Pennies on the Dollar?

[Snaggletooth]

A year-or-two?? ago I posted on this subject.

Going to revisit, because since that time, the number of TV ads has at least TRIPLED for these tax-settlement firms. Let's do some thinking between the lines.

This can mean only one thing, folks -- that the TV ads are working. Or else they would not be spending this kind of big time money to put their name in front of us in prime time.

Usually sales ads are from people who can be successful puffing their wares in front of the masses. If you stop and think about it, these ads must appeal to high income taxpayers. Who else would have tax liabilities of $150,000? I wouldn't think high income taxpayers would fall prey to shallow advertising.

I don't have much experience in tactics such as Offers In Compromise, but I'm told that the IRS will absolutely not agree to "pennies on the dollar" unless the taxpayer is destitute, and has no future income with which to pay.

Even I write, a J K Harris ad is running in the background. Roni Deutsch will air a dozen times on that station before the day is over.

I guess the questions are
(i) If their business is growing, how can they REALLY be as successful as they claim?
(ii) How can they justify these huge advertising budgets?

[David1980]

There's a lot of complaints about people getting "scammed" or "cheated" by those same companies if you look. As for why they're successful, same reason so many people fall for Nigeria scams I imagine. The brain just stops functioning at the prospect of saving all that money.

Reading through even their own sites those companies often mention the service they do obtaining a payment plan for their clients. As if that was a challenge, hah. The OIC's seem to be big in the advertisements but it doesn't look like those are that big in what they actually accomplish.

[BOB W]

Keep in mind that most IRS notices are overstated as to what t/p owes and that is probably what they are promoting and paying pennies on the dollar. Many owe little or nothing when they file a tax return or just send in a simple explanation clarifying some issue..

[outwest]

A couple came by my office ..

to see if I could help reduce their installment plan. They had signed up for one of those outfits. They were charged a $5000 retainer upfront. When that was paid, what amounted to a Form 433 was sent for them to fill out and returned to the company. Then someone called and asked how much they could pay, filled in the blank and sent it on the the IRS.

Of course it was rejected and when the couple called the company to get them to "fight the IRS for you" then were told they needed to send another $3000 retainer first.

They eventually called the number on the IRS notices they were again receiving and arraigned a $300 a month payment themselves.

After listening to all this, and looking over the information they gave me, I told them they had made a pretty good deal themselves, not likely I could improve on it. No charge initial consultation.

So now you know how they pay for those ads. $5000 retainers and three costs: $.42 to send the form to the sucker, $5 in time and phone call for the followup, $.42 to mail the form to the IRS.

[outwest]

On yeah..

I just got the notice that a $8000 penalty was completely abated for one of my clients based on the letter I prepared for them.

Two weeks ago, I got the results on an appeal of a $18000 assessment on an issue before my time that was reduced to $5400.

Fees: Pennies for those dollars saved.

[joanmcq]

JK & Roni make me sick. People will scrape up money for these kinds of fees (and if someone was SE, the back taxes can grow very quickly, especially with interest and penalties) or charge up a credit card, and all they get is an installment plan. I've done two OICs and even the guy that WAS destitute they wanted to pay $2500 on 40K...in other words $50/month out of his $850 social security. Now that settlement WAS pennies on the dollar but I think he paid me about $750 total to do it...

[DaveO]

No smoke and mirrors here

Several Times each year a client comes in with a CP2000 showing a balance due of a few thousand to tens of thousands of dollars. Most times I write a letter or two and send some corrected forms and the issue is solved for no more money or at worst a few hundred. Often these are due to unreported stock sales. Everyone on this board probably does the same thing. We look like heros to our clients and may get some referral's. Only difference is we don't blow smoke about insider information or secret handshakes to get it done.

[Bees Knees]

I had one this year where the 1099-MISC clearly reported $700.00 and the IRS CP2000 letter said it was $70,000. I didn't even charge the client to write a one paragraph letter to IRS saying the correct income is $700, not $70,000. See copy of 1099-MISC attached. IRS wrote back and agreed. End of story.

[David1980]

I had one this year where the 1099-MISC clearly reported $700.00 and the IRS CP2000 letter said it was $70,000. I didn't even charge the client to write a one paragraph letter to IRS saying the correct income is $700, not $70,000. See copy of 1099-MISC attached. IRS wrote back and agreed. End of story.

That would be reducing the tax liability by a single penny on the dollar! That's even better than pennies per dollar!

Who you gonna hire for the TV ad?

[Bees Knees]

That would be reducing the tax liability by a single penny on the dollar! That's even better than pennies per dollar!

Who you gonna hire for the TV ad?

Maybe my cat.

[JoshinNC]

Maybe we're the naive(?) ones??!!!

If we're doing all this work for our clients and saving them tens of thousands of dollars in tax than maybe we should be charging more money for our services.

Thoughts?

[Snaggletooth]

Already a Star

Maybe my cat.

Sorry, Bees. The cat is already an accomplished movie star, out of our price range.
Plays the piano too...

[For those who have the Web CD, See Intro/Tutorial]

[Roberts]

nice

Sad to hear our competition is so pathetic. Ronne Deutch (however it is spelled) is now doing franchises for tax offices. Greaaaaat

Good news for me today. I saved a client $3,000 in their tax bill on a correspondent audit by the state. They took it to a tax attorney at the company he works for and he said they owed all of it. I argued with the state until I found someone to look up the rules and got it waived (as our return said it should be). Stuff like this ALWAYS puts me in a good mood.

[erchess]

Grrrrr

I still say that the root of the problem is that taxing agencies send out erroneous notices and pay no consequence other than the fact that sometimes the taxpayer responds by proving the error and paying only what is owed. Other times the taxpayer pays the full amount asked for. The net effect is that erroneous notices enhance revenue. What we ought to do is penalize the taxing agency financially - say $100K for every dollar of error. Of course in the long run what we need is a simpler system so that one's tax can be computed from information we are willing for the government to have. That would enable us to shift the burden of proof entirely onto the taxing agencies. Of course that would mean that those of us who do returns for the public would have to go to work for the taxing agencies or find other work entirely and it would probably mean the elimination of most tax deductions, so I guess this won't be too popular here. Oh well

[tilt53]

What appalls me even more, is the Roni Deutsch had a booth at the vendors exibits at the Vegas IRS forum.