Highly Dishonest IRS Resolution Companies

About everyone has heard the radio or tv advertisements saying “they can settle your IRS debts for Pennies on the dollar”. If this sounds too good to be true, it’s because it is too good to be true.

Isn’t it interesting that these same advertisements have a radio voice, not a real attorney or CPA’s voice, and there is no one’s face on the advertisement backing up these statements?

These dishonest advertisements are talking about the 1 in 30 situations. It’s dishonest to make it seem normal that common tax debts can we wiped away with some special trick. Below, I will discuss one of these situations in which tax debts can be significantly reduced. In my next article, I will discuss another.

When they are talking about significantly reducing your tax debts they are talking about rare situations. If you have money, the IRS is not going to let you get away with not paying anything.

Here is an excerpt directly from the IRS website:

Generally, the IRS will not accept an offer if you can pay your tax debt in full through an installment agreement or equity in assets.

Here is an example in which tax debts can be significantly reduced:

  1. Substitute tax returns:

Let’s say for 2021, A subcontractor completes a significant amount of construction work for a larger construction company, the subcontractor receives a $150k 1099 for 2021. The subcontractor never files their 2021 tax returns. The IRS then files a substitute tax return for 2021 as they did receive the filed 1099. To keep it simple, let’s say the IRS calculates the subcontractor owing 20%, which would be $30,000 Federal tax for 2021.

The subcontractor receives a notice in the mail from the IRS stating that “they owe $30k Federal tax and that they now have a lien against their assets.”

The subcontractor is worried now, and says, “Oh crap! They got me now”.

The subcontractor goes to an accounting firm (preferably Simpson & Simpson Accounting 😊) and asks what should be done.


The tax accountant says “It’s simple, we get all your business expenses for 2021, and file an amended tax return for 2021, Form 1040x)

The accountant helps make a profit and loss statement for the business for 2021:

(example items, listed below)

  • Sales $150,000
  • Materials/Supplies Expense $48,524
  • Tools Expense $3,890
  • Auto Expense $14,473 (2021 business miles at .56 cents per mile)
  • Cell Phone $1,200
  • Work Clothes $2,000 (Remember that you wear the clothes in your off time too, they are not deductible)
  • Meals $5,760
  • Business Insurance $3,600

>>>Total 2021 Business Expenses = $79,447

  • 2021 Sales $150,000
  • 2021 Business Expenses $79,447
  • 2021 Net Income $70,553
  • 2021 Federal tax owed at 20% tax rate = $14,111

Now that the 2021 profit loss has been completed, the substitute tax return for 2021 can be prepared and filed by the CPA firm.

The substitute tax return decreased the 2021 federal tax owed from $30,000 down to $14,111. This saved the taxpayer approximately $16,000.

If you or somebody you know has a similar situation, feel free to reach out. We don’t want anyone to have to pay more than their fair share of taxes.

In my next article, I will talk about another situation in which taxes owed can be significantly reduced. But as I mentioned before, it is a rare situation that is not commonplace.

Call Simpson & Simpson Accounting, the Veteran CPA, for a FREE 30-minute consultation!