Beware of IRS Tax Relief Scams and Unethical Companies

Beware of IRS Tax Relief Scams and Unethical Companies

Paying taxes is never fun, but dealing with tax problems can be downright scary. Unfortunately, some companies out there try to take advantage of people’s fears by promising too-good-to-be-true solutions. Don’t let them trick you! This article will help you spot common tax relief scams so you can avoid them.

How Tax Relief Scams Work

Tax relief companies promise they can make your tax debt go away or dramatically reduce what you owe. They might say they know special techniques or have inside connections with the IRS. It all sounds great, but in reality, many of these outfits are scams. Here’s what to watch out for:

• Charging Upfront Fees – Legitimate tax professionals won’t ask for large upfront payments before doing any work. Scammers want your money before you realize they can’t deliver.
• Guaranteed Results – It’s illegal for any company to guarantee results with the IRS. No one can promise your tax debt will be wiped out or cut by a specific amount.
• “Special Techniques” – Watch out for any tax relief company claiming they know special procedures or loopholes to make taxes disappear. It’s probably a lie.
• Threats and Pressure – Unethical companies will try to scare you into using their services with threats of wage garnishment, property liens, or even jail time.

Beware of Abusive Tax Shelters

One popular scam is promoting abusive tax shelters to avoid paying taxes. For example:

• Employee Leasing – Where an employer “leases” its employees back from an employee leasing company. This makes it look like the employees work for the leasing company to avoid payroll taxes.
• Trust Misuse – Transferring assets into trusts in an attempt to hide them from the IRS for tax purposes. This is illegal.
• Frivolous Tax Arguments – Claiming the income tax itself is unconstitutional or voluntary. All these arguments get rejected in court.

Steer clear of any company pitching tax shelters like these. They rarely work as advertised and can get you in serious legal trouble.

Watch Out for Tax Return Preparer Fraud

Dishonest tax preparers also commit fraud and hurt taxpayers. Here are some warning signs of shady preparers:

• Promising Extra Large Refunds – Tax preparers who promise bigger refunds than anyone else by fudging numbers, making up deductions, etc. This is illegal.
• Charging Fees Based on Refund Size – It’s unethical for a tax preparer to charge a fee that’s a percentage of your refund. This creates an incentive to cheat.
• Refusing to Sign the Return – All paid preparers are required to sign returns they complete. Avoid any who won’t sign.
• Hard Sell Tactics – Unethical preparers may try high-pressure sales tactics or offer refund loans with hidden fees. Walk away.

Protect Yourself from Tax Scams

Here are some tips to avoid tax relief scammers and shady preparers:

• Research Companies Carefully – Check out any tax relief firm thoroughly before signing anything. Look for reviews, complaints, disciplinary actions, etc.
• Don’t Pay Upfront – Avoid any company asking for large upfront fees before doing any work. This is a huge red flag for a scam.
• No Guarantees – Hang up on any tax relief outfit promising to wipe out your tax debt or get big refunds. These are always empty promises.
• Report Suspicious Activity – If you spot any shady practices, report the tax relief provider to your state regulators and the IRS.
• Hire an Ethical Preparer – Make sure to find a reputable tax preparer with proper credentials. Ask questions about their practices.
• Review Before Filing – Carefully look over your return before filing to catch any errors or fraud.

Dealing with tax problems is tough enough without getting scammed. Do your homework to find legitimate help and steer clear of unethical operators just trying to rip you off. Don’t become another victim!

References

IRS. “Tax Scams/Consumer Alerts.” https://www.irs.gov/newsroom/tax-scamsconsumer-alerts. Accessed October 11, 2023.

IRS. “Dirty Dozen: IRS Urges Tax Pros and Other Businesses to Beware of Spearphishing.” https://www.irs.gov/newsroom/dirty-dozen-irs-urges-tax-pros-and-other-businesses-to-beware-of-spearphishing-offers-tips-to-avoid-dangerous-common-scams. Accessed October 11, 2023.

IRS. “Tax Fraud Alerts.” https://www.irs.gov/compliance/criminal-investigation/tax-fraud-alerts. Accessed October 11, 2023.

Key Private Bank. “IRS Releases Its “Dirty Dozen” Tax Scams for 2023.” https://www.key.com/kpb/our-insights/articles/irs-dirty-dozen-tax-scams-2023.html. Accessed October 11, 2023.

IRS. “IRS Wraps Up 2023 Dirty Dozen List.” https://www.irs.gov/newsroom/irs-wraps-up-2023-dirty-dozen-list-reminds-taxpayers-and-tax-pros-to-be-wary-of-scams-and-schemes-even-after-tax-season. Accessed October 11, 2023.

IRS. “To Protect Taxpayers from Scams, IRS Orders Immediate Stop to New Employee Retention Credit Processing.” https://www.irs.gov/newsroom/to-protect-taxpayers-from-scams-irs-orders-immediate-stop-to-new-employee-retention-credit-processing-amid-surge-of-questionable-claims-concerns-from-tax-pros. Accessed October 11, 2023.