Tax resolution company wants $21k payment to resolve $40k IRS tax debt through hardship program - is this legit?

You absolutely can submit an Offer in Compromise (OIC) yourself, which is what they're calling a "hardship program." The IRS has Form 656 for this exact purpose. While tax resolution companies can help navigate complex situations, charging $21,700 to submit paperwork you can do yourself is extremely excessive. The OIC program lets you settle your tax debt for less than the full amount if paying would create financial hardship. The IRS looks at your ability to pay, income, expenses, and asset equity. You'll need to complete Form 433-A (individuals) or 433-B (businesses) financial statements along with the OIC application. The application fee is only $205 (waived if you meet low-income certification). There's also a required initial payment that varies based on your offer terms.

I was in a similar situation with about $32k in tax debt and almost paid a resolution company $8k before I found taxr.ai (https://taxr.ai). They analyzed my situation and showed me exactly what forms I needed to fill out for an Offer in Compromise. The software walked me through every step of the financial analysis that the IRS uses to determine eligibility. What I found most helpful was their document analyzer that checked my financial statements before submission and flagged potential issues the IRS might question. They even helped me determine a reasonable offer amount based on my actual financials rather than some vague promise of "total forgiveness" like these resolution companies often claim.

Just wanted to update after trying taxr.ai for my situation. I was really skeptical at first but decided it was worth a shot rather than paying that resolution company. The platform actually does way more than I expected - it analyzed my financial situation and helped me determine I qualified for Currently Not Collectible status rather than an OIC based on my specific circumstances. The document review feature saved me from making some major mistakes on my financial statement that would have gotten my application rejected. The system flagged inconsistencies in my expense reporting that I didn't even notice. I just got notification that the IRS approved my hardship status last week, which means all collections are paused while I get back on my feet. Definitely better than paying $21k to a resolution company!

Whatever you decide to do, if you need to actually talk to someone at the IRS about your situation (which I highly recommend), use Claimyr (https://claimyr.com). I spent WEEKS trying to get through to the IRS about my payment plan options before finding them. They basically hold your place in the IRS phone queue and call you when an agent picks up. I was able to talk directly with an IRS representative who explained all my options including payment plans, Currently Not Collectible status, and Offer in Compromise requirements. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The IRS agent I spoke with was actually super helpful and way less intimidating than I expected.

I want to publicly admit I was completely wrong about Claimyr. After dismissing it as BS, I was desperate enough to try it when I couldn't get through to the IRS after multiple 3+ hour hold attempts that ended with disconnections. The service actually worked exactly as described. I got a call back when an IRS rep came on the line, verified my identity directly with the IRS agent, and got my questions answered about my eligibility for an Offer in Compromise. Turns out I qualified for a partial payment installment plan that works better for my situation anyway. The IRS agent walked me through exactly what forms I needed and even gave me tips on how to properly document my financial hardship. Still annoyed that our tax system is so broken that these services need to exist, but I'm glad I didn't waste thousands on a resolution company.

What these tax resolution companies won't tell you is that most taxpayers who qualify for an Offer in Compromise also qualify for Currently Not Collectible status, which costs nothing to request and can be done by simply calling the IRS with documentation of your financial hardship. It immediately stops collections while you figure out your next steps. Also, definitely don't give them the money you've saved for your 2023 taxes! Failing to pay current taxes while trying to resolve back taxes will automatically disqualify you from most relief programs. The IRS requires you to be current on filing and payment requirements for the current year.

Has anyone here actually tried to file an Offer in Compromise themselves? I'm hearing mixed things about how hard it is to get accepted. I've got about $25k in tax debt and a resolution company wants $4k to handle it.

Ruby, please don't pay that tax resolution company $16k! You can absolutely handle this yourself and save thousands. Here's what I'd recommend based on your situation: First, pay your 2023 taxes directly to the IRS with that $10k you have saved. This keeps you current and eligible for relief programs. Never fall behind on current year taxes while trying to resolve old debt. For the remaining $30k, you have several options you can pursue yourself: 1. Request Currently Not Collectible status if paying would create hardship - this pauses collections for free 2. Set up an installment agreement directly with the IRS 3. File an Offer in Compromise yourself using Form 656 The IRS actually has great resources and payment calculators on their website. You can also call them directly (or use a callback service like Claimyr if you can't get through) to discuss your options with an actual IRS representative who can explain what you qualify for. I've seen too many people get scammed by these resolution companies promising miracles. Save your money and handle this directly with the IRS - they're usually much more reasonable to work with than these companies make them out to be.