All the time on TV I see commercials for "Ronnie Deutch" who will "solve your IRS nightmare for pennies on the dollar". Many satisfied customers testify how they paid their thousands of dollars of back taxes for only $20.

What exactly does this Ronnie Deutch do? Just negotiate smaller payments on badly defaulted tax bills?

(before anyone asks, no I do not owe back taxes, I'm just curious)

What this person does is the same as any good tax attorney would do.....they file with the feds what is known as an "Offer in Compromise", whereby you show that you cannot afford to pay back all your past due federal taxes by filing a financial statement of gross income versus necessary living expenses (mortgage or rent, food, utilities, car and insurance payments, current taxes, etc.). So depending on your net income after expenses, the IRS mighty settle for say $5000 instead of say the $20,000 you owe, either as a lump sum payment or spread out over 10 years or so. In this example, you settle for 25 pennies on the dollar. As far as the IRS settling for say 5 pennies on the dollar, this would be reserved for those who are really hurting on income.
Of course, the attorney or whoever gets a certain percentage for himself, and to avoid this, you can file the "Offerin Compromise" yourself, using the forms the IRS will send you when you call. If you're making good money with little debt, your Offer will be refused, no matter whether you or the attorney files the paperwork.

Does the IRS allow that even if the back taxes are due to misrepresentation or fraud, or only if there are extenuating circumstances?

Like I can see where if you suddenly lose your job, and have to sell your house--well the tax law states you have to buy a house of equal or greater value within two years or pay capital gains tax on the gain. But if you lose your job, it isn't likely you'll be buying a bigger and better house. So I can see where they'd possibly forgive that.

But if the back taxes are due to fraud or something, I can't see why they'd allow a compromise, even if you were technically poor now.

I'm talking the IRS offering a reduced tax payment for those who find themselves in hardship, who have filed their taxes but just can't pay the full amount, like they lost their job for example as you mentioned. If someone has committed tax fraud, the IRS will probably send you to jail instead.

The normal way for the IRS to collect on back taxes is to garnish future returns and wages and to have cash accounts frozen. They have no need of attourneys, the IRS is actually also the authorized federal collection agency.

What this man will do for you is something you can do for yourself: call the IRS and fess up. They're not monsters, they'll work with you.

Um, okay, they are monsters, but they will work with you.