The IRS Offer in Compromise (OIC) program gives some taxpayers the chance to settle their tax debt for less than they owe. Because it sounds like an easy way out, it has also become a common target for scams and misleading advertising.
Many companies claim they can help you erase your tax debt for “pennies on the dollar,” but they often skip the critical step of reviewing your financial situation. These offers are designed to take advantage of taxpayers who are feeling overwhelmed and unsure of their options.
In this article, we’ll explain how the OIC program actually works, what warning signs to watch out for, and how to find trustworthy help.
What Is an Offer in Compromise?
An offer in compromise (OIC) is a program offered by the IRS that allows eligible taxpayers to settle their tax debt for less than the full amount they owe. It’s designed for individuals or businesses who are unable to pay their full tax liability or who can prove that doing so would create a financial hardship.
To qualify, you must meet specific criteria. The IRS considers your income, expenses, asset equity, and overall ability to pay. In most cases, you must also be current with all required tax filings and not be in an open bankruptcy proceeding.
While the program can provide real relief, it’s not available to everyone. In fact, most applicants do not qualify. That hasn’t stopped some companies from making blanket promises or advertising guaranteed approval, which is simply not how the program works.
If you’re considering an offer in compromise, it’s important to understand what the IRS looks for and to get an honest assessment of your eligibility before moving forward.
How Offer in Compromise Scams Work
Offer in compromise scams are often run by high-volume sales operations known as call mills. These companies use nationwide TV, radio, and internet ads to lure in taxpayers who are behind on their IRS bills and looking for help.
Once someone expresses interest, they are usually passed to a call center rep who follows a script designed to close the sale quickly. These reps may sound knowledgeable, but they typically aren’t licensed tax professionals. Their goal is to collect payment, not to assess whether you qualify or explain your options.
These companies often charge thousands of dollars upfront, and many never follow through with the IRS. Some file offers that are destined to be rejected, just to say they took action. Others do nothing at all. In the end, the taxpayer is left with no resolution, more penalties, and less money.
Red Flags to Spot an OIC Scam
If you’re considering working with a company to help resolve your tax debt, it’s important to know the signs of a potential scam. Here are some red flags that should make you think twice before signing anything:
They don’t review your financials or request IRS documents.
A legitimate offer in compromise is based entirely on your financial situation. If a company claims you qualify without asking for details about your income, expenses, and assets, that’s a sign they’re not doing real due diligence.
They guarantee approval or make it sound easy.
No one can guarantee that the IRS will accept your offer. The process is complex, and even well-prepared submissions can be rejected. Be cautious of anyone who makes bold promises without explaining the risks.
They ask for full payment upfront.
It’s common for reputable firms to require a deposit or retainer, but they should also be transparent about their pricing and process. If a company demands thousands of dollars before offering any real guidance, it’s a red flag.
You can’t speak with a licensed tax professional.
If you’re only dealing with a salesperson and not an enrolled agent, CPA, or tax attorney, you’re not getting proper representation. Licensed professionals are required to follow ethical standards and can represent you directly before the IRS.
They ignore other resolution options.
The offer in compromise isn’t the only way to resolve tax debt. In fact, most people qualify for other programs like installment agreements or hardship status. If a company won’t explain those alternatives, they’re likely pushing a one-size-fits-all sales pitch.
Tips to Protect Yourself from OIC Scams
Work with a licensed tax professional.
Only enrolled agents, CPAs, and tax attorneys can represent you before the IRS. These professionals are required to follow ethical guidelines and will give you a realistic assessment of your options based on your financial situation.
Ask the right questions before signing.
Don’t be afraid to ask how the process works, what services are included, and how much you’ll pay. Reputable firms are transparent about their fees and timelines.
Insist on a full financial review.
Any company offering to help with an offer in compromise should start by reviewing your IRS transcripts, income, expenses, and assets. If they skip this step, they’re not in a position to determine whether you actually qualify.
Check credentials and reputation.
Do a quick search for the company or individual online. Look for verified credentials, professional licenses, and independent reviews from real clients on Google and Yelp profiles. Watch out for generic testimonials or companies that frequently change names.
Avoid anyone promising fast, easy results.
There is no fast track for an offer in compromise. If someone guarantees approval or claims they can resolve your debt quickly without reviewing your case, it’s best to walk away.
How to Recover After a Tax Relief Scam
If you’ve already paid a company or individual that misled you or failed to follow through, you’re not alone, and you still have options. Acting quickly can help you limit the damage and get your case back on track. Below are a few quick tips if you’ve been scammed or feel that you may have been scammed.
Report the fraud
Start by filing a complaint with the Federal Trade Commission (FTC) at reportfraud.ftc.gov and with the IRS using Form 14157 (Return Preparer Complaint). These reports help regulators track patterns of abuse and may assist in shutting down deceptive companies.
Notify your state authorities
Your state’s attorney general or consumer protection office may also have a process for reporting fraud. In some cases, they can pursue legal action against the company on your behalf or help you recover part of what you paid.
Get real, professional help moving forward
The most important step is to regain control of your tax situation. A reputable firm can review where things stand, help you understand what was (or wasn’t) filed, and put together a realistic plan to resolve your IRS debt.
Knowledge Is Your Best Protection
Offer in compromise scams take advantage of people who are already under financial stress. While the IRS does offer real options for tax relief, it’s important to understand that programs like the offer in compromise are not quick fixes — and they’re not right for everyone.
The best protection against scams is information. Know what to look for, ask the right questions, and be cautious with companies that promise results without first understanding your situation. If you’re unsure whether you qualify for tax relief or want a second opinion, schedule a consultation with Andrin Tax Relief to get your questions answered with confidence.
