The Back Taxes Scam Hiding Behind “Pennies on the Dollar” Promises

If you owe back taxes, the idea of wiping your slate clean for a fraction of what you owe sounds appealing. But behind many of these “debt relief” offers are companies more interested in your money than your financial well-being.

Don’t be misled: too-good-to-be-true promise that you can wipe away your tax debt for next to nothing often comes with some shady operators.

“Settle Your Tax Debt for Pennies!”

Sound familiar? It’s the tagline of late-night commercials and online ads that prey on stressed-out taxpayers. These companies claim they can help you erase your IRS debt for a tiny fraction of what you owe. All you have to do is fork over a hefty upfront fee.

The pitch? An Offer in Compromise (OIC), a legitimate IRS program designed for taxpayers who truly can’t pay what they owe.

The problem? Most people don’t qualify, and these companies know it.

The Scam in Action

Here’s how it typically works:

• You see an ad offering to “settle your IRS debt.”
• You call, desperate for relief.
• The salesperson assures you you’re a “perfect candidate.”
• They collect thousands in fees, promising to file an OIC.
• Weeks later, you’re denied and out a lot of money.
  

These outfits rarely evaluate your financial situation. In fact, the IRS warns that some don’t even submit the offer. They just take the money and disappear.

What Is an Offer in Compromise, Really?

An OIC is real. The IRS uses it to give struggling taxpayers a chance to settle for less than they owe.

But there are strict rules:

• You must prove you can’t pay the full amount.
• You have to file all required returns.
• You need to stay compliant going forward.
  

Translation: It’s not for people who just don’t feel like paying. It’s for those who can’t pay.

How to Protect Yourself

The IRS urges taxpayers to:

• Avoid firms that guarantee results. The IRS doesn’t make guarantees, so neither should they.
• Do your homework. Check with the Better Business Bureau and read reviews.
• Use the IRS’s free OIC Pre-Qualifier tool to see if you’re eligible (see link below).
  

Talk to a Trusted Tax Professional

Offers in Compromise are complex. That’s why it’s worth talking to someone who knows the ins and outs of the tax code (and who won’t vanish after cashing your check).

At Smith Patrick CPAs, we help clients understand their options, and we’ll be straight with you about what’s realistic. No gimmicks. No “pennies on the dollar” pipe dreams. Just experienced guidance and smart strategies.

Let’s talk about what actually makes sense for your situation. Until next time, steer clear of the empty promises.

For more information, check out the IRS’s free Offers in Compromise Pre-Qualifier Tool.