Don't Fall Prey to Tax Debt Relief Scammers
The Michigan Attorney General's Office recently posed an alert warning taxpayers to be wary of scams related to tax debt relief companies. The scam is simple - pay a big upfront fee to a tax relief company in exchange for a promise to settle tax debts for pennies on the dollar. The problem is this arrangement is a scam - many taxpayers will not qualify for the "fresh start" offer in compromise program offered by the IRS or the state of Michigan. As a result, months go by without any relief and then when the offer in compromise is rejected, the tax relief company refuses to refund the thousands of dollars paid by the customer.
Too often taxpayers fall prey to these companies that promise to drastically reduce their tax liabilities and pay thousands more for an offer in compromise, when the best outcome is an installment agreement that allows them to manage their finances. In other cases, a bankruptcy filing may be a better option, but tax resolution companies do not file bankruptcy petitions and cannot give solid advice to minimize payments to creditors, including the IRS.
Common Tactics Used by Tax Relief Companies
- Promises like “We’ll settle your IRS debt for pennies on the dollar.”
- Promises to drastically reduce or eliminate your tax debt.
- Promises to eliminate interest and/or penalties for you.
- Fails to initially assess your financial background.
- Fails to ask you why you owe taxes.
- Preys on your fears of the IRS.
- Sends unsolicited letters or emails claiming that you qualify for a government plan to help settle your tax debt. It is a creative scammer who wants you to think you are working with a government entity related to the IRS.
- Charges a large upfront payment—often equal to the amount of cash you list on an asset inventory.
- Uses delay tactics like being asked for the same documents repeatedly, then eventually says you no longer qualify for relief or that the IRS has rejected your offer.
The reason you may hear advertisements for "pennies on the dollar settlements" is because there are taxpayers who are able to settle a large tax debt for very little. These taxpayers typically have many years of large unpaid tax balances owed and have lost a job or had another large financial problem that caused their income to decline sharply or they lost their savings and have little to no net worth and income. Many taxpayers will not qualify for this relief.
You should expect the professional you contact to ask questions and to get an understanding of your full financial picture before determining what relief you may qualify for. If your tax professional spends substantial time explaining how the IRS is going to destroy your life or take everything you own, that professional is probably looking to maximize their fee at your expense.
Expect More from a Tax Professional
If you currently have tax debts for prior years or unfiled tax returns, contact a reputable tax attorney to give you advice and a fee you can count on. At Steiger Tax Law, I stand behind my work and will not charge you for tax resolution work that you do not benefit from. Further, if you file for an offer in compromise that is not accepted by the IRS, and an installment agreement is the best relief you can achieve, I will reduce the fee to the installment agreement fee and return any retainer previously paid and held in a trust account. Tax relief companies cannot promise this and are not subject to strict professional standards for handling client funds that are imposed on lawyers by their state bar associations.
You should also be aware of who is doing the work. Many tax relief companies claim to have attorneys, CPAs and enrolled agents on staff. However, if you search for these attorneys in their state bar directory, you cannot locate them. Further, these companies claim to have offices nearby but they are just mailboxes. The actual employees are located in another state. Having recourse against those professionals, if they actually exist, will be difficult across state lines, especially if you cannot locate the state where they are admitted to practice law. Attorney Andrew Steiger is licensed to practice by the State Bar of Michigan, and can provide IRS tax debt services to taxpayers across the country. This fact is not hidden in my website. You should know all the facts about your tax provider before you hire them and pay a large fee. Can you get that fee back if you do not get the outcome you were promised? If there are no refunds or price reductions, and the professionals are not subject to discipline from their professional licensing board, then you should strongly consider hiring someone else. If you have tax or legal needs, contact Steiger Tax Law for honest advice with fair, upfront fees.