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Settle your Tax debt for Cents on the Dollar

Authored By: Iowa Legal Aid LSC Funded

Information

This is a common phrase you hear on television ads. There are a number of tax settlement firms that advertize on TV.  Some firms might also send letters or post cards that look very similar to official IRS documents, but they aren’t from the government.

  • These companies often get information about tax liens from county offices where tax liens are filed and send correspondence that warns about the consequences of ignoring a tax lien. 
  • Firms that use these types of deceptive tactics probably will not put your interests first.  
  • They often promise results, taking thousands of dollars up front in fees, but deliver nothing. 
  • Several of these companies have been shut down by the IRS or have gone out of business.

How will I know if I have a tax lien?

When the IRS files a lien or levy against you, it will send you a letter via certified mail, not a postcard or a letter sent by regular mail.

  • The IRS will not e-mail you. With the first notice,
  • the IRS should give you a deadline to ask for a collection alternative.
  • If you have a question about whether or not a notice or letter is legitimate, call the IRS at 1-800-829-1040.

What is the real story about the Offer in Compromise program?

The offer in compromise program is a real program.  Generally, to settle a debt with the IRS for less than you owe, you have to prove that you don’t have enough income or assets available to pay the debt in full. 

  • There is a form that you have to fill out, “Offer in Compromise Booklet Form 656-B.” 
  • You have to offer a minimum of what the IRS calls your “reasonable collection potential. “
  • An offer in compromise can be a good solution for some taxpayers.  
  • The IRS has a pre-qualifier calculator. It is found at http://irs.treasury.gov/oic_pre_qualifier/ .
  • You should have information about your bank accounts retirement accounts, loan balances and pay information to use it properly.
  • The calculator should at least give you some idea of whether your offer has a chance. 

Where can I go for help?

Because the IRS can consider some special circumstances, it is wise to check with someone who is familiar with the rules to see if you should still consider trying this option.  

  • There are tax practitioners who are very well informed and can help you through the process. 
  • A tax practitioner should attend regular continuing education and they should be able to explain the process in a straightforward manner. 
  • If they try to charge large fees up front, be skeptical.
Iowa Legal Aid provides help to low-income Iowans. 
To apply for help from Iowa Legal Aid:call 800-532-1275. 
Iowans age 60 and over, call 800-992-8161 or 
apply online at iowalegalaid.org
 
If Iowa Legal Aid cannot help, look for an attorney on “Find A Lawyer” on the Iowa State Bar Association website iowabar.org.   A private attorney there can talk with you for a fee of $25 for 30 minutes of legal advice.
*As you read this information, remember this article is not a substitute for legal advice. 
Last Review and Update: Sep 04, 2014
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