Written by attorney Irina Nicole Goldberg

Unreasonable Expectations: Offer in Compromises and Tax Liens

While I was watching a YouTube video earlier today, an advertisement for Tax Resolution Services ("TRS") popped up. This was the first time that I heard of this company so I decided to do a Google search for reviews. A preliminary search revealed a B+ BBB rating due to 39 complaints filed. Eventually, during my search, I came across a website called Complaints Board and found the following review:

"I hired TRS over 3 years ago and they have yet to have my case resolved. I paid $5,000 to have an Offer in Compromise submitted (that's already .25 cents on the dollar). They accepted payments over a 10 month period, but did no work at all until the entire amount was paid. My case has now been in appeals process with IRS since October of 2008. My current case rep at TRS (it has changed 5 times) tells me the IRS is the reason for delay. As of Aug 1, I now have to pay an additional fee of $1,500 or they will no longer represent me. This is not right. I can not believe they do nothing and then charge you for what are supposed to be IRS delays. Additionally, they did not stop (nor did they make any attempt to stop) the IRS from issuing a Tax Lien that appears on my credit reports. So, after 3 years, still carrying a monkey on my back, my credit is in the toilet, and the company that is contracted to resolve the issue is demanding more money - immediately." (submitted August 17, 2009).

Although I don't know the exact circumstances of this case and all the facts involved, two issues in this complaint immediately jumped out to me as worthy of explanation: (1) the delay with the Offer in Compromise ("OIC") and (2) failure to stop an IRS lien.

Offer in Compromise Delays

These two issues reflect the unreasonable expectations of many taxpayers. First of all, the OIC process takes a very long time. The acceptance of an OIC is not a right, it is an exception to the general rule that taxpayers have to pay their taxes. This reviewer sounds extremely shocked at how long this OIC process has taken. Well, it can take a long time and IRS representatives can be very unresponsive. After an OIC is submitted, it takes anywhere from six months to a year before a representative contacts you for additional information. If the representative decides to reject the OIC, and many of them do, an appeal should be submitted. It takes about another six months or more for a new representative to be assigned to the case. These representatives are IRS Appeals Agents who are swamped with cases. For example, I submitted an appeal for my client's OIC near the end of August 2010. I was contacted by an Appeals Agent in March of 2011. After all the documents requested by the agent were submitted and all the issues dealt with, the agent stopped returning my calls. I began calling and leaving her voice mails once a week. Eventually, after no call back, I left monthly voice mails. This OIC was finally accepted on January 19, 2012. Tax Lien Prevention

The other issue that I want to address is this reviewer's complaint that the company "did not stop (nor did they make any attempt to stop) the IRS from issuing a Tax Lien." The IRS almost always files a tax lien if a debt is owed and it is almost impossible to prevent the IRS from issuing the lien. The lien is there to protect the government's interest in the tax debts owed to it.

In order for the IRS to release the lien, the debt must either be paid in full (or a bond is submitted that guarantees payment of the debt in full) or settled through an OIC. Additionally, if your tax debt is less than $25,000 and you set up a direct debit installment agreement (monthly payments will be withdrawn from your checking account), you can request that the IRS withdraw the lien after three months of successful payments.

The other option is to wait for the collections statute of limitations ("SOL") to expire. The IRS has 10 years from the date of assessment to collect the taxes owed. Nevertheless, this SOL can be extended by a number of actions including, the filing of an OIC, bankruptcy, a formal request for an installment agreement and a voluntary agreement to extend the SOL. While this SOL is running, unless you have an installment agreement with the IRS, the IRS will do everything in its power to collect what you owe. If they can, they will garnishing your pay check and take money out of your bank account.

Since I don't know the specifics about this reviewer's billing complaint, I don't want to go too much into this issue. This billing problem is probably the main reason that this customer posted this complaint. If this reviewer had a flat fee agreement of $5,000 with TRS to submit the OIC, it was not right for this company to demand the extra $1,500 by threatening to terminate representation. Why they did so I do not know.

It also does not seem right that the company waited to receive all the payments before they began working on the OIC. Nevertheless, if this reviewer was informed beforehand that no work would be done before the balance was paid, she should not be complaining about the deal she agreed to. Also, I do not know how much preliminary disclosure this reviewer received from TRS. It is important for a tax professional to inform the client that the OIC process is burdensome and long and why tax liens will be filed. Disclosure, frequent communication and flexibility in dealing with billing problems prevents clients from getting frustrated when their case does not go as planned.

In conclusion, there are companies out there that take advantage of taxpayers and the OIC process. Whether TRS is one of them, I don't know. The company has bad reviews but so do other legitimate companies and attorneys. I am not making a recommendation about the legitimacy of this company. If you are considering hiring this company, I recommend that you read the reviews yourself before you make a decision.

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