5 Red Flags to Watch for When Seeking Tax Debt Resolution Services

5 Red Flags to Watch for When Seeking Tax Debt Resolution Services

• Jul 29, 2022

Providing guidance and support to help taxpayers settle their tax debt is an incredibly rewarding realm of work. However, there are also many scammers who will take advantage of Americans in a desperate situation and take their money without providing any help to their situation. But how do you, as a taxpayer in debt to the IRS, differentiate between the legitimate tax debt resolution services and the scams that are looking to take advantage of you? While it’s not necessarily an easy thing to do, here are five red flags to watch out for that can alert you to a tax debt settlement scam.

Overpromising

When it comes to taxes, no professional will ever make an outright guarantee. This is just as true for tax debt resolution as it is for tax preparation; a tax preparer cannot guarantee that you will get a certain amount in a refund, and tax resolution services cannot guarantee that you will get that repayment plan or that you will be able to settle your debt for less than what you owe.

If you see any supposed service promising you an offer in compromise or guaranteeing that you’ll be able to settle your debt for a certain amount, this is a clear red flag—especially if they make these promises without knowing your financial situation. This kind of overpromising is intended to draw in desperate debtors, but odds are, they’ll end up taking your money and running with it.

Lack of Transparency

Any reputable tax resolution provider will be forthright and transparent about their company’s history and will provide you with information regarding their credentials without difficulty. If they’re not willing to discuss details like how long they’ve been in business, what their qualifications are, or past clients’ success stories (while maintaining client confidentiality, of course), then you should assume that they’re hiding something. Find another provider to help you with your tax debt instead.

Demanding Full Payment Upfront

A tax resolution service should not charge you an upfront fee simply to speak to a consultant. This is because every tax situation is different, and the company will have no way of knowing that they can even help you without first discussing your unique circumstances and finances. You should not have to pay an upfront fee simply to be told whether or not the company in question can help you. This is an all-too-easy way for scammers to get your cash quickly and provide you with nothing of value in return.

Legitimate tax resolution services should offer a free initial consultation to determine whether or not they think they can help you. That’s why we always provide a complementary meeting for new clients, so we have the opportunity to determine our chances of successfully settling your tax debt, without any risk or cost to you.

Furthermore, if a company demands the full payment for their services upfront before they will begin negotiating with the IRS on your behalf, you should look for help elsewhere. Any tax debt resolution provider will base their fees on services rendered, after we’ve put in the work, and never before.

Lack of Credentials

As we mentioned before, a trustworthy tax resolution provider will be transparent about providing their credentials when you ask for them—and, in most cases, will proudly display those credentials so that you don’t even have to ask. If someone is offering to resolve your tax debt but does not appear to have any credentials, you should absolutely find someone else to advocate for you.

This is not just about having the knowledge needed to negotiate on your behalf; it’s a question of legality as well. Only a CPA, attorney, or Enrolled Agent (EA) can work with the IRS and represent you in those negotiations. If someone without any of these credentials is offering this service, they’re lying to you—no ifs, ands, or buts about it.

Unclear Process

Finally, a tax debt resolution provider should have a clear process with actionable next steps that you can follow. They should be able to discuss items like who will be working on your case, how often they’ll contact you about case progress, what paperwork you need to complete, estimated timelines, and so on. If they can’t provide clear specifics about their process or the next steps they’re going to take to help you, walk away.

Finding a reliable tax resolution provider isn’t always easy, but hopefully these red flags can help you avoid becoming a victim of a scam. If you have tax debt and need a qualified advocate on your side to negotiate with the IRS for a settlement plan, contact the IRS Advocates today for a free initial consultation.