I initially contacted the law firm to see if I qualified for an offer in compromise on my outstanding taxes. I provided my financial information to the representative and was told that I did qualify for the offer in compromise which would likely be $100 (as opposed to the $12,000+ that I owed). At this time, I was also told the legal fees would be $2225. When I expressed concern about the cost, the agent assured me it would be worth it since I would only have to pay $100 to clear my tax debt.
Later, another agent said that I may actually qualify for a currently not collectable status, meaning I would not have to pay anything on my tax debt. He put me on hold to talk to a lawyer and when he returned said that yes, I did qualify.
Nothing changed in my financial status. All the information that was initially given by phone was later verified by the documentation I provided. In fact, I believe the documentation eventually showed more monthly expenses than originally calculated. At no time was I ever given any reason to believe that I may not qualify for either currently not collectable status or an offer in compromise. On the contrary, I was repeatedly told that I did qualify and that this was the route the law firm would take in assisting me with the resolution of my back taxes.
After all but one of my payment installments had been made to the law firm ($1885 in total so far), I received a notice from the payroll department where I work that my wages would be garnished by the IRS. When I contacted the law firm I was told that an installment agreement had been sent out to me because it had been determined that I had an $800 surplus each month which would have to be used to pay my back taxes.
I was speechless, having no idea where this supposed surplus was coming from and having already spent $1885 toward entering a currently not collectable status for my back taxes. As it turns out, the agent grossly miscalculated the amount of taxes being withheld from my paychecks. Once corrected, the surplus came to only $37.
The agent advised me that I would have to enter into an installment agreement for $37/month to avoid the garnishment. So, I was stuck. The agent basically told me that since I didn't qualify for the "currently not collectible" status that I had to do the installment agreement. When I asked about trying an offer in compromise instead, I was basically told that I only had one shot and I'd "chosen" to try for the currently not collectible status. This was news to me!
Why had none of the other agents noticed any kind of surplus which would disqualify me for the option reccommended to me? I never would have hired the law firm if I thought there was any question of whether or not I qualified for this option. I have successfully negotiated installment agreements with the IRS in the past and would have done so again if I had known it may have been my only option.
Now, I have a $37 installment agreement with the IRS, which doesn't even cover the interest plus a damaging tax lien on my credit report. But here's another kicker for you... my student loans, which were in deferment at the time the installment agreement was set up and which the law firm knew about all along, are now due ($300+/month) starting this month.
So, I called the law office to ask what I need to do now that I no longer have any kind of surplus. Shockingly, I was told that I'm no longer an active client so I'll have to call the IRS myself!
I was promised something so that I would hire the law firm and then conveniently dropped once I had paid most of the $2225.
If you have back taxes GO TO THE FREE TAX ADVOCATE SERVICE. There's a link for them right on the IRS homepage. Don't trust any of these tax lawyers.