Anyone have an opinion on tax

[byu71]

ads saying they can reduce the amount of back taxes you owe the IRS? I know one of them was just indited and I tend to think it is a scam.

If over 50% of what you owe them is penalties and interest, anyone know if they will work with someone and reduce that amount.

[Moliere]

ads saying they can reduce the amount of back taxes you owe the IRS? I know one of them was just indited and I tend to think it is a scam.

If over 50% of what you owe them is penalties and interest, anyone know if they will work with someone and reduce that amount.

Are you asking this question to help out a "friend"?

[byu71]

Are you asking this question to help out a "friend"?

Yes, I am. Actually a son who wasn't too responsible 6-7 years ago. When he finally filed his return, all he actually owed was Self Employment taxes. However, the penalties amount to about $6,000. He doesn't have a pot to piss in. If they would reduce it down to about $3,000, I would probably pay it for him.

Perhaps I should have him write a note to Obama first pleading his case as a poor person.

[Moliere]

Yes, I am. Actually a son who wasn't too responsible 6-7 years ago. When he finally filed his return, all he actually owed was Self Employment taxes. However, the penalties amount to about $6,000. He doesn't have a pot to piss in. If they would reduce it down to about $3,000, I would probably pay it for him.

Perhaps I should have him write a note to Obama first pleading his case as a poor person.

I don't know the exact answer, but based on my reasoning and deduction I'd say that you can generally negotiate with the IRS since they'd probably rather get some of their money instead of none of it. This might be like a credit card debt where the credit card company will forgive a portion of the debt for a smaller lump sum to keep you from filing bankruptcy. I might be wrong since I don't know if you can discharge tax debt through bankruptcy.

But the bottom line is the IRS just wants whatever they can get from someone that owes them money.

[Indy Coug]

Speaking without experience and completely off the top of my head...

The IRS probably has a recoverability formula where they expect to recover x% of someone's outstanding debt given the value of some key predictor variables. The companies that assist debtors understand this recoverability assumption and negotiate a settlement somewhere in the ballpark of what the IRS would have expected to have received in absence of a 3rd party.

[byu71]

I don't know the exact answer, but based on my reasoning and deduction I'd say that you can generally negotiate with the IRS since they'd probably rather get some of their money instead of none of it. This might be like a credit card debt where the credit card company will forgive a portion of the debt for a smaller lump sum to keep you from filing bankruptcy. I might be wrong since I don't know if you can discharge tax debt through bankruptcy.

But the bottom line is the IRS just wants whatever they can get from someone that owes them money.

That is what I was thinking. Everytime he calls them, they put him through to another extension. He always gives up after being on hold for 40-45 minutes. I tell him that is just the price he has to pay for getting on the governments wrong side.

[BYUMizzou]

ads saying they can reduce the amount of back taxes you owe the IRS? I know one of them was just indited and I tend to think it is a scam.

If over 50% of what you owe them is penalties and interest, anyone know if they will work with someone and reduce that amount.

I have had several clients as well as a family member successfully negotiate down tax bills with the IRS. Other than the family member, these were all corporate income tax liabilities, and you have a better chance negotiating these down or getting them discharged than personal income tax liability. The reason is that if your corporation goes under or becomes insolvent, federal income tax liability is not imputed to the shareholders. If you can show the IRS that (a) the company has no ability to pay the liability and (b) if the company went under, that the assets of the company wouldn't come close to paying off the tax lien, then they will work with you.

On an individual case (based on my one experience with a family member) the IRS has less incentive to work with you. The liability can't easily be discharged, so they can sit and garnish your wages or seize your tax refund year after year until its paid off.

The first time I ran into this issue, I hired a company out of Denver (Phoenix Financial) to negotiate with the IRS. We eventually got a "no further action" letter from the IRS. It cost $2500 for the service. After watching what they did, I handled it for the other 3 or 4 clients who had this issue pop up. I was not able to get anywhere close to this for the family member, so we talked to a couple of the IRS settlement companies, and they told us what we already knew - that it's harder to work out a settlement for an individual tax liability. We ended up settling his for about 75% of what was owed. They put him on a 12 month payment plan with direct debits from his checking account

[byu71]

I have had several clients as well as a family member successfully negotiate down tax bills with the IRS. Other than the family member, these were all corporate income tax liabilities, and you have a better chance negotiating these down or getting them discharged than personal income tax liability. The reason is that if your corporation goes under or becomes insolvent, federal income tax liability is not imputed to the shareholders. If you can show the IRS that (a) the company has no ability to pay the liability and (b) if the company went under, that the assets of the company wouldn't come close to paying off the tax lien, then they will work with you.

On an individual case (based on my one experience with a family member) the IRS has less incentive to work with you. The liability can't easily be discharged, so they can sit and garnish your wages or seize your tax refund year after year until its paid off.

The first time I ran into this issue, I hired a company out of Denver (Phoenix Financial) to negotiate with the IRS. We eventually got a "no further action" letter from the IRS. It cost $2500 for the service. After watching what they did, I handled it for the other 3 or 4 clients who had this issue pop up. I was not able to get anywhere close to this for the family member, so we talked to a couple of the IRS settlement companies, and they told us what we already knew - that it's harder to work out a settlement for an individual tax liability. We ended up settling his for about 75% of what was owed. They put him on a 12 month payment plan with direct debits from his checking account

Thanks. That is one thing I was afraid of. It could cost him more in fee's getting the amount reduced than the amount he could save. He owes $6,200 and $3,700 is actual taxes. $2,500 are penalties and interest.

I would hope they would understand if they come down on him too hard with wage garnishments, they could endanger his job.

He looked hard to get this job and get off unemployment. I would hate something to interfer with him being on the right track now.