Discussion:Pay Only Pennies On A Dollar???
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Discussion Forum Index --> Tax Questions --> Pay Only Pennies On A Dollar???
| 3 August 2007 | |
| Can anyone comment on businesses that advertise that they can resolve someone's tax liabilities so that they owe very little tax? I have a cliet who owes a lot of back employment taxes (trust fund taxes)along with penalties and interest. I had been working with this client along with a CPA/tax attorney. The client panicked, fired the CPA/tax attorney, and went to one of the above mentioned places. Has anyone had any experiences with these businesses? The situation for client is complicated and there is an issue of whether the client is a CCorp or LLC. | |
| 3 August 2007 | |
| they just kissed the money goodbye that they sent to the "pennies on the dollar" company.
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| 3 August 2007 | |
| Thanks for your comments. I didnt know anything about this company. I was very sceptical when this company called my client. I told my client that if they were that good, they wouldnt be making cold calls to get clients. I've never had to. The CPA/tax attorney said not to worry, the client will be back with a bigger mess. Thats just great!!! | |
| 3 August 2007 | |
| This is a very interesting question. I, too, have been puzzled by the wide spread ads about your "one time opportunity" to settle your debt for much less than owed. They are obviously talking about offers in compromise. However, my experience (and probably due to my own ignorance) is that these offers are not easily negotiated. I have done only one and it took over two years to complete. Even then, our settlement was about 60% of the amount owed. I must think that I am missing something somewhere. Any other comments? | |
| 3 August 2007 | |
| I am an EA who specializes in preparation of offers in compromise and other collection related headaches. There is at least one other offer specialist who posts regularily. They seem to promise that everybody can settle for a few pennies on the dollar but it doesn't work out that way. My fees run about half that of companies that advertise on cable TV. This is because I have low overhead and don't have to pay for TV ads or sales commissions. I can't speak for others. I have had several clients who were dissatisfied with the service from the big companies. It doesn't matter if the company is a corp or LLC. The first thing the client has to do is get current and stay current. Any offer filing is still somewhere down the road. Presuming the company will not treated as a proprietorship, an offer in compromise would have to take into consideration the ability of the responsible persons (the warm bodies) to pay the trust fund portion of the liability as well as the company's ability to pay anything else. Without the tax problem, is this a viable business? A business that is willing to tolerate a runaway withholding tax bill and penalty and interest charges that are worse than credit card rates may by terminally underfunded or just terminal. No matter what the client thinks he wants, it is time for an unpleasant reality check. | |
| 3 August 2007 | |
| I always advise potential OIC applicants to avoid the pennies-on-the-dollar mills. Their advertising is misleading, as it implies that almost everyone is approved. There is no mention of the actual requirements for an OIC, nor do they even mention the term. The emphasis seems to be on touting their staff of experts who will make the IRS withdraw in fear. The clients who ask me about them are also very surprised when I tell them that OICs are a routine tool; the commercials leave the clients thinking the pennies people know something no one else does. | |
| 3 August 2007 | |
| And can anyone tell me where they get the catch words of "once in a lifetime opportunity to settle the debt." I know of no restriction limiting a person to only 1 OIC. Or is there something which I am mising. | |
Death&Taxes (talk|edits) said: | 3 August 2007 |
| Worse, a client went to one of these specialists and basically they proposed they would lend her the money to pay off IRS at 23-24% interest. She had lots of real estate but had little liquidity, and to my mind, while the IRS R.O.'s definitely played fast and loose with her, I found her to be the same way.....dealing in lies. | |
Adrian2Day (talk|edits) said: | 6 August 2007 |
| I used to work for one of these firms. It was my experience that they deal in quantity and not quality. I found out that they had no respect fot the IRS, their clients or their employees. I have also had clients that previously used one of the firms and they too were ignored once they had signed up and paid their money. That doesn't mean that tax debt can't be settled for "pennies on the dollar", although I would never use that phrase in my advertising. I have represented numerous client where they have settled their tax debt for "pennies on the dollar". I settled a case with IRS last month for a client for $25.00. He owed $23,000. The one before that we settled for $64,000. He owed $380,000. The one before that we settled for $6,500. He owed $30,000. And previously I had a client who owed $30,000 settle for $5,500. I am currently working on three Offers in Compromise which I am confident I can settle for less than 20 percent of what is owed. | |
Death&Taxes (talk|edits) said: | 6 August 2007 |
| Please fill in your profile, Adrian2Day. I am sure many of us have clients in need of your services. | |
| 6 August 2007 | |
| ABSOLUTELY!!! And are these "real debts" or are they for SFR's filed by IRS? I have had 2 clients who filed the returns and IRS accepted the originals to replace the SFR in place....but I have NEVER had an OIC approved. If they can settle for 20% and I don't have to do all the nasty correspondence and jump through hoops, let them...hehe | |
| 7 August 2007 | |
| To Sandysea. Anything that results in an accepted offer based on doubt as to collectibility is going to be a "real debt." If there is an SFR the taxpayer must file a correct return before an offer or anything else will be considered. I had one client who had agreed to an SFR assessment then had second thoughts (as in oops, forgot to claim the kids.) I had to prepare an original return for her; a 1040-X would not do. I haven't managed to get an offer through for $25 like Adrian2Day, but did get one accepted at 1 cent on the dollar and scored with an Effective Tax Administration offer. I also have a lot of clients who have been told they are going to have to pay up. | |
Death&Taxes (talk|edits) said: | 7 August 2007 |
| btw, Sandy, I was not being facetitious when I asked Adrian to fill in a profile. We learn from each other.
Way back before the Internet and TaxAlmanac, I convinced an IRS auditor and her fellow technical staff expert to accept an equipment leasing shelter, a 'business' that disappeared after passive losses were written into the law. The only document I used was the man's job title and description [he was an IT supervisor for a regional bank, doing the buying of computers for them]. Within three to six months, the promoter and another promoters sent over a dozen audit clients to our office [I worked for a prominent tax lawyer]. I never duplicated that success again, but I did settle a number of cases without going to court. Were these situations alive today, I would have added this experience to my profile. This is why I hope Adrian will give us more insight. | |
| 7 August 2007 | |
| I am always skeptical of these ads as well. And on occasion I get asked about them by clients. I just shrug and tell them to go there if they feel like it.
I had one OIC client. She settled for "pennies on the dollar." She and her ex-husband owed $6,000 plus on a joint return and she paid $300 for her share. The reason? That's all the money she had on her and in her bank account. We also claimed innocent spouse. She went to work in a car borrowed from her dad. We gave the IRS information on the ex-husband to go after him for the balance. Also, during this, she was told she was going to lose her job. Also, she and the ex-husband had a daughter and he never paid any support. I told the IRS this very true sob story. In the end, they really wanted the ex-husband, so they just took what she had and were satisfied. Now being the good Irishman that I am, we love a good story and some good blarney, but I never tell say this to a client. "Well, I got a $6,000 debt settled for $300." I don't want the client to get the impression I am a miracle worker who has the IRS cowering in fear at the mere mention of my name. To be candid, my last several attempts to reduce a client's tax burden left me wondering where my four-leaf clover went as well as my leprechaun with my pot of gold at the end of the rainbow. Adrian2Day, in your one case of the $25, the client settled for just a little over one-tenth of one percent. No offense, but I have a hard time believing it. How did you get paid? There has got to be more to the story. This is why I hate those ads. There are absolutely misleading by leaving out simple things like, oh, facts and details. It reminds me of the H&R Block ad of a few years ago, when they told people "come in and see us about the new tax law changes" when it turns out the changes were for the next year, not the current year. | |
| 7 August 2007 | |
| Thanks for all of the comments. Very helpful. I have had a couple of days to figure out what is going on with this company. My client owes $129,000 in payroll taxes (penalties & interest). This company (the miracle worker) says that my client should pay the employee portion of the payroll taxes and then shut down the corporation leaving the employer taxes and penalties unpaid. It is my understanding that IRS can go after officers for all trust fund taxes. However this company is telling me that employer portion of taxes and penalties are not trust fund taxes and IRS cant go after someone personally for these.
Comments? | |
Death&Taxes (talk|edits) said: | 7 August 2007 |
| Much of what they say depends on the financial health of the corporation. The officers would not be able to simply shut down the corporation and transfer assets to a new business entity, especially accounts receivable, inventories and fixed assets for this transfer of assets would be considered fraudulent.
If the corporation is truly worthless, and if the payment of trust fund liabilities is coming from the responsible parties, and if they are in a situation where they can designate how to apply the payments, there might be a chance of this strategy working, though there was a recent thread where collection efforts would resume sporadically. Perhaps TxSrve or Steve Kassel, gentlemen who know a great deal more about this than I do, will post. | |
| 7 August 2007 | |
| They have it right on the advice to pay the employee portion of the liability. Under Internal Revenue Code Section 6672, the responsible persons, normally the president, secretary and treasurer of a defunct conporation, can be held liable for a penalty equal to the withheld taxes. This is call the trust fund recovery penalty because the taxes are no longer the employer's money, but the employees' and "held in trust" until they are paid over to the government. If your client is a corporation and can get the bucks to specifically designate as payment the trust fund portion, IRS cannot normally go after the responsible persons. There will be no compromise involved, the corporation will still owe the employer taxes along with penalties and interest but the individuals will be clear. In my experience, by the time it gets to this point, the accumulated penalty and interests along with the employer taxes is about half the total. In my state, CA, responsible persons are liable for all the tax, penalty and interest owed by a corporation for state employment or sales taxes but that's another story. | |
| 7 August 2007 | |
| Mscash-you mentioned a defunct corp-but what are your thoughts on a corporation that isnt defunct? Is it fraudulant to transfer assets and just open a new corp? My client owes a lot of $ and they are desperate. But this whole thing seems unethical to me. Oh - btw - The letter my client received from the miracle company had a disclaimer that said that they were not CPAs or tax attorneys, however they are tax professionals and X-IRS agents and that is why their advise is so great. I asked my client to read the disclaimer out loud twice, and they still want to go with this company. | |
Death&Taxes (talk|edits) said: | 7 August 2007 |
| Enrolled agents are considered tax professionals, and many ex-IRS people are enrolled agents. I did mention what you asked about above. | |
Adrian2Day (talk|edits) said: | 7 August 2007 |
| There are two subjects here. One, Trust Fund Taxes and two, Offers in Compromise. First the NON TRUST FUND portion, that can not be collected from a "responsible person, is only the corporate portion of the FICA & Medicare taxes(7.65%) and any Federal and State unemployment taxes not withheld from the employees. This certainly is not the major portion of the payroll tax liability. Therefore, advising the client to pay the trust fund portion of the liablity, at the corporate level, is usually something they can't do and would only make sense if you were trying to save the company.
Second, the Offers in Compromise that I mentioned in my previous posting were settled because we gave the IRS everything the client had plus some. In each situation the client borrowed money from family members to pay the tax and in one situation to pay my fees. You should not be surprised about what taxpayers will do to get the money to pay a fraction of what they owe IRS when the alternative to not paying is explained to them. | |
| 7 August 2007 | |
| D&T - I am an enrolled agent. Since the letter didnt specifically mention enrolled agent, I assumed that they werent. You are right, many ex-IRS agents are entrolled agents after going through the ranks. I sat through the 2 day test, so I just didnt think of that. My point in bringing that up was that it seems to me that the miracle workers do not have a license to protect - you know - nothing to lose. I find it hard to believe that an enrolled agent, CPA, or tax attorney would advise something like this. So far, I havent seen anyone comment in proving me wrong.
Everytone's comments are very helpful - Thanks! | |
| 7 August 2007 | |
| Tax resolution specialists, whether they are big guys who advertise on cable TV or solo enrolled agents like me have to have someone with a license to protect otherwise they couldn't represent taxpayers. In response to your statement: "My client owes a lot of $ and they are desperate. But this whole thing seems unethical to me." In the context of an out of business corporation, there would be no ethics problem. The responsible persons have a fiduciary responsiblity not to use the withheld taxes for their private piggy bank and congress enacted Sec 6672 to recover the withholding from those who do. Having the corporation designate its payment to the withheld tax portion of its liability will not "save the company," but will protect the responsible persons from liability when the company goes under. As for a corporation that is not defunct, if it wants to stay not defunct, your clients are going to have to deal with it and needs to develop a plan. IRS is really down on offers from going businesses but the party line is that they have to show a two quarter pattern of paying current taxes on time before IRS will even look at an offer then its like any other offer, they have to offer an amount that represents the reasonable collection potential of the account. As a practical matter, businesses that have got to this point are generally on life-support and rarely have much to offer. As for moving assets into a new corporation, tax lien follows the property so there is not much point. If your client was my client, I would analyze the problem looking at what the principal's resources are outside the corporation, the corporate assets and the potential for generating money in the future then recommend if it should pull the plug or not. | |
| 9 August 2007 | |
| I can't talk about every single company that advertises on television and radio, but most of them are lying, criminal pieces of dung that should be jailed for fraud. In particular, I will absolutely mention by name, American Tax Relief. They are, in my professional opinion, a criminal organization that should have been shut down by the Feds or state long ago, but the IRS doesn't give a rat's pitoot about who gets ripped off and the media is just as complicit. Could I make that any clearer? | |
| 9 August 2007 | |
| Steve, you are being too soft. Toughen up and let us know how you really feel. | |
Death&Taxes (talk|edits) said: | 9 August 2007 |
| The man tells it like it is: http://www.consumeraffairs.com/finance/american_tax.html
http://www.consumeraffairs.com/news04/2006/06/nyc_tax_relief.html And here are a few other bottom feeders: http://www.ripoffreport.com/searchresults.asp?q1=ALL&q5=Tax+relief+&submit2=Search!&q4=&q6=&q3=&q2=&q7=&searchtype=0 God Bless Google. | |
| 11 August 2007 | |
| Here is the American Tax Relief BBB Report
http://www.labbb.org/BBBWeb/Forms/Business/CompanyReportPage_Expository.aspx?CompanyID=13105757 The Los Angeles BBB is, IMNSHO; the best in the country by far. It ain't even close. | |
| 11 August 2007 | |
| By the way, they are now showing the owner of the company to be Joo Park. I don't buy it. That is the wife of the "former" owner, Alex Hahn. Alex Hahn is a convicted Federal felon. Like I said, it is a criminal organization. | |
LAddington (talk|edits) said: | 17 November 2009 |
| Any way a taxpayer could take a theft loss on payment for these types of "services" where the company did nothing, but to take their money? After client remitted payment, they were informed that their case wouldn't be allowed for an OIC, though they were told prior to sending payment that they did qualify. | |
| 18 November 2009 | |
| Win or lose, it should be a miscellaneous deduction for tax advice. | |
