It’s all over the internet: Jerry Brown has sued Roni Lynn Deutsch, calling her practices ‘heartless’ and saying she ‘preys’ on individual taxpayer’s ‘vulnerability’. While this is big news, she’s not the first TV tax solution huckster to be sued. And I’m certain she won’t be the last.

If you owe taxes – particularly if you owe a large sum, or have the IRS breathing down your neck, it’s easy to be drawn into these ads. In fact, you’ve probably seen the commercials, frequently on late-night TV: “Do you owe taxes? We can help! Call us now, and see how you can save thousands in taxes!!!” Frequently, they feature average, middle-class-looking actors raving about how they owed tens of thousands, but settled for only pennies (“I owed $50,000, but only paid $800!”).

That’s pretty much a ubiquitous line – every huckster on TV who’s looking for your business will pretty much use some variation of the above. Roni Lynn Deutsch, JK Harris, Tax10000, it doesn’t matter. All of them promise to reduce your taxes by thousands. Some are more entertaining to watch than others, but all of them have some fine print about how ‘results (are) not typical. You may not realize the same savings.’ Tax10000 even goes so far as to say that “[y]ou may not meet IRS eligibility requirements for this program.
Even if you do, you should not expect to reduce you taxes by this much.” Even better is another one of their disclaimers – the one that says that they do”not provide tax relief services but only refer[] you to a company that helps people negotiate with the IRS”.

Of all of these, RLD is the ‘oldest’ in terms of advertising on television (not in terms of attorneys, though. Her Managing Attorney has only been practicing for 5 years, and most of the attorneys listed on her website have been practicing 3 years or less). She’s been on numerous TV shows, radio programs, and quoted in articles several times over. But she is not without her detractors. (Neither is JK Harris). So what’s more surprising than the fact that she’s being sued is the fact that it’s taken so long for it to happen.

What all of these services are pitching – without actually saying so, for the most part – is the IRS’ Offer in Compromise (OIC) program. What they are NOT telling you, though, are the important parts:

1. That it costs $150 plus 20% of the submitted offer to even get IRS consideration (so if you owe $100,000 and want to settle for $1,000, you’ll have to pay $350 [$150 plus 20% of $1,000] to the IRS).
2. That most OICs that are approved settle for about 18% of the balance owed (in the hypothetical, that means you’d pay $18,000 of that $100,000, and owe $3,750 upfront).
3. That only about 20% (depending on year, often less) of all submitted OICs are accepted. If your OIC is not accepted, you forfeit the money you’ve paid to the IRS – the IRS won’t send it back (except for the $150 fee, it gets applied to the balance outstanding).
4. That the IRS will review your financial situation against national standards, and not necessarily against your actual payments. For example, if the national standard for a family of two in your area for housing and utilities is $1,450 per month, and your actual payments exceed $3,000, well…you’re out of luck – the IRS will say you can afford to pay, because in its eyes you have $1,500 a month to draw from. How does the IRS figure that? Because the IRS will tell you to sell the asset or live more frugally in order to pay the debt you owe. Sure, it may not be realistic, but that’s the standard, and it will likely mean your offer gets rejected.
5. That the process can take several months to resolve and one phone call won’t do it.
6. That you will not qualify if you are currently in a bankruptcy proceeding.

Here’s another part that rarely gets mentioned: if you owe the IRS, you probably owe the state, too. And unlike the IRS (who must collect any tax within 10 years of assessment or lose it forever), states often don’t have statutes of limitations – meaning that they can come calling with a huge tax bill years after you think you’ve solved your problems. Interestingly, not one of the TV ads mentions helping you solve your state tax problems.

So back to the question posed by the title:  if you owe thousands to the IRS, can you eliminate that by watching TV?

Not really.

If you owe taxes, and need help, click here.