Tax time can be stressful if you owe more taxes than you can afford or if you’re behind on past taxes. The anxiety can feel overwhelming. It can be difficult at this time to know what to do next. Many people turn to tax debt relief companies for guidance.
While there are legitimate tax debt relief companies, some companies are simply a scam. If you fall victim to a scammer, you’ll end up spending lots of money without solving your tax debt problem. Tax scams are so prevalent that the IRS posts a “Dirty Dozen” list annually, highlighting the worst tax scams of that year.
Fortunately, knowing the signs of a tax debt relief scam can help you avoid becoming a victim. Signs of a tax debt relief scam to watch out for include:
- Requesting a large upfront fee before they do anything to help you
- Making claims or promises that seem too good to be true, such as settling for significantly less than you owe or a company claiming they have never had a settlement denied
- Contacting you directly through email, phone, text, social media, or mail
- Indicating you’ll work with a team of tax attorneys or CPAs, but you never have contact with them
Owing money to the government is stressful. If you need help, there are legitimate tax debt relief companies who want to help you solve your debt problem. The free Tax Debt Relief Hotline at (888) 452-7841 will connect you to a trusted expert experienced in helping with tax debt relief.
What is Tax Debt Relief?
If you owe more taxes or past taxes than you can pay, you may qualify for tax debt relief. If you are eligible, you typically will be put on a payment plan or given the option to settle with the IRS.
If you’re not sure you can pay your taxes or are behind on payments, you need to act efficiently to address the issue. This can help you avoid additional penalties and get you on the path to a solution.
Legitimate tax debt relief companies will help you evaluate your options and help you work with the IRS to find a solution.
Warning Signs of a Tax Debt Relief Scam
Unfortunately, tax debt relief scams take advantage of people who are under stress and feeling scared. They often make promises that they can drastically reduce your tax debt or even eliminate it.
While you sometimes can settle for less than you owe through an IRS Offer in Compromise, not everyone will qualify. There are no guarantees.
Dealing with tax debt can feel overwhelming. To avoid being scammed, here are some of the common warning signs of tax debt relief scams.
Warning Sign #1: Requiring You to Pay a Large Fee Upfront
Some tax debt relief scams attempt to get as much money as they can from you during this process. Unfortunately, many of these scammers don’t even do the work they are promising. As a result, you’re out the money and are still facing the same (or worse) tax debt problems.
The typical scam begins with them requiring that you pay a large upfront fee—often thousands of dollars. They may suggest you borrow the money or use saved or retirement money.
Next, they tell you to complete a bunch of paperwork. After you return the forms to them, you may not hear from them in a while. They eventually get back to you saying your case is extra complicated. They need you to pay more money. If you don’t pay, they say they will close your case.
Lastly, after more time passes, they will have you sign a form that contains a contract saying that you have to respond within a short period, like 24 hours, or your case will be terminated, and they keep all fees.
To avoid this type of scam, be sure to:
- Research the tax debt relief company leadership.
- Don’t pay large upfront fees. Make any payments with a credit card for added protection.
- Read all contracts carefully and be on the lookout for the phrase “non-refundable”
- Research their reputation. Read reviews and their report with the Better Business Bureau.
Warning Sign #2: Making Claims That Are Too Good to be True
When faced with a stressful situation, it’s common to want the problem to end quickly and as painlessly as possible. But don’t forget to trust your instincts. If their promise appears too good to be true, it likely is.
To avoid this type of scam, look out for words and phrases like:
- Our settlements are never denied
- We will help you settle for significantly less than you owe
- We will resolve your problem for pennies on the dollar
Warning Sign #3: The Company Initially Contacts You
Not every tax debt relief company that contacts people or advertises extensively is a scam. However, many scam companies contact people directly through email, texts, phone calls, social media, or mail.
You will need to thoroughly research a company that reaches out to you to ensure they are legitimate. To help avoid a scam, consider:
- Avoiding companies that initiate contact with you, or at least research them before talking to them
- Working with a local tax relief company can offer some assurance where possible. There is something about walking the floors of an established office, to put you at ease
- Avoiding any company that guarantees you will get an Offer in Compromise before they have investigated your specific financial situation
Warning Sign #4: Promising You’ll Work with a CPA or Tax Attorney, but You Don’t
Many scams lead you to believe you’ll be working directly with a team of CPAs or a tax attorney. Yet, as you go through the process, you realize you’re not working with an expert. Worse, an expert never even reviews your case, paperwork, or situation.
To avoid this situation, you can:
- Ask about exactly who will be working with you at every stage
- Research and confirm the qualifications of the individual(s)
What to Do if a Tax Debt Relief Scammer Contacts You
If a scammer contacts you, the IRS recommends that you don’t talk or reply to them either online or by phone. However, you can take action by reporting the scam to the IRS.
If you receive a suspicious email or unsolicited email that references the IRS or taxes, don’t open links or attachments to avoid potential computer viruses. Don’t reply. Instead, forward the email you received to the IRS at firstname.lastname@example.org and then delete the email.
If you get a phone call by someone claiming to be an IRS employee, contact the Treasury Inspector General for Tax Administration. During the fraudulent call, don’t provide any information. Over the last few years, there has been a wave of scam calls made to frighten taxpayers into making payments under the threat of arrest. Be assured, the IRS does not typically call you when you have a tax debt. You will receive a letter or statement in the mail. You will not be jailed just for owing tax.
If the scam involves impersonating a state tax person instead of the IRS, you can contact your state’s Attorney General’s office.
Protect Yourself by Knowing the Signs of Tax Debt Relief Scams
Owing taxes is stressful and can be confusing. Most people could use some help with their situation. But make sure you are working with trusted, vetted individuals and companies.
Knowing common signs of tax debt relief scams can help protect you from falling for a scam. But how do you find a legitimate company or individual? The free Tax Debt Relief Hotline at (888) 452-7841 can connect you with a trusted tax debt relief expert who can answer your questions and help you determine your next steps.