Last week I alluded to that old saw about the two certainties of life, and with the unofficial end of the tax season just one day in the rearview (I say “unofficial” because it never really ceases), I thought a few hundred words on the single most cussed and discussed of all American institutions were in order.
After our great forefathers fought a war and separated from England and the maligned monarch King George III over that whole no-taxation-without-misrepresentation notion, one of the very first orders of business for our new nation’s leaders, with treasurer Alexander Hamilton as the point man, was to impose a tax on whiskey to pay the debts incurred by the Revolutionary War.
That, of course, led to our own first-time-ever tax protest, called the Whiskey Rebellion. I don’t know about you, but, just as I like a little soda with my Jack Daniels, I also like a little irony with my history.
Since that time, many have weighed in on the taxes they are forced to pay and the ways in which the government chooses to use those tax dollars. And, all have sighed or cursed and accepted the anticlimactically second-mentioned certainty as being just as inevitable as death.
However, if one is to believe the glut of commercials on both radio and TV from all those tax-settlement firms during the run-up to April 15, especially in the last couple of months, our tax-paying inevitabilities can be mitigated. Now, the fear-inducing message varies little from commercial to commercial; only the talking head and/or voice do.
It goes something like this: During these difficult economic times, the IRS has increased its efforts to collect back taxes from both individuals and businesses that have outstanding balances due. Those unable to pay their back taxes face severe penalties by the IRS, including garnishing wages and even seizing personal or business assets.
The commercials then move into the message that while it’s unwise to fight the dragon that is the IRS alone when you owe a lot of taxes, there are others in _____ company who can, while perhaps not slay the dragon, at least compel that creature to reduce dramatically your tax debt and accept pennies on the dollar.
Now, every time I hear one of these commercials, I have two reactions, one skepticism, as to how this is possible, and two, resentment, as in, if it’s true, why have I been paying every penny of a substantial annual quarterly tax tab lo these many years despite my ongoing unvoiced dispute with the government, the foundation of which is that said government thinks I’m a whole lot richer than I think I am.
So, after having just left a few weeks ago the office of my go-to CPA, Dan Clifford of ES Evans, who so expertly prepares my return each year, I thought I’d do a little Googling and try to find out the real story behind the claims made by these tax-relief firms.
According to Mark Cussan, a financial author with more than 20 years experience in the financial industry, of my two aforementioned reactions when I hear the commercials, skepticism indeed trumps resentment.
Cussen points out that while many companies claim to have legions of former IRS agents as employees, most of these tax-settlement firms have far more minimum-wage customer-service reps than former agents.
And, when it comes to doing battle with the IRS, the harsh reality for those who pay a nonrefundable rate of anywhere from $3,000 to $6,000 to their knight in shining armor is there is rarely any reduction in tax consequence, unless the taxpayer is near death or so destitute that he’s got far more serious problems than paying his taxes!
More likely, the best that one of these tax-settlement operations can do is negotiate an extension to pay the owed amount. Cussen points out that while these firms will seek what’s known in the business as an offer-in-compromise, a special settlement in which the government will acquiesce to accept a lesser amount, the number of those granted is very low, generally less than 10 percent of all seeking an abatement. Cussen goes on to say those in tax trouble are far better off seeking the advice of a reputable financial adviser who can recommend a good tax attorney.
Cussen reminds all of us that there is absolutely no creditor you can ever have that is more tenacious than the IRS in getting what is owed. The agency has the legal power that other creditors, including credit-card companies, do not. And, it appears that the IRS cares little what your name is. Just ask Wesley Snipes, who did almost two and a half years in a federal prison for failing to file a tax return during a three-year period. Hey, if the IRS can put The Blade in jail, what chance do we mere mortals have?
So, apparently, the most likely word a taxpayer seeking one of those pennies-on-the-dollar settlements will hear from his or her favorite Uncle is about as succinct as this — NO!