Are tax debt relief companies a scam? This is a valid and very logical question to ask especially if you are faced with back taxes and growing tax debts with the IRS or North Carolina Department of Revenue (NCDOR). Chances are that you’ve witnessed the TV and radio ads where you have happy people sharing their stories of how they settled their tax debts with the IRS for pennies-on-the-dollar. You may have even done your own research on tax relief scams to find that many people have become victim to “tax relief” companies. Some of those companies have since been forced to go out of business and others are currently under investigation by the Federal Trade Commission for false advertising. So to answer the original question posed; are tax relief companies a scam? The answer is, not surprisingly, that some are and some aren’t. Perhaps what is most important is that you be able to identify those companies which are truly invested in helping people to resolve their tax problems from those that are simply scamming people out of their money while utilizing unethical sales tactics. Here are 3 red flags to be aware of when evaluating working with a tax debt relief company.
Red Flag #1: Guarantees to Settle Your Tax Debt with the IRS or North Carolina Department of Revenue
If anyone guarantees that they can settle your tax debt with the IRS or NCDOR just based on your initial conversation then run, run away fast! Not even the most skilled and competent CPAs, tax attorneys, or other tax professionals can make a guarantee just based on a conversation. True tax debt resolution that will benefit you will come as a result of an analysis of your IRS transcripts, NCDOR account, and your financial assets and liabilities. Real opportunities to settle your tax debt DO exist; however, you must first be eligible. Eligibility requirements are best determined by competent tax professionals, not the sales people you often encounter when you reach out to the TV/radio firms.
Red Flag #2: Demand of a Large Upfront Fee
Don’t let fear and promises to instantly stop IRS collection actions cause you to part ways with large sums of money in the form of upfront fees. As mentioned above, a true resolution to your tax problems will result from a thorough analysis of your individual tax situation. As such, paying a one-size-solves-all amount will not benefit you! A word of caution – there are certain actions that just about anyone (i.e., sales people) can do to temporarily delay IRS collections almost immediately. Don’t confuse the value of this temporary action with an actual permanent solution. To protect yourself ask questions – what specifically am I paying for (a temporary delay or a permanent solution)? Can you provide a schedule of anticipated fees? Make sure you aren’t parting with your hard-earned money only to be put into a temporary IRS collection delay situation.
Red Flag #3: Lacks Proper Professional Credentials
Is the person offering you tax debt relief a competent tax professional (i.e., CPA, tax lawyer, enrolled agent, etc.) OR a sales person? Competent tax professionals are often held to high standards by third-party governing boards which require specific educational requirements and experience as well as ongoing yearly ethical and technical training. Additionally, the credentials of competent tax professionals can easily be verified. For example, a CPA licensed in North Carolina can been verified online by the state board (click here). It is important that you have a good understanding of who is actually personally responsible and invested in getting the best outcome for you. Therefore, it is advised that you speak directly to such professional. If you will be assigned to a “team” consider asking questions about them too. Are you really working with a “team of tax attorneys and CPAs”, a term popularly touted in many advertisements? Be sure to ask questions.
About the Author:
Lauren Massie, CPA, EA, MBA is based in Raleigh, North Carolina. The primary focus of her CPA practice is income tax representation for individuals who need tax help with the IRS or the North Carolina Department of Revenue. She regularly assists clients with issues such as unfiled tax returns, back taxes, wage garnishments, bank levies, installment agreements, and the filing of an Offer in Compromise to settle tax debts. Have questions? Lauren can be reached directly at (919) 792-8511 or through this link.
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Lauren Massie
Lauren Massie, CPA, PLLC
8480 Honeycutt Road, Suite 200
Raleigh, NC 27615
(919) 792-8511
Lauren Massie, CPA, PLLC is based in Raleigh, North Carolina and serves clients throughout the Greater Triangle Area including cities such as Wake Forest, Durham, Cary, Chapel Hill, Morrisville, Holly Springs, Fuquay-Varina, Clayton, Louisburg, Knightdale, Zebulon, Rolesville, Wendell, Hillsborough, Youngsville, Franklinton, Garner, Zebulon, Henderson, Franklinton, Holly Springs, Creedmoor, and Angier.