Tax Laws

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There's this commercial that I've seen on TV now for the past couple of months. It's a group of tax attorneys and they claim that if you are past due on your IRS payments, they can seriously reduce the amount of money you owe to the IRS. In the commerical, you see testimonials from previous customers. These people owed gobs of money to the IRS - in some cases over $100,000. These people claim that by using this tax service, they were able to settle with the IRS for about 10% of what they owed.

Now, in order to accumulate over $100,000 in debt to the IRS these people have to either be wealthy, or have accumulated that debt over many years. My question is this: I pay my taxes every year. If other people don't, and these people are likely far wealthier than I am, why do they get off for a small fraction of what they owe?

 

Hah, it's the age old case of the rich get richer while the poor get poorer hun. The state isn't geared towards helping people who are honest. Just the rich lay-about crooks!

 

The attorneys are using a deceptive ploy (say it ain't so, Joe...). The IRS automatically assume a higher income that you could possibly have for those who do not pay their taxes. Once the person files and proves income, the tax amount for a specific year is reduced -- typically by tens of thousands of dollars. The other thing a tax attorney can do is negotiate for reduction in fees (although they typically charge a significant amount for the service).

Most taxpayers will save nearly the same amount by simply filing late and applying to have some of the fees waived (the IRS goes through cycles where fee waiver is automatic).

 

T2 is correct. IMHO they are crooks of the highest degree. Anybody who is premitted to practice in front of the IRS is allowed to negotiate for the reduction of penalties and interest (interest is much harder). When a proper return is filed the proper tax is assessed.

There are examples when you can negotiate with the IRS to have your tax reduced or wiped out. An example that comes to mind is I know someone who went to prison for a really long time. To pay for his defense he cashed in his retirement plan. This was a taxable event, but with him in prison and no cash the IRS was never going to get payment.

A large percentage of these cases where people owe a lot of money do not involve income taxes, they are for trustee taxes (federal withholding, FICA, Medicare). These ones really bother me as the employer is basically stealing the employee's withholding and using it for either their own or their companies benefit. The IRS agrees with me and the penalties assessed are 100% of the amount. This adds up to a lot of money really quickly. Now any good CPA or attorney is going to work to get the penalty waived.

As a final comment the IRS does not forgive/eliminate the amount of tax due if they have any hope of collecting. If someone has real estate they are perfectly willing to put a lien on the property and either wait or force a sale. They never mention this in the commercial.