Unfortunately, the industry is rife with scams and bad business practices. Disreputable companies lure customers with false promises while charging high fees. Still, legitimate tax settlement firms exist. These companies are honest about whether you can benefit from their services and charge reasonable rates that are stated in advance.
The IRS has the authority to cancel all or part of your tax debt and settle with you for less than what you owe. This is called an offer of commitment (OIC). A tax agreement is an agreement between a taxpayer and the IRS or state tax authority to settle a tax debt for less than what is due. It's a highly desirable resolution strategy because of the immediate savings effect it provides.
Known as tax settlement firms, these entities claim that they can dramatically reduce or eliminate what the customer owes to the IRS. The vast majority of potential clients of settlement agreements need to develop payment plans with the IRS that allow them to settle their tax balances over time and, at the same time, preserve their assets and their dignity. Most tax settlement firms promise to send their experts to the IRS to negotiate on behalf of the client, where they will presumably be able to persuade the agency to accept a much smaller amount, often a penny on the dollar. The most common resolution strategy for an IRS tax settlement is through the commitment offer program.
Compare that information with everything a tax settlement company tells you to make sure you've received the correct information before deciding whether or not to hire the company. The number of customers who get satisfaction from tax settlement firms is negligible, and most are practically financially destitute. There are several red flags that should warn potential customers who are considering hiring a tax settlement firm.
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