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ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – IRS WARNING-STAY AWAY FROM “OFFER MILLS”

By Robert S. Schriebman

2024

Introduction

An Offer in Compromise (OIC) is the IRS version of “Let’s Make a Deal.” OICs are not unique to the IRS. The EDD and the FTB also have their respective version. The process can be a great relief to those owing large amounts but can only afford to pay pennies on the dollar. On September 19, 2024, the IRS issued IR-2024-243 warning the public to be wary of unscrupulous TV and radio commercials promising what cannot be delivered. These advertisers are known as “offer mills.”
According to the IRS Publication, “These unscrupulous “mills” use aggressive marketing to make false claims of guaranteed settlements for ‘pennies-on-the-dollar’ or will say there’s a limited window of time to resolve tax debts through the IRS OIC program.”
In this article, I am going to debunk a few myths generated by these so-called office mills.

The Smiling Couple in the Fancy Car

Myth
A typical offer mill advertisement offers testimony by so-called “real life” taxpayers. They are telling you how an offer mill got them a deal with the IRS for pennies on the dollar as they drive off into the sunset in their fancy car.

Reality
The OIC program, whether from the IRS, FTB, or EDD, is designed to accept pennies on the dollar in full payment of old tax debts. The taxpayer must complete a financial statement showing total inability to fully pay. If and when the offer is accepted, the taxpayer is left with only minimal assets. There is no fancy car at the end of the sunset. The IRS conducts a thorough investigation to make certain that there are no hidden assets and that the disclosures on the financial statement are the absolute truth. If the taxpayer happens to be driving a fancy car, the IRS makes sure there is no hidden equity in the vehicle.

Omitting Assets on the IRS Financial Statement

If after the OIC has been accepted, the IRS discovers that the taxpayer has omitted substantial assets from the financial statement, the accepted offer will be voided, and the IRS may seek criminal prosecution.

There Is No Such Thing As a Limited Window of Time To Make An OIC

Myth
Offer mills falsely claim that the OIC program is new with the IRS and is available for only a limited time. This false advertising, of course, is designed to make you pick up the phone and give them a call or you will lose out.

Reality
The rules relating to OICs are the oldest continuing legislation in the entire body of tax law. OICs have been part of the tax law long before the present Internal Revenue Code was adopted – ever since 1831. The laws are found in IRC § 7122. There is no such thing as a limited window of opportunity for any OIC program including the IRS, EDD and the FTB.

OICs Are Easy to Get All You Have to Do Is Ask

Myth
Offer mills mislead the public into believing that anyone who owes the IRS can walk away paying pennies on the dollar. All you have to do is pay them a huge fee and it’s a slam dunk. Just give them a large upfront payment and you will get the deal.

Reality
Only a small percentage of submitted offers are accepted by the IRS, and even less are accepted by the FTB and the EDD. In fact, a few years ago, the FTB adopted a policy of refusing each and every submitted offer. EDD and FTB offers have a very low acceptance rate.
What the offer mills do not tell you about the “future income collateral agreement.” Even if the IRS accepts your offer, there is a side contract, lasting about 5 years, that require you to pay additional amounts on the original offer depending upon future income.

Only the Offer Mill Can Tell You if Your Offer Has a Chance for Acceptance

Myth
An offer mill improperly tells the public that only they are in a position to forecast the success of your offer with the IRS. They have powerful and sophisticated computers that can analyze your financial situation and project success with the IRS.

Reality
Most attorneys and other tax practitioners who have experience in the OIC process can make a fast determination and projection of your chances of your success with the IRS OIC process. I have done so over the phone with prospective clients more times than I can count. Let’s look at a couple of examples:

Example #1:
If someone owes the IRS $100,000 and they have equity in their home of $200,000, an OIC is very problematic. The IRS Collector will demand the taxpayer refinance the home and pay off the IRS. The IRS Collector will not entertain an OIC.

Example #2:
Dr. Jones makes a good living. However, he does not like paying taxes, and he has not paid the IRS for several years. The IRS will look at Dr. Jones’ income earning ability for the future and conclude that he is not a candidate for an OIC.
An offer mill will give both of the above taxpayers a false picture of reality and charge each one a huge fee only to tell them that the IRS turned down their offer.
The IRS website has a place where you can do-it-yourself and determine if the OIC program is right for you. You don’t need the offer mill.

Conclusion

Attorneys, CPAs, and Enrolled Agents are bond by strict codes of ethics demand that they be truthful and honest in their evaluation of as client’s chance for a successful OIC. Offer mills are not run by licensed professionals. They are a business and can make exaggerated and unrealistic representations bordering on false advertisement. Recently, in California, an offer mill was sued by the State for false advertising. It was run by an attorney who was disbarred.

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 50 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD, and he is not employed by the EDD or any other agency of the State of California.
Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

Web Site Article 806