By Dennis Quick
Senior Staff Writer

Taxpayers, businesses included, should beware of services claiming to settle tax debt for “pennies on the dollar” through the Offer in Compromise program.

The Internal Revenue Service issued that warning Oct. 25. On Jan. 26, the warning sprang to life when Mount Pleasant-based law firm Motley Rice and Strom Law Firm of Columbia filed a class action suit against JK Harris & Co., a tax resolution company based in North Charleston.

The suit alleges JK Harris, reportedly the nation’s largest tax settlement company, failed to deliver promised services to clients and charged some clients fees for participating in the IRS’ Offer in Compromise program, even though JK Harris knew the clients were not eligible. JK Harris denies any wrongdoing.

“JK Harris promised to help resolve clients’ tax issues with the IRS under the OIC program, but JK Harris did nothing with the clients’ files for months, in some cases almost a year, some two years, some not at all,” says Motley Rice spokeswoman Sally Comollo. “Upon entering a contract with JK Harris, clients paid substantial down payments and executed automatic monthly withdrawal authorizations to JK Harris.”

JK Harris says it received the complaint and is evaluating it.

“Our initial response is that the facts simply don’t support these allegations. There is often a big difference between allegations and facts,” according to a JK Harris statement. “Obviously, it is premature to comment on the specifics of this case at this time. However, we can speak generally about issues related to our business. It is also important to note that JK Harris & Co. LLC, is the largest and most successful tax resolution company in the country. As with other industry leaders, we, too, are often targets of lawsuits like this one.”

JK Harris & Co. has more than 485 offices nationwide and has served more than 120,000 clients during the past seven years.

An Offer in Compromise is an agreement between the taxpayer and the IRS that settles the taxpayer’s debt for payment of less than the full amount owed. The IRS collects what it can by negotiating a payment plan.

An OIC is a last resort and may be considered only after other payment options have been explored, according to the IRS. To qualify for an OIC, taxpayers must submit an application and pay a $150 application fee.

“This program serves an important purpose,” IRS Commissioner Mark W. Everson says. “But we do warn taxpayers who have no chance of meeting the program’s requirements. Taxpayers should not be duped by high-priced promises.”

To qualify for an OIC, applicants cannot be involved in a bankruptcy proceeding and must have no outstanding tax returns. If the applicant is a business with employees, the applicant must have paid federal taxes on time during the current quarter and the two previous quarters.

Taxpayers can find qualified tax professionals to prepare and submit OIC applications by contacting state or professional associations, the IRS says.

The agency recommends that taxpayers send complaints about promoters who are using the OIC program inappropriately to the IRS’ Office of Professional Responsibility, 1111 Constitution Ave. N.W., Washington, D.C., 20224. 

Dennis Quick is senior staff writer for the Business Journal. E-mail him at dquick@crbj.com.

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