Tax debt relief is one way the government helps you when you can't pay your tax bill. This comes in the form of a payment plan or agreement in which the IRS commits to settle your tax debt for less than the full amount you owe. Some companies and law firms use false promises and deceptive tactics to take advantage of consumers who desperately need help resolving their overdue tax debt with the IRS. These companies usually charge a high initial fee, possibly thousands of dollars, for their services.
They tell consumers that they can stop IRS collection activity and resolve IRS problems. After collecting their advance fee, these companies often don't offer the promised tax relief. Instead, after requesting the same documents over and over again from consumers, they conclude that consumers no longer qualify or that the IRS rejects their efforts to resolve the overdue tax debt. Some companies don't even submit a request to the IRS to resolve the debt.
And, in the end, these companies often refuse to refund the advance fee that consumers paid them. Fortunately, since what the IRS (and any other tax enforcement agency) really wants is what is owed to the government, there are ways out of the tax debt problem. Despite its intimidating reputation, the IRS does not intend to punish out of spite. In addition, since it knows that it can only raise money if the money actually exists, the agency has payment options for taxpayers in difficult situations.
There are legitimate tax debt relief companies with qualified, licensed, and experienced professionals who want to help you. They'll meet with you, review your financial data, and then provide you with a realistic assessment of what they can do. These legitimate companies will charge a reasonable fixed fee for their services. The answer to this question really depends on the company you use for your tax debt relief service.
Yes, there are legitimate tax relief companies that can help you reduce your tax debt or sign up for an affordable repayment plan. However, there are also a lot of fraudulent companies. Do some research before choosing a tax debt relief company that represents you. A good tax debt relief company will have a licensed tax professional who will analyze your specific tax debt situation and determine the best solution or combination of solutions to help you pay off your tax debt.
While most tax settlement services promote lists of former IRS agents and other tax experts willing to use their experience to reduce what they owe, the reality is a little different. While state and local tax authorities also offer debt settlement programs similar to those of the IRS, there can be significant differences. Taxpayers who signed a contract with one or another tax debt relief company (and paid thousands of dollars in advance) complained to the Federal Trade Commission about unauthorized charges on their credit cards or withdrawals from their bank accounts. Often, you'll hear announcements from tax debt relief companies about “cents on the dollar” settlements.
Tax relief may allow you to divide your debt into payments or reduce the amount of taxes you pay to the government. Team members with these credentials can represent you before the IRS or the state and have received extensive training in the tax field. Tax relief really means establishing a payment plan or negotiating an agreement with the IRS; it's not about erasing your tax liability. If you are the victim of a tax debt relief scam, file a complaint with the Alaska Attorney General's Office.
These scammers rely on false claims, including the ability to help you pay off your IRS tax debt by cents on the dollar. A less extreme measure would be to consult an accredited tax debt relief service, which could step in to ease levies, bank account seizures or wage garnishments. No, the tax relief won't end your tax bill and may cost you more in the long run, but it could make paying what you owe the federal government much more manageable. The IRS charges a penalty for non-payment of 0.5% of outstanding taxes per month or part of a month, plus interest.
And technically, it's possible to settle your tax debt for less than the full amount you owe through an IRS transaction offer, known as an OIC. And, if you think you might be a victim of tax identity fraud, see What to do if you're a victim of tax identity theft. . .