemes, most practitioners give
quality service to their clients. Taxpayers who
need a qualified tax professional to prepare and
submit their offer in compromise application form
may contact state or local tax professional
associations to find enrolled agents, CPAs or
attorneys in their geographic area with the
education and experience to assist them.
The application package, IRS Form 656, Offer in
Compromise, was recently redesigned with new
instructions, worksheet and checklist to make it
easier for taxpayers to determine if they are
eligible for the program and to accurately prepare
the necessary forms. The recent revision of the
application form also contains a new paid preparer
signature block. Taxpayers may wish to reconsider
using preparers who hesitate to identify
themselves on the form.
An offer in compromise may be considered only
after other payment options have been exhausted.
If taxpayers are unable to pay their taxes in
full, there are other payment options, such as
monthly installment agreements, that must be
explored before an offer in compromise can be
submitted.
Additional information is available in IRS
Publication 594, The IRS Collection Process, and
Form 9465, Installment Agreement Request. These
documents provide complete information on all
options available and help taxpayers determine if
they qualify for a payment program.
Taxpayers who are unable to pay their taxes in
full and who have explored the various options
should use the checklist in the Form 656 package
to determine if they are eligible for an offer in
compromise.
Some taxpayers may be exempt from the $150
application fee depending on income or whether the
offer in compromise is based solely on doubt as to
tax liability. Taxpayers who claim the income
exception must certify their eligibility by
completing Form 656-A, Income Certification for
Offer in Compromise Application Fee. This
certification should be attached to Form 656 in
lieu of the $150 fee at the time of submission.
The Form 656 package contains a worksheet designed
to assist taxpayers in determining whether they
qualify for the income exception. The income
exception applies only to individuals.
The publications and forms are available at on
this Web site or by calling 1-800-829-3676 to
order copies. All publications and forms are free.
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