Tax Lawyer's Blog

People who owe back taxes have probably seen television commercials and mailers from businesses claiming to be able to settle their tax debts for them for “pennies on the dollar.”

In the last fifteen years Pappas & Associates has represented over two hundred people who have been taken in by this scam.

Here’s how it works:

1. The purported tax representative (usually not licensed to practice in the state in which he or she is advertising) produces an ad promising to settle your tax debt for a fraction of the stated amount.

2. The taxpayer, desperate for a resolution to his or her problem, calls the representative.

3. A screener/sales person answers the phone. This person’s sole job is to get the caller to sign up and give her a credit card number. She will promise the caller anything, including a “pennies on the dollar” settlement, just to get a sign up.

4. Once the money is safely in the tax representatives account, everything changes. The representative, if he does anything at all, may file an Offer in Compromise with the IRS. But what he doesn’t tell the client is that the offer is unacceptable on its face. This is because offers are ONLY accepted under certain, narrowly defined circumstances.  See my blog post on how to calculate reasonable collection potential for an Offer in Compromise.

It is the classic bait and switch. The bait is the “pennies on the dollar” claim. The switch happens after your money is securely in the account of the representative.

WORD TO THE WISE: NEVER HIRE A TAX REPRESENTATIVE WHO SAYS SHE CAN RESOLVE YOUR TAX DEBT FOR PENNIES ON THE DOLLAR. ONLY HIRE SOMEONE WHO IS EXPERIENCED IN TAX LAW AND HAS A REPUTATION FOR HONESTY AND INTEGRITY.

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