Tuesday, August 24, 2010

Pay your taxes off at 10 cents on the dollar?

These claims are touted on cable TV and radio ads frequently, and at times we have received inquiries from clients about them. Our advice is usually unpleasant, but pragmatic: If you owe the money and have the ability to pay (whether you want to or not), you will not qualify for any special negotiated settlement, and to try and get one will only drag the process out and drive your ultimate costs up.

This was reinforced Monday with the announcement from the California Attorney General’s Office of a lawsuit filed against the nation’s largest tax resolution law firm. The suit alleges that the firm engages in unfair business practices, defrauds customers, makes false promises while taking large up front payments and provides little or no help in lowering tax bills. The lawsuit says that one ad featuring three individuals and claiming to have saved them $86,000 is misleading since all three still owe the IRS the tax plus interest and penalties and have only temporarily delayed their payments.

The best advice for anyone owing back taxes: Take the steps necessary to minimize any penalties incurred, and pay off old balances as quickly as possible. Interest and penalty assessments can in many cases exceed the amount of original taxes owed had they been paid on time. The government is not a cheap lender, and in collection cases they are not here to help. While they will work with you to facilitate payment of back taxes, your best interest in the long run is never incurring any penalties or interest by keeping your payments current.

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