Every year, thousands of taxpayers are scammed. Many unscrupulous companies are preying on the elderly or those overwhelmed by their tax troubles. Most scammers will ask for high, upfront fees. In exchange, they promise to eliminate your tax debt before fully knowing the specifics of your situation. If you owe the IRS, don’t make the mistake of going with the wrong tax relief company. Before you pay anyone to handle your tax issue, be sure you know how to recognize tax relief scams and how to choose a reputable service.
Most Common Tax Relief Scams
Tax relief scams can take various forms, each designed to deceive and defraud unsuspecting individuals. In fact, scams are becoming so common that the IRS publishes a “Dirty Dozen” list annually. Here are just a few of them:
- Phishing Scams. These scams involve fraudulent emails, phone calls, or text messages purporting to be from the IRS or other legitimate tax authorities. The goal is to trick you into revealing sensitive personal and financial information, which can then be used for identity theft or financial fraud.
- Promises of Debt Elimination. Known as Offer in Compromise (OIC) mills, these companies claim they can completely eliminate your tax debt or settle it for a fraction of what you owe. While debt settlement is possible in certain circumstances, the majority of taxpayers will not qualify for an OIC.
- Impersonation of IRS Agents: Scammers may pose as IRS agents, threatening legal action or arrest if you fail to pay an alleged tax debt immediately. The IRS will never demand immediate payment or threaten arrest without due process.
Beware of These Red Flags
To protect yourself from falling victim to tax relief scams, it’s essential to be vigilant and watch out for the following red flags:
- Unsolicited Calls or Emails. Legitimate tax professionals will not contact you out of the blue, especially if you have no prior relationship with them.
- Pressure Tactics. Scammers often use high-pressure tactics, such as creating a sense of urgency or threatening legal consequences, to coerce you into making impulsive decisions.
- Requests for Upfront Payments. Reputable tax relief services typically do not require large upfront payments before providing any services. Never pay a fee until you read the contract and sign it.
- Promises of Guaranteed Results. No legitimate tax professional can guarantee a specific outcome, as each case is unique and subject to various factors.
- Lack of Transparency: Trustworthy tax relief companies should be transparent about their services, fees, and the potential risks involved.
How to Avoid Tax Relief Scams
Avoiding tax relief scams requires a proactive approach and a healthy dose of skepticism. Here are some practical steps you can take to protect yourself.
- Verify the Legitimacy of the Company. Research the tax relief company thoroughly. Check for valid licenses, professional certifications, and online reviews from reputable sources.
- Understand Your Rights and Options. Educate yourself about your rights and the legitimate options available for resolving tax debts. This may include penalty abatement, installment agreements (most common relief), Currently Not Collectible (CNC) status, or an Offer in Compromise.
- Never Provide Sensitive Information Unsolicited. Be cautious about providing personal or financial information to unsolicited callers or emails, even if they claim to be from the IRS or other government agencies. If in doubt, contact the IRS directly at 800-829-1040.
Reporting Tax Relief Scams
If you suspect that you have encountered a tax relief scam, it’s essential to report it to the appropriate authorities. By doing so, you can help prevent others from falling victim and assist in the investigation and prosecution of these fraudulent activities.
- Report to the IRS: The IRS has a dedicated website (www.irs.gov/privacy-disclosure/report-phishing) where you can report suspected tax scams, phishing attempts, and other fraudulent activities.
- Contact the Federal Trade Commission (FTC): The FTC’s Consumer Complaint Assistant (www.ftc.gov/complaint) allows you to file a complaint about deceptive or unfair business practices, including tax relief scams.
- Notify Your State Attorney General’s Office: Many states have consumer protection divisions that investigate and prosecute fraudulent activities within their jurisdiction. You can find your state’s office here – https://www.usa.gov/state-attorney-general.
- Report to the Better Business Bureau (BBB): The BBB tracks complaints against businesses and can take action against those engaged in deceptive or unethical practices. To file a complaint, visit this link – https://www.bbb.org/file-a-complaint.
Tips For Choosing a Reputable Tax Relief Service
While exercising caution is essential, there are legitimate tax relief services available that can assist you in resolving your tax issues. When considering a tax relief service, keep the following tips in mind:
- Check for Credentials and Licenses. Ensure that the tax relief company employs licensed tax professionals, such as Certified Public Accountants (CPAs), Enrolled Agents (EAs), or attorneys with expertise in tax law. Ask about professional memberships, as well, such as the National Association of Tax Professionals (NATP).
- Understand the Services and Fees. Reputable tax relief services should clearly explain their services, the associated fees, and any potential risks or limitations.
- Avoid Upfront Payment Requirements. Be wary of companies that demand large upfront payments before you have the opportunity to review your contract or sign it.
- Read Reviews and Check Complaints. Research the company’s reputation by reading reviews from trusted sources and checking for complaints filed with consumer protection agencies or professional organizations.
- Seek Multiple Quotes. Obtain quotes from multiple tax relief services to compare their offerings, fees, and qualifications.
If you have any questions or doubts, voice them immediately. Most importantly, trust your gut. It’s perfectly fine to take additional time to think things through before signing any contracts.
Final Thoughts
Dealing with tax debt on your own can be overwhelming. By arming yourself with knowledge and exercising vigilance, you can protect yourself from falling victim to tax relief scams. Remember to verify the legitimacy of any tax service before providing any sensitive information over the phone, through text, or email. If you suspect a scam, report it to the appropriate authorities and seek assistance from reputable resources. By staying informed and taking proactive measures, you can protect yourself from the perils of tax relief scams and make informed decisions that safeguard your financial well-being.