Settlement Firms

[Corduroy Frog]

In the last couple years, I've noticed several firms advertising on TV for tax relief.

They look very much like an Attorney firm commercial. In black and white, shows a man and wife opening a letter from IRS with this horrid look on their face as huge numerals appear on the TV showing tax liabilities, like maybe $150,000.

Amazingly, the black and white turns to color and the same couple is sitting in a comfortable chair shaking hands with a well-dressed man from the "firm." And a voice comes from the TV set saying you can settle for just pennies on the dollar.

Question for you folks:

1) If taxpayer's are solvent enough to pay a large hunk for the foreseeable future, can these guys really get the IRS to settle?
2) Can these guys actually do anything but an offer-in-compromise?

I admit to having an automatic bias against these firms, but would like to hear from some of the rest of you.

[JG EA]

Here is what the IRS thinks at least about "pennies on the dollar" for OIC:

http://www.irs.gov/newsroom/article/0,,id=120169,00.html

[S T]

TV Ads

Since we happen to have this ad played on our TV on a regular basis, thought this website was interesting. Apparently the ad is nationwide, which I did not know.

http://www.ripoffreport.com/reports/...Off0259858.htm You can search any business name, so I could pull up several that we hear about in So Calif.

Sandy

[erchess]

Pennies on the Dollar

Some years ago I had a client whose sole source of income was a Schedule C masonry business. Anyway, one return I prepared for him showed him owing quite a sum of money because he had foolishly chosen not to pay his estimated taxes. The best news of all was that he freely admitted to me that the jam he was in was his fault not mine.

He went to one of these Pennies on the Dollar outfits and they did indeed lower his tax. I think they did an OIC but the only thing he was really clear on was what happened to him.The outfit had told him to buy a car on time with as large a monthly payment as he could stand. He had also been running his business out of the rather large yard associated with his rented home, and upon advice he acquired another business location at, naturally, added cost. He wrote one check to the IRS and one to the outfit for a total of less than half of what I had expected him to have to pay. It was impressed upon him that for the next several years he had to file and pay timely and that his books and records had to be in order.. He came back to me to review his estimates and he came in quarterly forever afterwards to be sure everything was ok. He also learned from me how to keep adequate records.

I have always felt that he got in this case advice that could have hurt him badly. I stayed in that town for I think three more years and when I left my fears had not come to pass.

In a typical year he took in 200K of revenue but had 140K of expenses. The car in question was a five year old Trans Am that needed body and interior work but had a good engine and transmission and for which he paid more than he would have paid for a budget priced new car. I do not recall the cost of the new business location but it consisted of a lot enclosed in an eight foot high chain link fence with razor wire on the top and a covered concrete pad somewhere inside.

[ED SMITH]

The IRS states that accepted OIC's are settled for 12-15% of the amount owed. Now that is 12-15 cents for each dollar, or pennies on the dollar. What they object to, is not the phrase 'pennies on the dollar', but the way it is promoted by some companies.

"This program serves an important purpose for a select group of taxpayers. But we are increasingly concerned about unscrupulous promoters charging excessive fees to taxpayers who have no chance of meeting the program’s requirements,”

Some people are led to believe that their taxes can be reduced or eliminated no matter the circumstances. This is blatantly untrue, and a reputable company will not even suggest doing an OIC unless the client meets the criteria for presenting an Offer.

The companies that do heavy marketing charge much higher fees than a practitioner would for an occasional offer, simply because the acquistion cost of obtaining clients is around $1400, so this is built into the fees. Advertising is expensive and the consumer has to pay the freight, but this is true in all kinds of businesses.

There are a lot of reputable companies in this field, in fact some display the BBB seal of approval. Unfortunatley the industry has become tainted because of the problems associated with the largest one and the bad notoriety of some others. Undoubtedly there are legitimate complaints, but at other times it is the client who does not provide the requested information in a timely fashion and then complains that the company did not perform.

There is one notorious company here in the SF Bay area that does considerable radio commercials. Several years ago one of the principals, Mr. M, was placed on probation by the state bar. After that, the company filed bankruptcy AND reformed itself under a new name.
When they went b/r they left a lot of clients with no recourse except to file as creditors in the bankruptcy court. Yet, even today, you can hear the cheerful voice of Mr. M telling listeners to watch out for unscrupulous tax resolution firms.

Welcome to America!

[Corduroy Frog]

Balanced

Thanks Ed, that's about as balanced a comment as any of us could have hoped for.

Been awhile since you've visited. Welcome back!

Corduroy Frog

[S T]

Sacramento County Calif

An article ran in our So Calif local paper today, about " A Tax Attorney/Company" located in Northern Calif, . That Tax Attorney/ Company who has advertised "pennies on the dollar" in Calif, are now going to promote in addition to their "IRS Comprises and Settlements " to open up tax prep offices all over and compete with H & R Block. Further they are thinking of teaming up with one of the companies that do "Fast Pay Day Loan Advances". Client base target the $15,000 - $50,000 range, simple returns.

Is there no protection from predatory lending practices and other unethical business transactions?

Sandy

[joanmcq]

Ugh, I saw a similar piece in our Sacramento paper about her. One of her satisfied customers told how he owed about $20,000 and she helped him set up an installment plan for only $450/month! Didn't say what he paid for this 'service', but I do installment plans as a service for clients and don't charge. If he came off the street, I'd probably fill out the form for about $25. I'm sure he paid at least a thousand. She's selling franchises to set up tax prep in check-cashing places. Pretty much makes me sick.

[S T]

I am all for shutting them down

I heard that North Carolina "banned" the payday loans, San Francisco, Calif is working on a bill to shut it down, and maybe with the Presenditial Election coming up soon, some of the candidates have a very "small" acknowledgement of this issue in their agenda.

Wouldn't that be wonderful!

The thought of tying in "payday loan business " with taxes, well I just can't describe my feelings! The feelings about the "huge" advertisers on "pennies on the dollar" is bad enough. Most of us already know we could have helped some these taxpayers for a lot less money and achieved the same result. The firms advertising are really not preparing OIC, just simply preparing or arranging installment agreements for a "huge" fee. An item that in some cases the taxpayer could have done on their own, they were just too overwhelmed or intimated.

Fear of the IRS!

Sandy

[taxmandan]

Payday lenders

Oregon just passed a law that shut down the payday/car title lenders. The law caps any loan of less than one year at a maximum 36% interest, and prohibits renewing a loan more than twice. Something like 66 payday loan offices closed up immediately. I'm wondering what that will do for RALs next year, since the loans are less than one year and the interest is definately more than 36%.

[Corduroy Frog]

RALs will remain unchanged

The situation you just described in Oregon was targeted to close up usurious corner shop businesses with obvious hooks into the less fortunate public sector.

Banks do not operate out of sleazy corner shops in pan alleys - they operate out of the largest buildings in Portland. What they do to the public can be just as much a grab, only more posh and subtle. I'm sure if the legislation affected banks, they would have lobbied it to death before it ever became law.

I don't see a change in RALs. Actually, during tax season I actually became aware of a San Diego bank whose APR was "only" in the 100% range. Lots of credit to the tax practitioner who arranged this for his customers who would have paid lots more to the big tax offices.