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In this final post on the July 23rd article in the Wall Street Journal online edition we’re going to talk about taxpayer misconceptions in negotiating a resolution to tax debt with the IRS. A few years ago the IRS hired an advertising firm to reshape its image with the American public. In large part this effort was a success. The IRS with the aid of Madison Avenue was able to convince a portion of the American taxpaying public that it was “friendlier” and “easy” to do business with. In some ways this is true. The IRS has one of most consistently lauded websites on the internet, most returns can be filed and taxes paid electronically, and refunds can be direct deposited. There is no doubt that the “business” of the IRS has become easier and more efficient. If you find yourself in the unenviable position of having a tax problem, however, it only takes one phone call to the number on your computer generated notice to discover that the “friendlier” IRS is a thing of the past (if not a straight up urban legend).

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The plain truth (and a fact of life) is that tax problems are not “do it yourself” friendly. Taxpayers that have outstanding liabilities with the IRS are bombarded with advertisements that tell them they can settle their tax debt for “pennies on the dollar,” and the simple truth is many times they can. Unfortunately, lost in the advertisements and in communications between tax resolution firms and their clients, is the establishment of reasonable expectations. It’s important for a taxpayer with an IRS problem to have a good grip on the understanding that their tax problem is at a very minimum their responsibility, and more often than not, of their own making. Even if the taxpayer is entirely “innocent” (which is rare), the IRS is not just going to carte blanche accept their claim of innocence without due diligence. There’s nothing “quick” about solving a tax problem (unless of course you pay the debt in full and even then “quick” is a relative term). Competent tax professionals communicate realistic expectations to their clients and patient persistence is paramount in that communication.

If a taxpayer owes the IRS $500,000 and they file an Offer In Compromise for $1500 they cannot reasonably expect it to be accepted on the first look. It’s unreasonable to expect the government not to fight for more money, and it’s certainly unreasonable to expect the IRS not to look into the matter thoroughly – which takes time – a lot of time. Is it possible that the IRS will eventually accept an Offer In Compromise under those conditions – absolutely, and it has happened – more often than the IRS would like to admit. It just doesn’t happen quickly, and it doesn’t happen unless the taxpayer’s circumstances warrant such a compromise. A competent professional will communicate these facts to his or her client and set reasonable expectations. Firms that advertise or promise an Offer In Compromise in every client’s circumstance are doing a disservice not only to their clients but do their own credibility and the credibility of their industry. In searching for a professional to assist them in resolving their tax problem, a taxpayer should keep in mind two cardinal rules. First there are absolutely no guarantees, and secondly, it takes time to resolve a tax problem and time means money, so don’t expect a miracle when you hire the lowest priced professional you can find. You get what you pay for, and you want a professional that’s motivated to solve your problem when you’re up against it with the IRS.

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