Tax Debt Relief Scams

Watch Out for Tax Debt Relief Scams

Dealing with tax debt can be extremely stressful. The letters from the IRS, the threatening calls, the penalties and interest piling up – it’s enough to make anyone feel anxious and overwhelmed. In these situations, it’s tempting to jump at any solution that promises to make the problem go away. However, consumers need to be very cautious of predatory companies claiming they can settle tax debts for pennies on the dollar. Many of these “tax debt relief” firms use deceptive tactics and false promises to take advantage of vulnerable people.

I want to have an honest conversation with you about tax debt relief scams, what to watch out for, and your better options. As someone whose been through this myself, I know how scary and confusing it can be. I hope this article can help you avoid getting ripped off during a difficult time.

How Tax Debt Relief Scams Work

Here’s how these predatory schemes often work:

• The company advertises on TV, radio, or online promising they can eliminate or drastically reduce your tax debt.
• They pressure you to pay an upfront fee, usually several thousand dollars.
• After taking your money, they either stop responding or continuously ask you for more information/documents.
• Eventually, they’ll claim you no longer qualify for the promised tax relief or that the IRS rejected their proposal.
• The company keeps your upfront fee and leaves you in an even worse financial position.

Many of these “tax experts” are nothing more than salespeople working on commission. They’ll say anything to get your business, even if it’s a complete fabrication. Their goal is to extract as much cash from you as possible, not actually help resolve your situation.

Warning Signs of a Tax Debt Relief Scam

Here are some red flags to watch out for:

• They promise to settle your tax debt for “pennies on the dollar” without reviewing your financial situation.
• They ask for a large upfront fee before providing any services.
• They claim you “qualify” for tax relief programs you’ve never heard of.
• They refuse to provide a detailed contract of services or have a vague refund policy.
• You can’t find any background information on the company or complaints filed with the BBB.
• They send unsolicited letters/emails claiming you’re eligible for tax debt assistance.

Legitimate tax professionals will never guarantee results without thoroughly reviewing your personal financial situation first. Be very skeptical of any company that promises immediate relief from IRS collections or penalties.

Your Better Options for Tax Debt Relief

If you owe back taxes, you have much better options than paying a sketchy “tax relief” company thousands of dollars upfront. Here are some legitimate ways to resolve tax debt:

• Work directly with the IRS – The IRS has flexible payment plans and settlement programs you may qualify for. Calling them directly is the best first step.
• Non-profit credit counseling – Reputable non-profits can help you manage tax debt for much lower fees.
• Hire a tax attorney – An experienced tax attorney can negotiate with the IRS on your behalf and provide legal protections.
• Bankruptcy – As a last resort, filing Chapter 7 or 13 bankruptcy may discharge income tax debt.

I recommend starting by contacting the IRS directly to see if you’re eligible for any of their payment plans or settlement offers, such as an Offer in Compromise. The IRS looks more favorably on taxpayers who proactively try to resolve debt rather than avoiding it. Calling them directly is free and the best first option.

If you need additional help, hire a local tax attorney, CPA, or non-profit credit counseling agency. Legitimate professionals will review your situation thoroughly before making any recommendations. Make sure to ask about their fees and services upfront so there are no surprises down the road.

How to Report a Tax Debt Relief Scam

If you believe a tax debt relief company has scammed you, it’s important to report them right away. Here are the steps to take:

1. Contact your state attorney general’s office and file a complaint.
2. Report the company to the IRS Tax Fraud Hotline at 1-800-829-0433.
3. File a complaint with the Federal Trade Commission at FTC.gov.
4. Leave online reviews warning others about your experience.
5. Consult a lawyer about recovering lost fees.

The more complaints these shady operators receive from consumers and regulators, the higher likelihood they will be penalized or shut down. Consider pursuing legal action to recover any fees you already paid the company.

My Story of Getting Scammed

I want to share my own experience getting duped by a tax debt relief scam when I was struggling with IRS debt. At the time, I was in a tough financial spot and felt totally lost about how to handle thousands of dollars of back taxes I owed. So when I heard a radio ad promising to get my tax debt forgiven, it sounded too good to be true.

Of course, I now know if something sounds too good to be true – it usually is. But I was desperate and made an emotional decision to go with this company called Tax Debt Solutions. Big mistake.

After an initial sales call where they made big promises about slashing my debt, I paid their $2,500 fee. But as soon as they got my money, everything changed. They stopped returning my calls and emails. After 6 months of being strung along, they claimed I no longer qualified for their debt program. Even though I begged for a refund, they refused and kept the $2,500.

I eventually found out Tax Debt Solutions was not even a real company. They had scammed me and who knows how many other vulnerable people struggling with IRS debt. I reported them to the state attorney general, but the company disappeared. And I never recovered the fee I paid.

I share this story to help others avoid the same mistake I made. I should have spoken to the IRS first or hired a legitimate tax professional to help me. Please don’t wait to get real help. The longer tax debt goes unaddressed, the more penalties and interest will accrue. Wishing you all the best in getting back on track with the IRS.

– Alex Johnson

The Bottom Line

Dealing with tax debt is difficult enough without predatory companies taking advantage and making it worse. Arm yourself with information so you can avoid tax relief scams. Remember – contact the IRS first yourself, use reputable non-profits second, and only hire local tax professionals that come highly reviewed. Don’t become another victim. You’ve got this!