Tammy: Hi, I'm Tammy Trujillo. I'm here with Raj Wadhwani, a bankruptcy attorney with Wadhwani & Shanfeld.
Raj, a lot of people are dealing with unpaid taxes, either with the IRS or state of California. What options do they have for that?
Raj: If bankruptcy is not an alternative, we can do what's called an Offer in Compromise, which is essentially a settlement with the IRS or the Franchise Tax Board.
Tammy: You're telling me the IRS will really settle this with somebody?
Raj: They will settle. If they're having a difficult time collecting, or they're not seeing payments coming in, and there's an avenue to get a stream of funds in, and the circumstances are right, the IRS will accept less than the total amount owed.
Tammy: Now you do hear a lot of commercials of people offering similar plans. What can somebody expect from your firm that they wouldn't get from other firms?
Raj: Yea unfortunately there are a lot of companies out there that do offer Offers in Compromise. And they don't discriminate whether somebody is a good candidate or not. They'll take virtually every case out there.
And the truth is, a lot of people don't qualify for an Offer in Compromise, and they really shouldn't submit an Offer in Compromise, and they shouldn't spend $5-$10,000 in fees that they do with these companies.
What we do is we screen the candidates carefully in determining whether they're a candidate or not. Otherwise, we won't take the case on if we don't feel it's a good Offer in Compromise case.
Tammy: And what kind of factors determine whether a person is a good candidate for an income tax settlement?
Raj: It's primarily income vs expenses, and the IRS has a very strict guideline when you look at income vs. expenses.
Another factor is assets. Somebody who has equity in a home, the offer that you submit to the IRS or the franchise tax board must equal the equity in that home, or the equity of other assets that they have.
So for that reason, a lot of people get knocked out, yet they're still spending enormous amount of fees with these tax settlement companies without doing their homework.
Tammy: So you really need to find somebody who will examine your exact income tax situation and make that determination?
Raj: That's right.