I have got to get a way to track the posts and articles I write. I know I wrote a post about the "tax relief" bozos but I can't find it. You've seen the commercials promising to work out a deal with the IRS or state taxing authority so that you only pay a percentage of what you owe.
This came up because of the news that Roni Deutch (the Tax Lady) is being sued by California AG Jerry Brown for over $34 million for regularly making false promises to reduce taxes for people. According to her advertising, she helps 99% of her clients by reducing their taxes but the AG's office found that the figure was closer to 10%. In one ad, 3 clients praise Deutch on saving them $86,000 collectively but all she did was to delay the collection process. The clients still owe the money and interest and penalty. Not only does she demand a large non-refundable retain in advance, up to $4,700, but then increases her fees with false billings. This isn't the first time she has faced these charges. In 2006, she settled with NYC's Department of Consumer Affairs for $300,000 on a charge of misleading advertising.
So, what can a taxpayer do if they have a big tax bill? First, did you file the return? The IRS and states will take the information they receive on W-2s and 1099s and create a return for you. So your first step is to find a good preparer and get all your returns filed. Actually, the IRS won't talk to you about reducing taxes or installments until all your returns have been filed. It's amazing how this one step can cut the tax bill. Now the hard part, be honest with yourself. Can you pay the taxes off in full or through an installment agreement? It many be possible to have the penalties or interest reduced or removed under special circumstances, but if you can or will be able to pay off the tax the IRS won't settle. If you honestly can't pay the taxes, you still have some options but it won't be easy. Now you have to prove to the IRS that you don't have the money to pay. Their definition of not having the money not what you need to maintain your lifestyle. None of the "pennies on the dollar" guys can help you much if you just don't want to pay what you owe.
What surprised me the most about the Roni Deutch lawsuit, was how low her actual success rate is alleged to be. I had thought her success rate came from selectively choosing clients she could really help. It worries me that there might of been people who could have been helped that weren't to generate profits.