Tax Resolution Services Scam Overview

The past decade has seen its fair share of Tax Resolution Services Scam operations.  TaxMasters, JK Harris, and Ronnie Deutsch were just a few of the big name services that came under legal persecution and eventually went into bankruptcy. But the real scam that happens in the tax resolution industry is much more subtle.  In this article we’ll unpack both types of scams out there and give you the keys to avoiding a scammer!

The Blatant Tax Resolution Services Scam

It’s an odd fact that most people are apprehensive towards the IRS.  Their complex rules and intimidating consequences scare taxpayers.  When a taxpayer is delinquent on a tax debt, they hastily seek to find an expert that can represent them.  This dire need for help has led to many abuses by predatory companies who take advantage of desperate taxpayers.  The blatant scams typically involve a predatory company implementing one or more of these tactics:

  1. Diverting payments intended for the IRS to an offshore account
  2. Lying about a taxpayer’s options to get them to choose outrageously priced solutions
  3. Representing clients without the required credentials

 

The Subtle Tax Resolution Services Scam

Let’s say that you’re on a road trip but you need to get gas in your car.  You exit the highway and pull into the gas station just off the highway exit.  You pay $3.25 per gallon of gas.  After you fill up, you drive down the road to get back on the highway and no less than two blocks away you see a gas station charging $3.00 per gallon of gas.  Did you get scammed?  Yes!  Your lack of knowledge does not justify a company to charge you more for the same product or service.  Sadly, this happens frequently with tax resolution companies where a customer is charged more, simply because the company felt they take advantage of the customer’s lack of knowledge.

 

Getting Tax Resolution Services isn’t a Bad Thing

It is natural to seek paid assistance in negotiating with the IRS on myriad problems, from Tax Liens, to Levies [ garnishments] of wages and or bank accounts, to requests for reasonable cause penalty abatements or submission of an Offer In Compromise or other tax settlements.  A tax professional can save you thousands of dollars by knowing the applicable remedies for your tax situation.  Many of the stories you hear about a family who was able to settle their $100,000 tax debt for pennies on the dollar are true.

 

What You Need to Know to Avoid a Tax Resolution Services Scam

1. Remember that ONLY an INDIVIDUAL can be ‘enrolled’ as a Federally Authorized Tax Representative; a company CANNOT be enrolled. Therefore it is critical for you to determine up front WHO exactly will be negotiating with the IRS for you.

2. Remember that YOU and the other clients are the ones who pay, as part of a tax company’s fees, for their advertising budget.  Monies diverted from your fees pay for T V ads and high paid executives – it is NOT money being paid to a Licensed / Enrolled person to represent you with the IRS.

3. ALWAYS take a few moments FIRST to check the Better Business Bureau or state consumer protection offices where the company is located to find out if there have been complaints and the nature and number of those complaints.  Lack of history is not a good sign!

4. Beware of BIG PROMISES to guarantee a particular result; there are NO ‘ magic wands’ when it comes to dealing with the IRS because every case is different

5. Remember that it is natural for you to WANT TO HEAR that some company is going to instantly and completely solve your tax problem for you with little or no further work on your part; if a deal sounds too good to be true, it likely is too good to be true.

 

We hope that this helps protect you as a consumer avoid a tax resolution services scam.  And remember, there truly are some fantastic companies out there full of people with the skills and compassion to help taxpayers in need.  You just need to have the knowledge to find the good ones.  If you have other tips or stories to share, please make a comment!

This article was partly based on contributions by Henry L. [T A] Taro, Enrolled Agent.  Mr. Taro is an ex-IRS employee and a Federally Authorized Tax Representative.  He is based out of Las Vegas, Nevada.  Please feel free to contact us if you would like to speak with Mr. Taro specifically.


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