Millions of Americans fall behind on their tax payments to the IRS for numerous reasons. Sometimes people do not update their paycheck withholdings after a raise, and some people do not budget for capital gains taxes.
Regardless of the reason behind your tax debt, there are solutions for settling with the IRS and negotiating an amicable repayment plan that does not involve wage garnishment or asset levies.
Tax relief companies can help close the gap by providing realistic guidance and reassurance to consumers who are battling tax debt. Unfortunately, the financial stress caused by tax debt can leave many consumers in a vulnerable state leading to tax relief scams.
This article will detail how tax relief scammers prey on financial vulnerability and what you can do to spot and avoid tax relief scams.
Tax Debt Is Intimidating
Tax debt to the IRS is one of the most intimidating financial predicaments since the IRS is the most powerful collections agency in the world. They can garnish wages from paychecks, levy assets and investment accounts and place liens on property until they receive the taxes owed to them.
While none of these collection tactics are ideal, the IRS gives considerable notice to taxpayers before implementing them. There are also plenty of tax relief measures people can take, such as the IRS Fresh Start program, or finding a monthly payment schedule that they can afford to pay until their balance is gone. Taxpayers can even work with tax relief companies to help guide them in their negotiations with the IRS.
Scammers Prey On Vulnerable People
While there are many legitimate and reputable tax relief companies available for people to work with, there are many scams and predatory fraudsters who see the pain and fear caused by tax debt, and they use people’s financial vulnerability to their advantage.
Many scammers masquerade as tax relief professionals who promise to reduce tax debt with the IRS by guaranteeing offers in compromise or settling on the taxpayer’s behalf for an upfront fee. But all too often, people will pay the scammer only never to hear from them again, which can further compound their financial trouble.
How To Identify And Avoid Tax Relief Scams
Below are five strategies you can employ when researching a tax relief company to identify potential red flags and save yourself from falling victim to a financial scam:
Request a Free Consultation
Most of the top-rated tax relief companies offer a complimentary consultation for taxpayers to discover their tax debt situation, ask questions about repayment options, and ultimately lead to a recommendation on if they would be a good fit to work together or not.
Since some tax debts are small enough that they would not justify the expense of hiring a tax relief company, or some situations may not benefit from tax relief help outside of the IRS programs, the consultation is an important piece of the tax relief puzzle.
Scammers will often avoid complimentary consultations because they prefer to work exclusively through email and indirect communication chains. They will also often request upfront payment for a consultation which should be an immediate red flag. If a tax relief company requests payment before talking with you or hearing about your unique tax situation, you would be better off talking to a company that offers a free consultation.
Read Customer Reviews
Customer reviews are one of the most powerful tools for finding a trustworthy tax relief company because they encompass details on customer service, pricing, and legitimacy with IRS negotiations. Although managing tax debt can be stressful, you can make a shortlist of highly-rated companies that should make finding a tax relief partner more manageable.
You can also use customer reviews to research companies who may reach out to you and solicit your business. Predatory scammers often use urgent terminology and scare tactics to deter people from researching their options.
Look For Independent, Third-Party Support
Third-party reviews and investigations are other powerful resources for consumers because they add an additional dimension to add legitimacy to a company or warn people from using their service. The Better Business Bureau (BBB) is one of the most trusted and well-known rating resources that assigns a grade to businesses based on reviews and complaints.
If you want to learn more about how a tax relief company works with its customers and with the public, you can check their BBB profile. Good companies often carry an ‘A’ or ‘A+’ rating, while illegitimate companies often carry an ‘F’ rating and avoid responding to complaints.
Check For FTC Complaints
The Federal Trade Commission is a powerful government agency that tracks financial crimes and investigates fraud. Many scammers and fraudulent companies have complaints filed against them through the FTC. If you are unsure of a tax relief company’s credentials, you can check with the FTC to see if there are any open complaints.
Ask Plenty Of Questions
One of the most important ways to gauge how a tax relief company operates is to ask plenty of questions to see if they can help you.
Ask questions like:
- How much does your service cost?
- Have you negotiated with the IRS in the past?
- What are your former customers saying about your service?
- How will you evaluate my tax situation?
Legitimate tax relief companies should be happy to answer these types of questions as they explore your tax situation. In contrast, illegitimate companies will be hesitant to detail what they do since they are not really a tax relief entity.
Final Thoughts
Tax relief is available to many Americans through IRS tax relief programs and assistance provided by tax relief specialists. Finding a trustworthy tax relief company is essential, and looking for the red flags detailed in this article can help you avoid further financial pain.
If you want to learn more about tax relief, be sure to read our other guides and reviews so you can make an informed decision about your tax situation.
* This content is not provided by the financial institution or the offer’s provider. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and does not constitute a financial or expert advice.