Increasingly, unscrupulous tax preparers are attempting to exploit those fears. In ads on late-night TV, the Internet and highway billboards, these promoters claim they can slash your tax debt to just pennies on the dollar.

Of course, these tax wizards don't work their magic for free. Their services usually cost hundreds or even thousands of dollars.

The dubious claims involve the IRS offer-in-compromise program, a legitimate service designed to help individuals with large unpaid tax bills and little hope of repaying them. Under certain circumstances, the IRS will agree to reduce your tax debt, sometimes by a significant amount. But what many of these smooth-talking tax preparers fail to mention is that qualifying for a reduction in your tax bill is extremely difficult. Only a handful of taxpayers make the cut.

IRS officials issued a consumer alert last month warning taxpayers to be wary of high-priced promises to slash tax bills.

The offer-in-compromise program "serves an important purpose for a select group of taxpayers," IRS Commissioner Mark Everson said in a statement. "But we are increasingly concerned about unscrupulous promoters charging excessive fees to taxpayers who have no chance of meeting the program's requirements."

Who qualifies

Simply owing money to the IRS doesn't make you eligible for an offer-in-compromise. You also must prove that you've exhausted all other resources, and that there's little chance you'll be able to raise the money in the future.

Only about 15 percent of applications for an offer-in-compromise are approved by the IRS, says Dale Hart, commissioner of the IRS division in charge of the program.

"We get a great number of them where the taxpayers flat out don't qualify because they can pay," she says.

If you can pay your tax bill by taking out a second mortgage or selling some of your investments, the IRS probably isn't going to approve your application. Explaining that you have other financial obligations probably won't get you far, either.

"We had one guy who came in and wanted an offer-in-compromise for a substantial amount of money, and one of his reasons was he had to pay for the wedding of his daughter," Hart says.

His offer was rejected.

Along with scrutinizing your investment portfolio, bank accounts and art collection, the IRS also will take a hard look at your potential future earnings when deciding whether to reduce your tax bill.

For example, after Internet stocks collapsed, many employees in the technology industry sought relief from big tax bills they owed on worthless stock options, says Donna LeValley, contributing editor for J.K. Lasser's "Your Income Tax 2004."

The only offers the IRS granted were from administrative employees "who were never going to make enough money to pay those taxes," she says.

The IRS rejected applications from software engineers and other skilled workers on the grounds that they eventually would earn enough to pay their debt, LeValley says.

If you're a senior citizen living on a fixed income, the IRS may decide you qualify for a reduction in your tax bill. Likewise, taxpayers who are suffering from a serious illness may get special consideration.

How to apply

If you're convinced you're eligible for an offer-in-compromise, get Form 656 and Form 433-A, both available at www.irs.gov. Be prepared to bare your soul to the IRS.

You also may need to include a check. Last November, the IRS added a $150 fee to offer-in-compromise applications. Low-income taxpayers may qualify for a waiver. The IRS imposed the fee to discourage taxpayers from filing frivolous applications, LeValley says.

If you decide you need professional help, look for a reputable tax preparer qualified to represent taxpayers before the IRS and who has experience with offers-in-compromise, he says.