Avoiding Tax Relief Fraud
- Written By Thomas J. Brock, CFA®, CPA
Thomas J. Brock, CFA®, CPA
Investment, Corporate Finance and Accounting Expert
Thomas Brock, CFA®, CPA, is a financial professional with over 20 years of experience in investments, corporate finance and accounting. He currently oversees the investment operation for a $4 billion super-regional insurance carrier.
Read More - Edited By
Savannah Pittle
Savannah Pittle
Senior Financial Editor
Savannah Pittle is an accomplished writer, editor and content marketer. She joined Annuity.org as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.
Read More - Published: December 12, 2022
- 2 min read time
- This page features 1 Cited Research Article
Consumers can fall victim to numerous financial scams. Unfortunately, there are always bad actors who are looking to take advantage of those who may not have the financial knowledge or experience to see a trick coming.
One common scam to watch out for relates to the tax relief industry. You may have heard of tax relief from television commercials and online ads as a way for you to reduce the amount of taxes you owe to the government.
Tax relief companies negotiate with the IRS and other taxing authorities on your behalf. The reputable companies draw on their expertise to try to reduce your tax debts and gain other measures of relief. If applicable, they file extensions, appeals and motions to stop wage garnishments, levies and liens. Some firms also assist with tax audits, tax preparation and compliance matters.
Unfortunately, the industry is also riddled with bad actors who prey on overwhelmed individuals who lack the time and/or confidence to deal with their tax debts. They make false promises and attempt to collect upfront fees for work they never perform.
The truth is that most taxpayers don’t qualify for any sort of tax relief at all. But companies with bad intentions can use the lure of lowered or even eliminated taxes to draw in unsuspecting consumers looking for a break.
According to the Federal Trade Commission, some fraudulent tax relief companies shake down their victims for even more money by making unauthorized charges to credit cards on file or even taking money directly from their clients’ bank accounts.
Signs of Tax Relief Fraud
- The company demands a significant sum of money upfront
- The company promises unrealistic services, such as mostly or entirely eliminating what you owe in taxes
- The company is overly aggressive in its marketing or determination to sign you on
As a result, it is critical to be comfortable with a tax relief firm and the services it offers before proceeding with an engagement. Make sure they have a long business history, extensive experience managing debts and overwhelmingly favorable online user reviews.
In addition, make sure they are a member of at least one of the following organizations:
- American Society of Tax Problem Solvers (ASTPS)
- National Association of Enrolled Agents (NAEA)
- National Association of Tax Professionals (NATP)
Stay clear of any company that promises to get you relief from tax liabilities, assures you a fast settlement or seeks upfront payment for its services.
There are also ways to avoid the tax relief industry and its potential pitfalls altogether if you owe taxes you can’t pay. For example, you can consider requesting an installment agreement from the IRS, allowing you to pay your debt over time instead of all at once.
Editor Samantha Connell contributed to this article.
