Tax Relief Scams

Tax Relief Scams: How to Protect Yourself

You’ve seen the ads. You’ve heard the commercials. “Settle your tax debt for pennies on the dollar,” they claim. “We are the country’s largest tax resolution firm,” they explain. “We are a publicly traded corporation,” they proclaim. Well Enron was a very large publicly traded company as well, and they weren’t exactly trustworthy, were they? Some of these same firms have been sued by Attorney Generals for consumer fraud and theft. Others have over 1,000 complaints with the Better Business Bureau for their tax resolution scams.

Unfortunately, the Tax Relief Industry has attracted circling vultures waiting to prey on those who are weakened by the threat of IRS action. Arm yourself with the tools necessary to defend against their self-serving actions. Start by informing yourself about some of the common tax relief scams below and reading our tips on how to protect yourself.

 

Top Tax Relief Scams

Tax Relief Scam #1 – Non-Refundable Upfront Payments Without Any Guarantees

The most common scam performed by these companies is to charge money upfront while promising to get results that they know are unpredictable, if not impossible, to achieve.










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The company may ask you to commit a very large sum of money upfront before an investigation is conducted or before the IRS side of the story is pulled (through the Master Transcript).

These are the companies that are the sour apples in the industry because they are focused more on driving upfront revenue than actually helping their clients.

Tax Relief Scam #2 – Misrepresenting Potential Outcomes

Related to the above, our second scam comes from aggressive sales people who try to reel in clients by dangling anecdotal stories of ‘pennies on the dollar’ Offer in Compromise tax settlements. The reality is that very few taxpayers qualify for an Offer in Compromise (about  25% to 33% of applicants).

But the scam companies out there won’t tell you that. They may string you along and make you think you are being taken care of only to discover that, when all is said and done, you did not qualify for the Offer in Compromise. At which point the tax settlement scams company will conveniently assert that it was because the IRS did not approve it, and it was not their (the company’s) fault.

There are multiple factors the IRS considers in an Offer in Compromise application such as the taxpayer’s ability to pay, income, expenses and asset equity. The truth is that most taxpayers don’t qualify.

When you are dealing with a new tax resolution company, ask yourself; does the company make a thorough assessment of the factors above? Do they emphasize the importance of these qualifications? Do they make it clear that an Offer in Compromise is difficult to obtain? If the answer to any of these questions is no, you may be dealing with a company who does not have your best interests in mind.

Tax Relief Scam #3 – Marketing Companies Posing as Service Providers

There are a lot of Companies that advertise tax relief services, but do nothing more than sell the customer’s information to other service providers.

A consumer will be led to believe they are working directly with the company that is doing the marketing, but in actuality their information will be sold to other service providers or outsourced independent contractors.  The companies doing the marketing have no control over the quality of the product or the service levels given.  In the worst cases, they sign up a consumer, with no intention of servicing the client whatsoever.

Tax Relief Scam #4 – The Outright Fraudsters

Unfortunately, there are some firms who have outright cheated and stole from their clients. These are the firms that are being targeted and shut down by the Attorney Generals and who have tarnished the industry.  In these cases, the unscrupulous companies will enroll many clients into a program and collect their money without providing adequate services. Some don’t even send the necessary paperwork to the IRS.

As soon as there are too many complaints or upset consumers, the Company will simply change their name and start preying on consumers all over again. Adding insult to injury, many of these companies don’t provide refunds and leave people even further in debt.