Many unscrupulous tax debt settlement companies swindle consumers using the legitimate IRS offer-in-compromise process. A recent Inc. magazine article lists tax relief services among its “7 Businesses To Watch Out For”. I do not doubt it! As a Maryland tax attorney I have received countless calls from taxpayers who previously fell victim to scam tax relief companies that claimed they could resolve any tax problem through the IRS tax debt settlement program, the Offer-In-Compromise.
Conversations with clients previously cheated by these companies provide me the following tell-tale signs of an unethical tax settlement company:
1) During your initial meeting they do not ask why you owe the tax debt. A reputable tax attorney first questions whether you truly owe the tax debt and will not consider an offer-in-compromise tax settlement until that issue is resolved. Unscrupulous tax relief services often push you into an offer-in-compromise based upon your inability to pay, even if they can easily resolve the issue by sending the IRS a couple documents. Why? For one, the tax settlement company’s “tax expert” you are speaking to is often trained and compensated only to land offer-in-compromise clients. Second, the supposed tax expert you are speaking to may not know a single thing about taxes. Third, the big money for them is not in actually resolving your tax problem, but in getting you convinced the “easier way” is to do a tax settlement, regardless of other options.
2) Unethical companies promise results… great results. Sure, it’s nice to be confident, but predicting an offer-in-compromise’s amazing success before even meeting a client should be a huge red flag. Making the IRS accept an offer-in-compromise is no easy task. Even the most skilled tax attorneys cannot make the IRS accept offers from some taxpayers.
3) They advertise so much you know their name. One sign a company is not legitimate is if they advertise offer-in-compromise services on television or radio. Of course, this is not conclusive evidence the company is a scam as I know a reputable Maryland tax attorney who regularly advertises. But a tax settlement company’s airing of commercials between payday loan and a cash-for-gold commercials should be warning enough.
4) They claim they’ll have your tax problem resolved quickly. The offer-in-compromise process is slow, sometimes real slow. An unethical tax settlement company loves to promise how quickly they can resolve your problems.
5) Your company representatives regularly change. If you have a different representative every other month, you may be dealing with a company that either has serious human resource issues or that doesn’t care that your case is not being properly handled. By the time a respectable tax attorney completes your offer-in-compromise, the tax attorney should have intimate knowledge of your finances. This is necessary to adequately represent you before the IRS. And, needless to say, your contact person should be able to tell you their last name.
6) Your first required deposit strangely reflects how much cash you have. First, it is regular practice for a good tax attorney to ask that money be deposited before starting a tax settlement case. Let’s face it, a tax attorney is going to be skeptical about whether someone who has not paid the IRS will readily pay their attorney. But be wary if the tax relief company asks for a deposit based upon the amount you just told them was in your bank account. Most real tax attorneys estimate how much your case will initially cost and ask for a deposit based upon that estimate.
7) They use phantom offices. This is a common practice by offer-in-compromise companies trying to claim to have a local presence. Google the local address they give you… better yet, Google every company address in your state, and you’ll likely find their ten Maryland “offices” are actually mailing addresses and conference rooms shared with a dozen other businesses.
8) Unresponsive company representatives… after they have your money. Of course, after the tax settlement company has your money, it may be too late. Or maybe not, there’s no reason to throw good money after bad. Unfortunately, a slow-moving representative can cost you a lot of money if your income or status changes during the delay.
9) Just Google them and look for complaints. Now, in defense of anyone practicing in this area, you are never going to satisfy everyone. Reputable tax attorneys use their best efforts to obtain the best possible results for their clients, and that’s all you can ask of anyone. But when there are websites dedicated to how bad you are, maybe it’s time to change fields.
10) Go with your gut. Don’t be afraid to trust your instincts.
If you find you are unable to pay your taxes, contact a local tax attorney or accountant. To see if the tax attorney is actually licensed in your state, your state’s bar association likely provides an online directory similar to Maryland. If you have already fallen victim to an unethical tax settlement company, you should not be afraid to start over. There are many reputable tax attorneys who will not take advantage of your situation. Try to receive a refund and/or contact your state’s Attorney General’s Office to file a complaint if deserved. The settlement generally requires professional assistance, but I do suggest you familiarize yourself with the process by reviewing the IRS website’s information on an offer-in-compromise.
For further information, please contact Jeff Rogyom at (410)929-4578.