How to Avoid Tax Relief Scams and Get Real Help for Your Tax Problems

Dealing with taxes is stressful. Confusing tax laws, lots of deadlines, and large tax bills lead to many taxpayers being in a vulnerable position—making them more likely to fall for tax scams.

Scammers and even some tax resolution companies advertise with misleading language about tax forgiveness opportunities and ways to get out of tax debt fast. Unfortunately, many are just bait-and-switch tactics. Taxpayers may end up paying for services they don’t need, paying for services that don’t help them at all, or being led into scams where their money or personal information is at risk.

Fortunately, staying aware and educated can help. What do scams look like, and how can you avoid them? Find out how to spot tax relief scams before it’s too late, or to get real, experienced, high-quality help now, contact us at W Tax Attorney today.

Common Bait-and-Switch Scenarios in Tax Relief

Companies commonly market services and relief options that they can’t actually guarantee. One example is an offer in compromise (OIC), which is essentially a settlement taxpayers make with the IRS when they can’t pay their full tax bill because of their financial situation. 

Misleading companies push OICs on customers without looking at whether or not they are likely to qualify first. When customers aren’t eligible, the company then switches to other resolutions when their offers are rejected by the IRS. These other options may require additional charges, and they may not be as favorable of options for the taxpayer.

Another common tactic is charging monthly fees to clients during IRS waiting periods—even though they’re not doing work during that time. Pay close attention to what companies are promising you and how their fee structures work. When in doubt, ask a tax attorney.

Deceptive Tax Resolution Language

There are many ways companies refer to tax resolution options. Some use the real names of the IRS programs so that you can easily research what they are talking about. But others use misleading language to refer to actual IRS programs. Here’s a breakdown of what to watch for and what they really mean:

• Zero tax program: This phrase is commonly used in reference to the IRS’s currently not collectible (CNC) status. This status is given to taxpayers with financial hardship and is a temporary pause on collections.
• One-time tax forgiveness: The IRS offers first-time penalty abatement, which this wording is usually referring to. First-time abatement is when the IRS waives or reduces a penalty if the taxpayer filed or paid late but otherwise has a history of good tax compliance for the last three years. Note that in this case, the forgiveness only applies to penalties, not the actual tax balance, but if you don’t have any income or assets, you may be able to get some of the actual tax forgiven through a different program or by letting the debt expire.
• Affordable payment agreements: This is usually another name for basic installment agreements. The IRS offers most taxpayers the option to set up a payment plan, where they can pay off their tax balance in monthly installments over a set period of time. 
• Settle for pennies on the dollar: This is exaggerated language that usually relates to an OIC. However, companies don’t know if the people they’re targeting would qualify for this settlement option.
• IRS writes off millions a year: Companies also try to convince people that the OIC is very common, when in fact it is not. For example, in 2023, there were 30,163 offers submitted to the IRS, and only 12,711 were accepted.
• Fresh Start Program – The Fresh Start Initiative was a set of updates that the IRS made to its collection processes way back in 2011. The IRS doesn’t really talk about these changes anymore, but tax relief companies like to make it sound like the Fresh Start is a limited-time option that’s brand new for struggling taxpayers.

Watch out for this kind of terminology. While these companies are not always scams, misleading language is never a sign of a reputable organization. It’s better to go with a company or firm that calls solutions by their actual IRS names: OIC, installment agreement, CNC status, and so on.

Tax Relief Company Red Flags

Now, aside from the language used, there are other signs to watch out for when you’re looking for tax assistance. Consider these additional red flags you should avoid:

• Unsolicited calls or emails: If someone is contacting you out of the blue, it’s often not a good sign. Scammers involved in phishing schemes often try cold calls and emails in hopes you’ll respond.
• Requests for personal information: Using phishing tactics, scammers will contact you and ask for sensitive personal or financial details. 
• Putting on the pressure: It’s common for scammers to put intense pressure on you to act fast. They may claim that this is your only chance to claim the offer and that you’ll miss out if you put if off. There are a lot of strict deadlines when you’re dealing with IRS collections. In particular, if you get a Final Notice of Intent to levy, but real IRS tax resolution programs don’t expire like that. For example, today is not your last chance to apply for a “fresh start”.

• Guaranteed results: Remember: no company should be guaranteeing that you’ll get your taxes forgiven. Any type of legitimate tax relief isn’t guaranteed. Upfront promises like “settling for less” are red flags. However, once a legitimate tax pro has a solid sense of your tax situation, they should be able to give you a good idea of which programs you will qualify for.
• No review of your financials: Legitimate companies will take time to get to know your situation and carefully assess your finances. They don’t make promises before they understand what’s happening. They should review applicable IRS documents and assess your eligibility for IRS programs.

Beware of OIC Mills

The IRS has recently warned taxpayers about a growing scam: OIC mills. These are untrustworthy companies that churn out OIC applications without taking the time to evaluate customers’ situations and finances. They are often just scams. 

These OIC mills may promise tax settlements for less, but it’s impossible for them to guarantee that upfront, and so they don’t often deliver on these promises. Always work with a company that wants to review your situation and will be realistic with you about your options—including the fact that the IRS could deny your offer.

What to Do If You’re Scammed

Sometimes it’s too easy to fall prey to a scam. If it’s already happened to you, it’s important to report the scam, find legitimate help to rectify your situation, and conduct research:

Report the Tax Scam

When you understand the red flags, you can more easily spot scams and dishonest companies. If you do, there are ways you can report them. Here’s where to turn to report tax scams:

• The IRS: The IRS has a Tax Preparer Complaint page where you can file a report on a scammer. You can also send in IRS Form 14157 with the details about your encounter.
• Federal Trade Commission (FTC): The FTC, which aims to protect consumers in the U.S., provides a compliant assistant online or by phone to report scams. Head to reportfraud.ftc.gov to get started.
• Consumer protection agencies: Your state will have resources you can contact to report scams. Look up your state’s consumer protection agency or attorney general office.

When you’re going to report a company or tax preparer, make sure you keep robust records of all correspondence and contact you’ve had with them — emails, calls, and messages of any kind. This may become important evidence to support your complaint.

Find a Legitimate Tax Relief Provider

When you’re seeking tax relief assistance, there are legitimate, trustworthy companies and law firms you can work with. These companies can help you get out of a bad situation if you’ve fallen for a scam, too. 

Start by ensuring the firm will first assess your situation before making any suggestions or promises. They should look at information like IRS transcripts, state tax documents, and your financial situation.

Another good sign of a reliable company is having tax professionals available to help you, including CPAs, tax attorneys, or enrolled agents. These experts should be the ones looking at your tax issues with you and coming up with the best way forward.

Note that legitimate companies may ask for an initial retainer fee so they can begin working on your case. This isn’t a red flag unless they are asking for a large amount of money upfront and making promises before even examining your case.

It’s also a good idea to read reviews and testimonials from past clients. Search online and read comments on trustworthy websites. You can also look up the company with the Better Business Bureau to read reviews and search for any complaints.

Do Your Research

The IRS offers many tools that help you determine your eligibility for tax relief options. For example, you can use the Offer in Compromise Pre-Qualifier tool to find out if you would qualify for an OIC before going to the trouble of submitting the paperwork. Note that this tool is only a guide, according to the IRS, and the agency will make the final decision “based on your completed OIC application and our associated investigation.”

You can also visit the appropriate IRS web pages that outline eligibility requirements for options like the installment agreement, partial payment installment agreement, CNC status, and penalty abatement. This research will give you an idea of what you may qualify for so you can better spot empty promises from companies when seeking help.

Questions to Ask Before Hiring a Tax Relief Company

It’s important to be diligent when searching for a tax resolution provider. Ask these questions to ensure it’s a trustworthy firm:

• What is your fee structure? Be on the lookout for large upfront fees, and make sure you can agree to what they’re asking you to pay.
• Who will be handling my case? You’ll want to work with an experienced tax attorney or CPA who understands tax law and how to resolve your situation.
• What kind of analysis will be performed initially? Work with someone who will do the legwork right away to understand the problem and evaluate your financial situation.
• What is the timeline of your services? It’s helpful to know upfront how long resolution may take once the firm uncovers your issue and makes a suggestion for moving forward.
• Have you worked with people in my situation before? If so, what was the outcome? This question gives you peace of mind that they know what they’re doing and can help you reach the ideal outcome.

Always make sure the company will perform a thorough review of your situation, tax history, and finances before offering any kind of resolution or promising a settlement.

Find Tax Resolution Assistance from a Tax Attorney

Unfortunately, there are many scammers and dishonest companies out there that will try to get your information or money with false promises. Watch out for deceptive language and marketing tactics. Always fully vet the company you work with when it comes to your taxes.

Turn to a tax attorney or CPA when you need help with a tax issue. Do plenty of research and read reviews so you know you’re working with a trustworthy provider. Make sure the company you choose does an initial thorough evaluation of your tax situation before offering any advice.

The team at W Tax Group is ready to help you with legitimate tax resolution options. Our tax attorneys specialize in both IRS and state tax problems, including unpaid back taxes, tax penalties, audits, tax liens, and unfiled tax returns.

Contact W Tax Group to talk to a reputable tax expert about your situation through a free consultation.