How To Identify Red Flags And Tax Scams

Millions of Americans fall behind on their taxes annually, and tax debt can cause significant financial and emotional stress if it is left untreated. Many professional organizations specialize in tax relief and can help reduce your tax burden and provide educational materials to empower you to tackle your taxes.

However, there are many scammers in the tax relief, and credit industries since many of the customers in that industry are invulnerable and potentially compromised situations. Falling victim to predatory tax companies can add insult to injury and leave you in worse financial shape than when you started.

This article will describe how you can identify a legitimate tax relief business and some of the major red flags associated with scammers.

Remember, many of the biggest scams rely on urgency and misinformation. The IRS will always provide detail and answer your questions regarding notices and documents they send to you.

Tax Relief Is A Legitimate Business

Many reputable and proficient tax relief companies offer robust tax solutions, including filing reports on your behalf, negotiating settlement payments with the IRS, and much more. Reputable credit relief companies have positive customer reviews, and they offer complimentary consultations without requiring upfront payment.

We partner with many of the top tax relief providers in America, and if you want to see what makes a great tax relief provider, you can go through our reviews to see what you should look for in a tax relief partner.

Legitimate tax relief companies do not guarantee that they will lower your tax bill because that is against the law. And for a tax relief company to have a legal precedent, they must employ professionals with certain credentials like enrolled agents (EA), attorneys, or certified public accountants (CPAs).

Red Flags For Scammers

Many tax relief scams have indicators and red flags that should not be trusted or require more investigation before proceeding. Some scams may have more than one of these red flags, while others may overpromise the possible results, e.g., guaranteeing to remove your entire tax balance and providing a large refund without even seeing any detail about your tax situation.

Requiring Upfront Payment and Information

Before talking to you, tax relief companies requiring upfront payment and personal information should be discarded immediately. All of the top-rated companies in this field offer complimentary consultations where they will let you describe your tax situation, and they will provide an estimation of the services they may be able to provide. They will not require you to pay for the consultation or provide sensitive personal information before you commit to working with them.

If a supposed tax relief company requires credit card details or other information when you book the consultation, then they may not be legitimate.

Lack Of Transparency And Alternative Payments

When you work with a reputable tax relief company, they should be tax code experts and provide prompt answers to your questions, and be able to articulate where they stand with your case. You should also be able to verify their legitimacy through positive customer reviews, industry licensees and certifications, and third-party reviews such as the Better Business Bureau (BBB).

Scammers often provide vague responses, if any, and they often vanish and stop responding to requests if they receive payment or personal details. Many scammers also want to promote alternative payments for any “tax refund” generated for the victim. If a tax relief company wants to pay you in gift cards or through a peer-to-peer payment platform, you should run the other way.

Indirect Contact

Another major red flag is if the tax relief company will not speak with you over the phone or by video. They will insist on keeping everything through email, text, or another indirect communication avenue.

Many professionals in the tax relief industry are licensed experts, whether they are accountants, attorneys, or enrolled agents. They will want to talk with you directly over the phone or through a video conferencing tool.

Delaying Your Case

Tax professionals are well-educated, and the IRS invests a lot of time in researching individual tax cases. Tax relief scammers often delay cases or tell the victim that the IRS rejected their case or that they are no longer eligible for a previously eligible plan. If they repeatedly ask for the same documents, that may be a red flag that they are delaying your case and stealing personal information or planning to take your money and run.

Urgency And Lack Of Information

One of the obvious yet most frustrating red flags for financial scammers is creating a false sense of urgency. They may send notices that read something like “Act Now Or The IRS Will Seize Your House,” or something to that effect. This type of predatory behavior can cause a lot of stress on someone who is already stressed about their tax situation.

Final Thoughts

There are plenty of ways to fight scammers, including contacting the IRS directly or working with a licensed attorney or CPA to investigate the company’s legitimacy. By learning some of the most common red flags covered in this article and performing your own research before paying anyone can prevent an unpleasant and potentially fraudulent surprise.