I owed $30,000 to the IRS...

In My Humble Opinion
1

“I owed $30,000 to the IRS but ended up paying much less”. Have you seen that TV commercial? Am I supposed to feel good about a company that saves its clients thousands of dollars in unpaid taxes… that WE then have to make up for? These people are down right giddy over how much money they didn’t have to pay the Government. They didn’t go to jail, they just found a compnay to work out a “deal” with the Feds. Huh?

So what’s the downside for these folks? Does their credit get dinged?

I realize that these companies provide a service to people who can’t or won’t pay their federal and state taxes, but it makes the rest of us law abiding citizens look like chumps for paying ALL of our taxes EVERY year like I thought we were supposed to.

Do you feel sorry for these poor overextended people? Do you appreciate these companies rubbing it in your face?

2

I’ve always been a little annoyed with these commercials, I mean how do you end up owing the IRS 2 million dollars? Seriously? 2

3

They make you a cabinet member so you’ll need to relocate to the DC area.

4

Earn 5 million?

5

Annoys the crap out of me. “We got out of paying our fair share”. How would they like it if the government negotiated down their Social Security payments when the time came?

6

But I’ve read about several cases where the IRS says something like: “You goofed up 2 years ago and owe us $1000. With interest and penalties that comes to $200,000.” After negotiations against a sharp accountant or tax lawyer they end up accepting $1200.

There’s actual taxes owed and then there’s numbers the IRS creates. The two are not the same. I wouldn’t assume that someone who made a deal with the IRS usually got out of paying the actual tax.

(But this means nothing in regards to the ads.)

7

I’m all for someone getting every legitimate deduction allowed by law and for companies that help the tax payer find them. But those that manage to weasel out of paying what they owe, thereby leaving it to the rest of us to make up the difference… yeah, they seriously chap my ass. That commercial annoys the heck out of me.

Heh, dolphinboy, when I first read the title I thought oh no, someone’s going to brag about this just like that damn commercial. Nice to see that wasn’t at all the case. :wink:

8

This is what I assume the companies in these commericals do - negotiate with the IRS to forgive interest and penalties, so they’re paying close to the actual amount they owed in the first place. If so, we the tax payers aren’t really getting screwed when they get their reduction. this time.

9

Something like that happened to my wife.

She does her own taxes, and in Canada (as it turns out) there was a reporting requirement if you hold more than a certain amount in equities in foreign holdings … which she did (but did not know about the reporting requirement).

Turns out there was a penalty for failing to report, a certain amount each day, and interest on that penalty … one day we get a nasty surprise: a bill for several thousand dollars in penalties.

There was no doubt that she was guilty - she had not made the required report.

We went to a tax expert then (not one of those who advertise in those annoying commercials), who advised us that - we would get a better result appealing the decision ourselves and not using his services. Which we did, and sure enough the penalty was waived (with a stern “do not do this again” letter).

10

We actually got a notice from the IRS that we owed a good deal more than $30,000. Our tax accountant went over the forms with them (and us) and we wound up getting a refund. It was the IRS that screwed up.

We had all the documentation, we could prove every line on our returns, and it all turned out OK.

Right - that is closer to what has been described in this thread - the taxpayer owes a lot, and the service negotiates a lesser settlement.

Regards,
Shodan

11

Often about half a IRS bill is due to interest & penalties. The IRS has quite low interest. (This differs from some CC companies where a $50 charge can multiply in thousand quite quickly).

What they are often doing is filing an “Offer in Compromise”.
http://www.irs.gov/businesses/small/article/0,,id=104593,00.html
*"The IRS may accept an offer in compromise based on three grounds:

  1. Doubt as to Collectibility - Doubt exists that the taxpayer could ever pay the full amount of tax liability owed within the remainder of the statutory period for collection.

Example: A taxpayer owes $20,000 for unpaid tax liabilities and agrees that the tax she owes is correct. The taxpayer’s monthly income does not meet her necessary living expenses. She does not own any real property and does not have the ability to fully pay the liability now or through monthly installment payments.

  1. Doubt as to Liability - A legitimate doubt exists that the assessed tax liability is correct. Possible reasons to submit a doubt as to liability offer include: (1) the examiner made a mistake interpreting the law, (2) the examiner failed to consider the taxpayer’s evidence or (3) the taxpayer has new evidence.

Example: The taxpayer was vice president of a corporation from 2004-2005. In 2006, the corporation accrued unpaid payroll taxes and was assessed a trust fund recovery penalty as a responsible party of the corporation. The taxpayer was no longer a corporate officer and had resigned from the corporation on 12/31/2005. Since the taxpayer had resigned prior to the payroll taxes accruing and was not contacted prior to the assessment, there is legitimate doubt that the assessed tax liability is correct.

  1. Effective Tax Administration - There is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an OIC. To be eligible for compromise on this basis, a taxpayer must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable.

Example: Mr. & Mrs. Taxpayer have assets sufficient to satisfy the tax liability and provide full time care and assistance to a dependent child, who has a serious long-term illness. It is expected that Mr. and Mrs. Taxpayer will need to use the equity in assets to provide for adequate basic living expenses and medical care for the child. There is no doubt that the tax is correct."*

Doubt as to Collectibility is the most common. The IRS will require you to prove you could never pay it all off, short of winning the Lotto. So the IRS then accepts less, so as to cut down on the costs of further collection efforts. My Bro sez that offering half of what was originally owed often works. So, for a now $30K debt, half is interest and penalties, so $5-7K would be a good offer.

12

Okay… well if the actual tax is ultimately being paid I guess I have nothing to complain about, but these commercials are still insulting to those of us that play by the rules.

It seems like a game that people pay with the IRS. If nothing else it delays when they actually pay their taxes, which in some cases lets them earn interest on money the goverment should rightfully have.

So what constitutes true tax evasion? If I don’t pay my taxes for a few years, and then settle for the amount I owed originally, aren’t I technically evading taxes?

13

Maybe I can sell all my spare gold jewerly at Cash4Gold to pay off my back taxes!

14

When they say “pennies on the dollar”, I respond (yes, to the TV) " 99 pennies are still pennies on the dollar."

15

For that matter, 100 pennies are still pennies on the dollar! :slight_smile:

These ads are right up there with the debt relief ones…file bankruptcy to get away from those pesky people YOU BORROWED MONEY FROM! I’m guessing they didn’t seem so problematic when you needed the cash, right?

16

Often, it’s the intention of the taxpayer that is the deciding factor.

In Malthus’ example up-thread, his wife didn’t know about the reporting requirement, so she didn’t report the assets. No intention to evade, and when it was pointed out, she paid it.

But what if someone has substantial foreign assets, and knows about the reporting requirement, and consciously decided either not to report, or under-reports? (e.g. - “I’ll declare the obvious ones, like my shares in that US company, because Revenue Canada would likely be able to find them easily, but I won’t report my interest in the gold mine in Tajikistan, because RevCan will never know about that…”) That’s tax evasion, because the taxpayer knows about the reporting requirement and consciously decides not to report it, in hopes of not paying taxes.

17

AWESOME idea! If you sidestep paying your share of taxes during your working years, then why should you expect full Social Security benefits in your non-working years?

Although, does anyone know if the mere fact that you didn’t pay “in” taxes to begin with means that you’re available pool of Social Security benefits is smaller to begin with anyway?

18

You’re right! It’s my money and I need it now!!

19

I’m writing this post from my work computer- I work at our family business that is one of the such companies everyone is talking about in this thread. And I can tell you, there are a lot of incorrect assumptions being thrown around here.

First, sure, there are some people that are all tee hee hee over not having to pay the IRS. They like to stick it to the man. Those people are tax protesters and I can tell you straight away most such companies will NOT deal with them. These people are not only epic pains in the ass, but they also are willingly breaking the law, something we refuse both logically and ethically to allow.

Second, there are people who just got over their heads. Trust me, it’s very easy- with interest and penalties- for a relatively tiny tax debt to balloon up huge virtually in the blink of an eye. Sure, they should have known better and paid in the first place, but people make mistakes and also, your average blue collar construction guy isn’t really going to realize the implications of their oversight until it’s far too late. $5000 becomes $15,000 in 3 years, $15000 becomes $45,000 in another three. In this case, we also see a lot of average folks with maybe a high school education who had a business that had one or two REALLY good years, then business fell off completely. Their fault? Absolutely.

Thirdly, there are the people who couldn’t pay their taxes one year because of an emergency- we see this a lot, horrible stuff, cancer, heart attacks, valley fever, etc. We’ve got one client whose husband did their taxes every year for 45 years-- then got Alzheimer’s. She was over her head and even if she did file, she had no money to give the agencies. So, these people then get over whelmed and don’t file for the next three years. Their mistake? Absolutely, but I’m sure our clients aren’t the only people in the world that sometimes bury their heads in the sand to avoid a problem. Before long, that tiny problem is now huge- huge to the point where the person once again just can’t pay.

I think most folks don’t realize how relentlessly the IRS will pursue things. They’ll take all the money out of your bank accounts, garnish 90% of your check, on and on. Again, is it the person’s fault? Sure. Should they have paid in the first place? Absolutely. Can they pay now? Most of the time, no. Plus, they have to eat/ feed their kids/ pay rent, etc. The IRS also regularly doesn’t even adhere to the legal standards which they are supposed to- leading us often to have to invoke the help of congressmen and other such folks. I know it’s hard to believe, but they- the IRS- break the law, too. Not always, but I’ve seen it enough times now that I’m certainly tremendously jaded.

Look, we’ve had clients that have come into us on the verge suicide because they can’t figure out how to fix this situation. We’ve had clients kill themselves- one woman’s husband hanged himself because he didn’t see a way out. Just a few weeks ago, a man who came into see us (but wanted to get back to us) shot himself in the head-- his last phone call was to an IRS agent that told him there was nothing anyone could do to help him. This man was living in his car, starving, because the IRS was taking almost his entire paycheck. Was it his fault that he was in that situation? Absolutely. Did he clearly have mental issues greater than his tax problems? Sure. Should a government agency be so unwilling to negotiate with a clearly desperate citizen that the person feels utterly helpless? Never.

It’s easy for us to dismiss these people as irresponsible- I know I did for a long time. The fact is though, that it’s very difficult to understand total desperation from an outside perspective. When these agencies are unwilling to negotiate or to even work with a citizen, it’s just not a good thing. I’ve seen far too many grown men sobbing in front of my desk because they don’t know how they can pay their tax debt and feed their kids. Should he pay his taxes? Absolutely. Can he? No.

So we help. There are Offers in Compromise, mentioned earlier, but those don’t really get accepted. We do our best to find a resolution that benefits everyone- which 98% of the time leads to the client paying the absolute most they can on their debt.

20

Yes, of course. Your SS benefits are based on the amounts of FICA and Self-employment taxes you paid in*. Of course, in many cases, you get maxed out.

  • don’t you get one of those green yearly statements from the SocSec Ad?