How to avoid IRS tax relief scams

Many people tend to be late with their tax payments, or can simply not afford them in certain situations. This causes taxes to “pile up” and becomes a real problem. In these situations, most people look for some sort of tax relief. Thus, hiring the services of a tax relief company might sound very enticing. But before you do so, you need to know how to avoid IRS tax relief scams, as they are quite common as well. In this article, Consumer Opinion Guide will provide you with all the information you might need to avoid being scammed out of your hard-earned money.

Seven vital tips on how to avoid IRS tax relief scams?

person doing tax research
You will want to spend some time on research.

While many tax relief companies are there to help their clients, some of them are looking to exploit them. Some companies even have TV ads that lure customers with special expertise or knowledge that will provide significant tax relief. These companies usually ask for significant upfront fees, as well as monthly fees. The issue is that once you give your money to these companies, you are basically buying a “cat in a sack“. Meaning that everything might be fine but you can also get absolutely nothing in return. To avoid IRS tax relief scams, you will want to do the following:

  • Try to work with the tax authorities themselves
  • Research tax relief organizations
  • Contact tax authorities if you think something is wrong
  • Don’t go for “too good to be true” deals
  • Don’t fall for money-back guarantees
  • Always look at the fine print
  • Beware of “one size fits all” solutions

The most common tax relief option that these companies advertise is to help you get an “Offer in Compromise”. While these offers are a great way to reduce your tax burden, the IRS has very strict guidelines about debt forgiveness. Most of the time, the company will know that you do not qualify for it and will still charge you for their services. The end result is that you spent your money on nothing. That is why it is advisable to work with tax authorities themselves instead of a tax relief company.

Working with tax authorities

The first thing that tax relief companies that want to scam you will say is that you will not be able to work with tax authorities by yourself. In most cases, this is a flat-out false statement. Before you even think about hiring tax relief services, you should contact the IRS or your local and state tax authorities and try to address the issues on your own. Quite often you will be able to settle on a payment plan, as the IRS provides payment plans to more than 2 million taxpayers each year.

If you think that you are over your head, you may want to contact a reputable, certified, local public tax attorney or an accountant and have them help you with your case.

Offers in Compromise (OIC)

As mentioned previously, the IRS has very strict guidelines on who qualifies for an Offer in Compromise (OIC) and who doesn’t. Some tax relief organizations claim that they are able to cut your tax debt by a significant margin by filing an Offer in Compromise in your stead. In reality, most taxpayers do not qualify for this program, and the IRS even published a nationwide consumer alert that cautions taxpayers not to fall for such scams.

Think about it for a second. If you are paying anywhere between $2,000 and $5,000 to a tax relief company, chances are that you are not able to qualify for the OIC. The company will simply take your money, file the petition, and wait for the offer to be unsuccessful. Then they say “bad luck” and do not refund your money. The best solution to avoid dealing with such companies is to contact the IRS directly and see if you qualify for the Offer in Compromise. Alternatively, visit the IRS Offer in Compromise page, where you can download the required forms and get all the information about the program.

Not all companies are “out to get you”, so to speak. Some tax relief organizations actually do good work for their clients. But to know which company to entrust your money to, you will need to do some research beforehand.

Researching tax relief companies

The first thing you will want to do is verify whether the organization is a part of the Better Business Bureau. After that, you will want to check out customer reviews and see what they have to say. Note that you may need to visit several review sites to get as much information as possible.

person giving a 5-star review
Customer reviews are your most powerful tool.

Additionally, involve your social circle in this process. Personal recommendations are always a great thing to have, especially from people that you can trust. Don’t act purely on recommendations, though, make sure that they “hold up” by checking the credentials, reviews, as well as registrations.

Always contact tax authorities at any sign of trouble

The best way to avoid IRS tax relief scams is not to get in the position where you absolutely need a tax relief company to help you out. Therefore, do not ignore any tax-related problems as they won’t simply go away. As soon as you figure out that you’re in trouble, contact the IRS directly. Chances are that you will be able to get a good payment plan that will help you become current on your tax payments.

Also, before you hire any of the tax relief companies to help you get an Offer in Compromise, check with the IRS if you qualify for it. Based on statistics from 2016, the IRS only accepts around one-third of these offers.

If it’s “too good to be true” it is most likely a scam

The standard “sales pitch” of a tax relief company is that they guarantee lower tax obligations. Or they may have some special expertise or skills, even insider tips, that can help you with tax relief. It is easy to make promises, after all. If you see that a promise is too good to be true, it most likely is.

Most such companies will not provide you with sufficient information, either. What you can do is ask for all the relevant information such as detailed biographies of the people who will be working on your case, be they attorneys, tax agents, or certified public accountants. Simply by doing this, you may experience a sudden change in the company’s tone. And if you do, do not do any business with them.

Money-back guarantees are not reliable

As people are naturally suspicious of tax relief companies these days (rightly so!), some companies are offering money-back guarantees. The issue with these is that they are often not available to unsatisfied clients. These guarantees are a way for a fraudulent company to lure you in with a false sense of security before they take your money. Even if the company is offering a money-back guarantee, make sure to do your research and see if their word is good. We’re not saying that a money-back guarantee is inherently bad, just that you should not trust it implicitly.

bundled dollar bills
A money-back guarantee is not always guaranteed.

Furthermore, be wary of any tax relief companies that want to charge you significant up-front fees. This is the most basic scam in the industry, and many people still fall for it. While some reputable companies may include up-front fees, it is always better to avoid paying for services you have not yet received.

Always read the fine print

Another very common tax relief scam is when companies construct their contracts with different details. You may have talked about your case over the phone, “nailed down” all the specifics, but the contract says something else. A prime example of this is that your company tells you that a one-time fee will cover all the required tax-related services. But when you look at the contract, it may state “limited services”, with additional services requiring further payments.

That is why you always want to read any contract you are about to sign in full. Not only read it, but you also want to understand it as well. If anything is unclear or it is written in the words you don’t understand, ask for clarification or amendment to the contract. It is fully within your rights. And if you get any verbal promises, make sure that they are present in the contract, too.

There are no “one-size-fits-all” solutions

When you work with a legitimate tax advisor, you will notice that it takes time for them to understand your income, expenses, and the nature of your tax-related issues. If a company presents you with general, “one-size-fits-all” advice or promises of help before they fully review your situation, you need to be extra careful. Most of the time, you are working with a fraudulent tax relief company.

There is no “magic” solution when it comes to tax relief. If a tax relief company promises a drastic reduction of your tax debt, be wary. Try to evaluate your case on your own to the best of your ability, do your research, and you will avoid IRS tax relief scams without much issue.

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