Okay, I’m now angry enough to invest the time to write about a problem that has bothered me for the last several years. Some recent experiences added the last push I needed to get motivated. I have been thinking about this ever since some nationwide firms began advertising to end tax problems “for pennies on the dollar” or some other misleading sales pitch.

Before I get into that, the experience that finally got me started was an interview with a newspaper reporter doing an article on tax resolution firms and another interview with a different reporter who was writing an article on the IRS Offer in Compromise program. As each of the interviews progressed I became aware that the agenda of each interviewer was that the taxpayers who get offers approved and the companies who represent them are getting away with something.

Let’s take a look at some of the basic regulations governing the offer program. First, the IRS cannot approve an Offer in Compromise unless it is the best solution the government can get. IRS evaluates offers to assure they are getting everything possible from the troubled taxpayer. If the taxpayer has equity in assets, they have to give that up to the IRS as part of the offer. If they have income that exceeds the minimum cost of living, they have to give at least four years worth of the excess to the IRS as part of the offer. The result of this requirement is that the IRS strips the taxpayer of any wealth they may have had. Further, when IRS believes the taxpayer has an ability to increase their income after the offer is accepted, they can insist on a continuing interest in any increase.

The reporters’ perception of the offer program might change with a brief look at a typical offer case. A 26 year-old taxpayer with zero tax sophistication worked for a company who paid him as an independent contractor in 2004 and part of 2005. He quit the job after meeting with his accountant in April of 2005 when he learned he owed several thousand dollars in income and self-employment taxes. The accountant also advised him that he had a similar problem underway for 2005. He immediately quit and found a new job where they paid him as an employee. Not having the ability to pay the tax, he filed the return for 2004 without payment. Later he also filed the 2005 return without payment. He filed all subsequent returns and had small refunds that the IRS applied to the 2005 year. By the time he started to receive bills from IRS the amount due was huge due to the added penalties and interest.

In 2007 he was married and had his first child, in 2008 the second child was born, and in 2009 IRS was threatening to levy his wages, which would have destroyed his fragile financial condition. The recommended action was to file an Offer in Compromise and pay the IRS what he could. After a thorough review, the IRS accepted his offer. He is now fully compliant, able to care for his family, and will never allow another tax problem to sneak up on him.

The result in the above case is a winner for everyone. The taxpayer, who had the tax problem through no intentional act of his own, is back in the good graces of the government. The government has collected more than they would have under other scenarios and the taxpayer will be sure to meet his responsibilities.

Let’s move on to the question of the companies who represent taxpayers before the IRS. Admittedly, there are many who have given the industry a black eye. Practitioners who abuse the trust of their clients by failing to provide competent representation have been the subject of media reports that shine the light on their abuses. They deserve this exposure and more. If the IRS Office of Professional Responsibility determines failure to provide competent representation, the transgressor should suffer loss of the right to practice before IRS.

Like the silent majority in any area, good practitioners suffer painting by the broad brush of the nefarious. Many competent practitioners are willing to assist troubled taxpayers to navigate the IRS system. Recommended actions to taxpayer include:

• Hire only a practitioner who is an Enrolled Agent, a CPA, or an attorney. A tax preparer who is not one of these cannot represent before the IRS.
• Inquire about the experience of the practitioner in representing taxpayers before IRS. Be specific about representation of your type of case.
• Look for professional association designations of expertise in this area of practice including:  Certified Tax Resolution Specialists from American Society of Tax Problem Solvers, Fellows in the National Tax Practice Institute from National Association of Enrolled Agents, or Tax Specialization designation from a Bar Association.
• Search for complaints about the practitioner or the firm on the internet. Search sites like ripoffreport.com or Google the practitioners name followed by a space and the word scam.
• IAsk the local Better Business Bureau and/or the Chamber of Commerce if they have received complaints about the firm.
• Ask trusted advisors like: your attorney, CPA, Enrolled Agent, banker, Insurance Agent, friends, and family

Practitioners who specialize in taxpayer representation generally have continuing education requirements that exceed the basic requirements of their profession. This continuing education assures the practitioner is current on IRS programs that will affect their case.

I’ve vented and I feel better and I hope this gives some troubled taxpayer some aid in finding competent, responsible, and reliable practitioners.