Tax attorneys who promise IRS debt relief of "pennies on the dollar" ... how?

Factual Questions
1

There are a few tax attorneys with televisions commercials here claiming that they can help folks in deep, overdue debt to the IRS. The claims normally include the phrase “pennies on the dollar”, implying that they can somehow disappear a significant percentage of an indivdual’s federal tax debt.

My question is this: just what kind of service are these attornies selling? What are their mechanisms for reducing IRS debt for their clients? And is it a significant savings – is it more like 10 pennies on the dollar, or 90 pennies?

Or is it all a barely-legal quasi-scam that doesn’t do much to help at all?

2

Was hoping his could be discussed in general terms, if there is a concern about someone giving out binding legal advice. All implicit message-board advice caveats are assumed.

3

As far as I know, most (if not all) of those schemes require you to file bankruptcy.

4

Don’t have any personal knowledge, but I assume that a significant mechanism for the attorneys is negotiating a settlement with the IRS. The IRS, I would think, would rather have, say, 20% of a bill paid than 100% unpaid. Negotiating saves the IRS the time and trouble (and cost) of keeoing an active file, going through collection processes, initiating property seizures, etc.

5

You see a few lawyer advertisements here in Canada that advertise “tax amnesty” for evaders who come clean. Revenue Canada denies there is any such thing as “tax amnesty”. Penalties on unpaid taxes can be very strict, 50-200%, and I think the “amnesty” in Canada is on the penalties, not the principal. By extension, pennies on the dollar may refer to the same thing?

6

An “Offer in Compromise”. If you are insolvent (which is not the same as bankrupt, but generally you have to be Insovent to enter bankruptcy) you can make a reasonable good faith “pay it all off now in cash” Offer to the IRS, through a Special program. Offers of 10% of the original amount due- and no interest & penalties- have been accepted.

You can do this yourself, but having someone who knows the ins&outs of the system can help.

IRS link:
http://www.irs.gov/businesses/small/article/0,,id=109628,00.html

7

pennies on a dollars?
pennies = >1¢ :smack:

8

Yay! Finally a question I can answer!

My dad owns a tax representation business that specializes in this arena. For the past 25 years, he’s literally saved people millions. My dad is not an attorney, but he is an Enrolled Agent and an accountant. There’s no reason to be an attorney because no in court representation is done (not really necessary).

A warning: even my dad gets angry at the commercials that say they will settle for “cents on the dollar” or “for $20!!!”. He says time and time again that he is amazed that these companies aren’t sued for false advertisment. There is no way to guarentee a settlement and there is certainly no way to guarentee a settlement for $20.

Someone mentioned Offer in Compromise and this is one of the biggest tools we utilize. For the average person trying to file this, it can get complicated. The IRS certainly doesn’t want to give up all the money and they will do anything to get the money. We have clients that signed Offers years ago (so long ago that the time limit has lapsed and they normally would be automatically out of the debt) and the IRS is still nailing them with penalties and such.

Sometimes bankruptcy is the answer, but- more often then not- the tax isn’t bankruptable anyway. My dad isn’t a bankruptcy attorney, so when he suggest that someone file it isn’t for any personal gain. We’re always looking out for what is best for our clients.

More often then not, my dad will get the clients on uncollectable status (we just show that the person simply cannot pay- the IRS then will remove a lot of the penalty and stop adding new penalty).

More then anything (especially after someone is put on uncollectable), we deal with the IRS so you don’t have to. We make sure they don’t levy your bank accounts and we make sure they don’t harrass you. Usually we’ll do this untill your time lapses and they can no longer collect.

There’s always a special situation- like tax protestors. Sometimes we then have to work with criminal attorneys to make sure these people don’t get sent to prison. Most cases just aren’t that complicated, though.

I hope this helped some. If you have any more questions I’ll be happy to help.

9

The state I live in did a similar thing last year, if you or a business owed back taxes to the state, the state had a program for a limited time where the penalties were waived and you paid half the interest plus the original amount due, or made arrangements to pay this money, then everything was ok.

If you owed and did not participate in the program, then after cutoff date, the full force of the dept. of revenue was unleased, with garnishments, seizures, and the like happening.

From what I understand, the amnesty part worked rather well, the state ended up with a lot of back tax money they thought they were never going to get.

D. Pirahna

10

The only commercial I’ve seen mention the $20 figure is from Ronnie Deutch (sp?) and from memory she doesn’t say that she will settle your tax debt for $20; she says she has settled tax debts for $20. She then presents someone purporting to be a client who settled her tax bill for $20. As long as she can point to a client whose tax burden she has settled for $20, she’s not engaged in false advertising.

11

She’s nationwide? We see her ads in Maryland too.

I agree. Her weaselspeak is incredible.

Was she paid $20 to settle someones IRU bill?

Did she get someones bill reduced to $20, and from what?

Did she get someone who owed $20 to pay $20?

You can’t tell.

12

Ronnie Deutsch commercials are shown here in Mississippi, too.

DiosaBellissima, thanks for the info. I do have a further question – would legitimate folks in your dad’s business (either enrolled agents or attorneys) troll for customers via direct mail? Or is that a big red flag?

In short – what’s the best way to determine who’s legitmate and who’s not? Degree of hyperbole? Overemphasis on “guaranteed” results?

13

Tax protsters? Like folks conscientiously opposed to paying tax?

14

Exactly. There are people who refuse to pay taxes because they don’t wish to support the federal government. Most frequently it’s around the issue of military spending. Most colorfully it’s about refusing to believe that the 16th Amendment is really part of the Constitution.

15

Here is an interesting list of Tax Protester arguments:
http://www.militia-watchdog.org/suss1.asp

16

I just remembered this thread! :smack: I’m back to answer some questions:

First, RLD is nationwide, much like JK Harris. (Obviously I am a bit biased here, so take what I saw with a grain of salt. What I say certainly isn’t the case for everyone…so on and so forth). We get a lot of clients from those two, big national corps because people are just so darned unsatisfied with their service. Your case isn’t assigned to any one person, so every time you call you speak to someone different, they give you the run around, the staff is generally pretty apathetic, cold and uncaring (these are all things I’ve heard from our clients). My dad has been here in Bakersfield 25 years and also does work in the high desert (Palm Dale), the entire, lower valley (Fresno, Visalia, etc), parts of LA and Las Vegas. Of course he’s had clients from all over the country (a multimillionaire Oil guy in Texas comes to mind, but we’ve had people in many states), but no matter when you call-you always talk to either me or my dad. Our clients like that.

Otto You are right that she just says that she’s settled cases for $20, but it is a bit disingenuous. We usually do great things (hundreds of thousands for less then $10,000), but it is rare that the case is settled like that. I mean, my dad could say, “We settle tax cases for absolutely nothing!!!”- we have, so it’s true, but it’s misleading. Of course it is all just marketing, so whatever works for them.

Bewildebeest I thinks he is saying she settled someone’s case for $20. (Like, the owe the IRS $1000…she got the IRS to accept $20 and get rid of the rest of the bill). This brings up another thing, we don’t accept cases smaller then $5000 because that is small in the grand scheme of things. If it’s less then $5000, the IRS generally wants you to pay it and wont let you get out of it- all we can do is set up payments. The larger places will take your money no matter how much you owe.
bordelond We often will send out mailers, so I don’t think that is a sign of a bad company (hehe, I hope not!). All tax liens are published in a county publication each month, we get that publication and send brochures to the people who owe more then like $10,000. How the bigger places do it, I’m not sure. As far as deciding who is good and who isn’t: you just have to find who you are most comfortable with. Some people are fine with the big corporations and they go that route; some people want to be able to call and speak to the president of the company whenever they have a question and they come to us. I would be weary of people that “guarantee” results. We cannot guarantee anything. If you do have a tax problem and you are looking for a representative in your area, I would look up the Tax Freedom Institute (they have a site somewhere) and Mr. Pilla (the president) can suggest the best people for you. We’ve been a member for years, but so are many other great, local tax reps.

bordelond Yes, people literally protest paying their taxes. I don’t get it, I really don’t. My thing is, if you don’t like the system-change it legally. Don’t be an idiot and get yourself arrested, because that doesn’t fix anything. Most of our clients protest because they are against how high the tax rates are. Most of the protesters are doctors, lawyers, even accountants (gasp…I know :eek: )- basically people in the upper tax bracket who are angry they are paying close to 50% tax. In order for us to take the protesters as clients, they have to sign an agreement saying they will file their tax returns, correctly, from now on and if they don’t, our services will be removed.

Sorry for the babbly- it’s early!

17

I always figured these tax guys were a much simpler operation. How about this:

Tax-(non)payer comes in and says he oses $400,000 to IRS. Tax service negotiates with IRS and gets the amount due down to $175K. Cool. Now, tax service pays IRS $175,000, thereby removing them from the equation. In exchange for this “friendly” service, our intrepid taxpayer has a loan with the tax service at usury interest rates. Plus, perhaps he pays a fee for the tax representation work. Perhaps the taxpayer has to secure the loan with property or accounts receivable.

This seems a much simpler sort of service that could be very lucrative. It seems similar to those companies that give out “instant” tax refunds by loaning the client the money and then keeping their real tax refund.

18

Drum God, although that could be quite lucrative, we don’t do that :-).

We just settle for them (for next to nothing :)!) We then set up monthly payments for what is remaining. It’s usually half of what they can afford, so that way it doesn’t put them in any kind of negative position. We also get the IRS to release all liens, levies, etc and promise that there will be no more penalties.

19

DiosaBellissima, does anyone do the sort of loan that I suggest? Is it even legal? I can’t imagine why it wouldn’t be. In the past, I have had minor problems with paying my taxes and I would get a letter from the IRS outlining the penalty and interest charged. The letter would always suggest finding a less expensive way to pay back taxes, like using a credit card or getting a bank loan.

So, in your business, you negotiate with the IRS, set up whatever payment plan, charge the client a fee for your expertise, and then get out of the whole deal?

20

Drum God I have consulted my dad :slight_smile:

A lot of our clients have BAD financial problems. It’s not just a tax issue, it’s an issue where the owe bunches to credit cards and just can’t pay their bills. So, it would be very hard to collect on your loan.

Plus, my dad does what he does because he really does like helping people. Like he said:

And yes, sometimes we negotiate, set up, charge (actually charging comes first…:)), but we don’t get out. We stay there to take of any of their tax issues. Of course, if something big comes up, we might charge another fee- but that’s rare. You also have to remember most of these people have levies on their bank accounts that they can’t get off themselves- we fix that right away. Most of our clients say that alone is worth the fee.