If you owe taxes to the IRS and are overwhelmed by the amount, chances are, you’ve considered using the services of a tax relief company. These companies often advertise that they can slash your tax bill, using phrases like “pennies on the dollar” and offering free consultations.
While there are some legitimate tax relief companies, many do not live up to their promises.
How do tax relief companies work?
These companies claim they can reduce the amount of taxes you owe by interceding with the IRS on your behalf. They do this by applying for special hardship programs offered by the IRS. These programs include installment agreements, filing extensions, and “offers in compromise,” which allows qualifying taxpayers to settle with the IRS for less than what they owe.
These are all legitimate programs. The problem is that not everyone qualifies for these hardship programs. Unfortunately, some less-than-honest tax relief companies don’t pass along this information until you’ve paid a non-refundable fee.
Some companies are even less scrupulous, and don’t even send in the paperwork to the IRS. A few have even gone so far as to use their client’s payment method, such as a credit card or automatic bank withdrawal, to rack up unauthorized – and illegal – charges.
If you have the bad luck of ending up with a company like this, you may find yourself with an unrelieved tax burden and even more debt than you started with.
What to watch out for
If you are shopping around for a tax relief company, it helps to know the red flags that may signal that the company is not legitimate. The Federal Trade Commission and consumer advocacy groups have called several these companies out for bilking clients out of thousands of dollars, without actually helping them with their tax burden.
These companies often charge hefty upfront fees, usually more than $1,000, while not providing even an in-person consultation. Some companies often use high-pressure tactics, forcing you into agreements you might not be comfortable with accepting.
Their “free consultation” often turns out to be a brief, cursory phone conversation, after which they won’t provide any information or assistance until the client has paid the hefty fee. A company that guarantees it will cut your tax bill is probably not legitimate, since there is no way to determine beforehand whether you will qualify for the relief programs.
Most tax-relief companies are for-profit businesses, meaning they are looking out for their bottom line. This isn’t in itself wrong, any company’s purpose is to make a profit. The problem is that they want to collect upfront fees from as many customers as possible, so quality customer service often falls by the wayside.
Is there a better way?
If you owe money to the IRS, a tax attorney is the only professional you can trust to act solely in your best interests. The hard truth is there is not an easy fix for your tax woes, but your tax lawyer will help you understand the various options available to you and choose the best course of action for you to resolve your tax debt.