If you have landed on this page then you might be interested in learning about the tax relief scams that are out there and what to avoid.
I shall go through here a list of the types of scams that different tax resolution companies may do:
1) Not work on your case at all. This is actually quite common. Because most tax relief firms are not actually owned by licensed practitioners, they are not held to the same standard of ethics and liability. The now shut down American Tax Relief was known for taking cases and not working on them at all. As opposed to a tax law firm, a “tax relief firm” can simply go out of business and no one completes your case. When Nationwide Tax Relief was in the process of shutting down, they were still taking cases even though only two people were left to handle hundreds of cases. The company closed and those client’s cases were left in the dark. Those clients thought there case was being handled until they received a levy or garnishment from their representative not responding. The owner Richard Boggs subsequently claimed bankruptcy and the clients were left out of luck.
2) Make false promises about results. Whenever your consultation over the phone for the “tax attorney firm” or “tax resolution firm” is only with a salesperson, be warned. If the company does not let you at least take a brief moment to talk to a licensed professional before they take money from you, it’s a scam. Tax relief salespeople are trained to persuade you that you will get a settlement even when there is no possibility. They claim you will get a penalty abatement on every year you owe for. You then will be asked to sign a waiver hidden in their contract language making whatever the salesperson told you non-binding. It is common for scam tax relief companies to ask a potential client to pay 50% of their fee now, and 50% of their fee in 30 days, and by the time that 30 days is up the company will tell them they do not qualify for an Offer in Compromise or a Penalty Abatement. The nationally advertised Roni Deutch firm was notorious for these kinds of practices. She has now been resigned from the California bar with charges pending and her company closed down. American Tax Relief, run by Alexander Seung Hahn, also was known for using these practices.
3) Company is not owned by licensed tax practitioner(s). If a tax relief company is not owned by a licensed tax practitioner, the company is more likely a scam. Tax attorneys, once paid, are obligated to complete your case. The same applies to Certified Public Accountants (CPAs) and Enrolled Agents. If you go with a tax resolution company that is not owned by one of the above licensed professionals or a group of these licensed professionals, there is no obligation to complete your case in the face of a financial meltdown for the company. Most tax relief companies are making it month to month operating only on the current month’s sales. If sales dip, the company goes under and the existing clients are out of luck. This was the case with Nationwide Tax Relief, after it was mis-published “Nationwide Tax Relief Scam” in an online newspaper. The paper was actually referring to the American Tax Relief scam’s nationwide reach, since the clients were all across the county. This created a dip in Nationwide’s sales and the company flopped, leaving full paid clients in the dust with no help. When the company is owned/operated by licensed tax lawyers, even if the company went sour the original operators are liable to finish your case, and have no problem doing so as it is their professional duty.
4) 50% or 100% of Due Up Front. If a tax relief company tries to charge you 50% or more up front to start a tax relief case, then most likely it is a scam, or you have been over promised on the results. A typical scam charge is 50% now and 50% in a month or 30 days. The main reason they charge this way is not even known to the salesperson on the phone. The reason is you won’t get a solid response on whatever information is submitted to the IRS within 30 days. In fact, they usually send you a letter letting you know it will take 30-60 days for them to get back to you on the information that was submitted. This enables the company to collect a full fee even though you don’t qualify for the settlement or hardship status you were promised. This is the standard billing procedure for most tax resolution firms, most of which are scams. The exception for this is hourly work such as audits and tax preparation, where up front pay is the industry standard for tax law firms.
5) Yearly Fees. This is what I would call a semi-scam. You are told your case will be completed in a certain amount of time and you are not told that written in small text in the contract there is an additional fee if your case extends beyond a certain time period, usually one year. Sometimes the fee is your entire case fee over again, sometimes it is $1,500. I have been told by a former employee of another tax relief company their old firm charged a $1,500 fee if your case extends beyond one year, although I have been told they do work on the cases until they are completed. This is not essentially a scam nor am I accusing them of being a scam, but this can catch some consumers off guard. Most firms that are fair with fees charge a small monthly fee if your case extends after a certain period. Be aware of any firm that makes you pay the full fee over again if your case goes beyond a certain time period.
6) Fee is only for one tax relief service. This is a semi-scam in that you may actually get work done on your case, but it might not be what you needed, resulting in double billing. In most tax resolution cases with the IRS, you will either be placed into a payment plan, you will receive a settlement, or you will be placed into hardship status. Some firms choose to charge for only putting you into one of those statuses. Roni Deutch did this practice and then a client would get re-charged all over again if they did not qualify for the IRS program they initially paid for. You want to look for a firm that does a complete resolution of all your back due tax issues for the fee they are charging. Before the person working on your case goes through your financials in detail, they cannot tell you for sure what you qualify for in terms of an IRS resolution. This payment scheme results in many clients paying twice. For example, you thought you qualified for an Offer in Compromise but you in fact only qualify for a reduced payment plan. If you hired Tax Resolution Professionals, our tax law firm, we would simply then shift our focus to putting your case into a reduced payment plan and submitting and IRS penalty abatement at the appropriate time. Our goal is to finish your case with the best result legally possible, regardless of how many hours we must put into your case. If you hired a firm using the “pay for one service” method, you would have to pay all over again and hope you qualify for what you paid for.
When looking to get your IRS tax debt or state tax debt situation resolved, make sure you hire a licensed professional. If you are interested in talking to one of our tax attorneys about your personal or business tax issues, call us at (888) 515-4TAX (4829) or fill out our contact form at www.taxresolutionprofessionals.com and we shall get back to you.