People trying to reduce their old tax debts should not expect the "pennies on the dollar" deals promised in television advertisements of now-bankrupt tax-debt negotiation firms, but U.S. state and federal tax agencies are willing to talk.

The U.S. Internal Revenue Service is facing a growing backlog of requests for the "offer in compromise" tax-relief procedure for delinquent taxpayers, according to a Treasury Department report released last month.

At the same time, tax attorneys say more Americans are trying to find solutions of all types to their tax debts at both the federal and state levels.

In fiscal year 2011, the IRS received 59,411 new offer in compromise requests, a 28 percent increase over four years earlier, according to the report by the Treasury Inspector General for Tax Administration.

This influx of new cases caused both by the ailing economy and a simplification of the offer in compromise program comes as the IRS has cut resources to manage those requests. The backlog increased 57 percent to 36,069 in 2011 from 23,003 in 2007.

"With the economy, what has picked up in our caseload is collection matters," says tax attorney Steve Katz of Sideman & Bancroft in San Francisco.

"Someone might have gone from a place where they had high earnings to a place where they don't," says Katz, who specializes in tax controversies such as such collections. "You need to persuade the IRS that their situation has really changed and that they are not hiding the money elsewhere."

Katz says he has been filing more offers in compromise recently. He is also having more discussions with both the IRS and California tax officials about clients who cannot pay or who need an installment agreement in order to do so.

Read more at Reuters:

http://www.reuters.com/article/2012/05/22/us-column-feldman-taxdebts-idUSBRE84L0TO20120522