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In IR 2024 – 91 the IRS Includes again in its Dirty Dozen List to Beware of offer in compromise "mills" that falsely claim their services are necessary to resolve IRS debt.

As in past years, companies running OIC mills continue heavily advertising their promises to settle taxpayer debt at steep discounts for pennies on the dollar. While OIC is a legitimate IRS program, many taxpayers do not meet the technical requirements for the tax resolution program, often leaving them facing excessive fees from the promoters for information they could have easily obtained for free by using the IRS's Offer in Compromise Pre-Qualifier tool.

The OIC is a valuable IRS program to help taxpayers who cannot pay their federal tax debts, and some companies offer legitimate services. But the IRS encourages individuals to take a few minutes to assess the information available on IRS.gov to determine if they meet the eligibility criteria for the OIC program and to avoid hiring expensive promoters.

"Taxpayers need to be cautious with aggressive marketing around the Offer in Compromise program that can mislead taxpayers,” said IRS Commissioner Danny Werfel. 

“These Mills Try To Pull In Steep Fees While Raising False Expectations And Exploiting Vulnerable Individuals With Promises That Tax Debt Can Magically Disappear.”

“The program is legitimate, but it’s not for everyone,” Werfel added. “The IRS wants to help taxpayers who qualify for this program, but there are very specific requirements for people to qualify. A good first step is for taxpayers to take a few minutes and explore our free resources on IRS.gov. They can find out if they might qualify for this program – and at the same time avoid paying someone a hefty fee.”

OIC mills are the focus of the fifth news release in the Dirty Dozen series. Started in 2002, the IRS' annual Dirty Dozen campaign lists 12 scams and schemes that put taxpayers and the tax professional community at risk of losing money, personal information, data and more. While the Dirty Dozen is not a legal document or a formal listing of agency enforcement priorities, the education effort is designed to raise awareness and protect taxpayers and tax pros from common tax scams and schemes.

Beware of Offer in Compromise mills

An OIC is a legitimate IRS program that allows qualifying taxpayers to work with the IRS to settle a tax debt for less than the full amount owed. It is an option for those who may be unable to pay their full tax liability, or if doing so creates a financial hardship. In determining eligibility, the IRS considers the taxpayer’s unique situation. 

Taxpayers, however, should be cautious of OIC mills, which make exaggerated claims through radio and TV ads about settling tax debts inexpensively. In reality, these mills often charge excessive fees, and taxpayers end up paying for a service they could have obtained directly from the IRS with The help of a qualified Tax Attorney.

Have an IRS Tax Problem?

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Read more at: Tax Times blog

On January 29, 2024 we posted "$20 Billion in IRS Funding Cuts Now Clawed Back in FY 2024" where we discussed that under the latest agreement from the hill, the fiscal 2025 $10 billion would be accelerated, meaning all $20 billion would be clawed back in 2024. 

With government agency appropriations having settled through the remainder of the 2024 fiscal year, the IRS' original funding authorization of $80 billion over 10 years under the Inflation Reduction Act (PL 117-169) is now less than $60 billion, but President Biden hopes to recoup rescinded amounts.

On Saturday, March 23, 2024 President Biden signed into law a $1.2 trillion spending package to avert a government shutdown for the remaining six months of the fiscal year after a series of short-term Continuing Resolutions going back to October as congressional lawmakers grappled over the federal budget.

Of the $80 billion in mandatory funding through 2031, $45.6 was marked for enforcement and $25.3 billion for operations support. The remaining buckets went towards taxpayer services and business systems modernization.

Many Republican lawmakers have proposed clawing back either the entire $80 billion, or all or a portion of the enforcement and operational buckets. However, the IRS' annual funding levels were unchanged from the prior fiscal year at $12.3 billion ($2.8 billion for taxpayer services, $5.4 billion for enforcement, and $4.1 billion for operational support).

Despite just signing the recission into law, Biden's fiscal 2025 budget, also released in late March, calls for the full restoration of the $80 billion provided by the Inflation Reduction Act. Further, Biden is seeking "new funding over the long-term to maintain progress on service enhancements and deficit-reducing tax compliance initiatives." The proposal cites the need to close the tax gap, that is, the difference between taxes owed and taxes paid.

In February, Treasury projected a $20 billion recission would reduce revenues by more than $100 billion. Although the IRS will continue to pursue ramped-up enforcement on large corporations, complex partnerships, and wealthy individuals via targeted campaigns, the remaining $58.4 billion is expected to dry up in 2029, two years earlier than intended. "Extending and maintaining IRS investments" would, according to Treasury, result in collections of $851 billion over the period 2024-2034.

Publishing their own estimates, the Congressional Budget Office in February forecasted a $20 billion rescission would "reduce outlays in 2030 and 2031 and lower revenues from 2030 to 2034 by a total of $43.6 billion, adding a total of $23.6 billion to deficits over the 2024-2034 projection period."

"In addition, the indirect effect of reduced enforcement activities in 2030 and 2031 would result in revenue collections from audited taxpayers that were less than they would otherwise be," the CBO continued.

Tax leaders at Grant Thornton observed that the 2024 elections may determine the fate of any potential future changes to IRS funding, though the agency "will remain a target for future cuts."

Read more at: Tax Times blog

According to Law360, the U.S. Tax Court on April 8, 2024, upheld  $11 million in foreign reporting penalties against a man who admitted he hid money overseas, but the court declined to overturn its ruling that the IRS lacks authority to assess certain Form 3520 & Form 3520 A foreign reporting penalties in Mukhi v. Commissioner, docket number 4329-22L, in the U.S. Tax Court.

The Internal Revenue Service didn't abuse its authority in assessing $5 million in penalties against Raju J. Mukhi for failing to report foreign trusts for 2005 to 2008 and another $5.9 million for 2005 to 2010, according to the Tax Court, finding that penalties imposed under I.R.C. § 6677 are not fines and therefore do not implicate the Excessive Fines Clause.

But the IRS lacked authority to issue $120,000 in penalties against Mukhi under Internal Revenue Code Section 6038(b) for failing to timely submit a Form 5471, regarding information reporting for foreign corporations, for 2002 through 2013, the Tax Court said.

While Mukhi's challenge to the penalties was still pending in the Tax Court, it decided in April 2023 in Farhy v. Commissioner that the IRS lacked authority to make assessments under IRC Section 6038(b). After the decision, the IRS asked the court in Mukhi's case to overrule its decision in Farhy, saying it was incorrectly decided, according to Monday's ruling.

But the court said it wanted to give the weight of precedent to its previous decision in Farhy. Furthermore, even though Farhy is on appeal in the D.C. Circuit, Mukhi's case, if appealed, would go to the Eighth Circuit, meaning any ruling from the D.C. Circuit wouldn't be binding for Mukhi, the court said.

Mukhi pled guilty to one count each of filing a false return and failure to file a report of a foreign bank account following his indictment in 2014, according to the opinion. The IRS audited him and issued the penalties in 2017.

Read more at: Tax Times blog

According to DoJ, A New Jersey man was arrested on April 5, 2024 on an indictment returned by a federal grand jury in Trenton, New Jersey, charging him with tax evasion and obstructing the IRS. 

According to the indictment, in 2015 and 2016, Matthew Tucci, of West Long Branch, received millions of dollars in income from purported refunds by the Customs and Tax Administration of the Kingdom of Denmark. 

Tucci allegedly filed federal tax returns for those years that reported he owed over $2 million in taxes, but included no payment with his returns. 

Instead, Tucci allegedly sought to evade IRS efforts to collect the taxes due. 

• He allegedly purchased more than $7.6 million-worth of real estate and attempted to conceal his ownership of these assets from the IRS by, among other things, transferring title to some of these properties to nominees. 
• He also allegedly made false statements to the IRS and withheld important facts from the IRS concerning his financial resources and his ability and intent to pay.

If convicted, Tucci faces a maximum penalty of five (5) years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors. IRS Criminal Investigation and the FBI are investigating the case.

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Read more at: Tax Times blog