Tax Relief Companies and Consumer Debt Scams

Do you owe back taxes to the Internal Revenue Service (IRS) or to the state of Illinois? If you do, you may have received calls, emails, or pieces of snail mail from tax relief companies offering to help you pay your bills. However, it is important for Oak Park residents to know that many tax relief companies often engage in consumer fraud, and sometimes they can even scam debtors who are in need of serious debt relief. As an article from the Federal Trade Commission (FTC) explains, “if you pay them an upfront fee, which can be thousands of dollars, these companies claim they can reduce or even eliminate your tax debts and stop back-tax collection by applying for legitimate IRS hardship programs.”
However, most individuals who owe tax debt simply do not qualify for these programs. Even if you do qualify for an IRS hardship program, tax relief companies often promise to settle debts when they lack the ability to do so, and many of these companies fail to ever send qualifying paperwork to the IRS for hardship program application. In other words, many tax relief companies take a lot of money from struggling debtors and they do not provide any relief. What can you do if you need assistance?
Seek an Installment Agreement Request from the IRS
The IRS has options for taxpayers who cannot pay their tax debt. Some of these options fall under the IRS’s Fresh Start initiative. Which options might be available to you?
First, if you do owe tax debt, you may be able to work out a payment plan with the IRS by submitting an Installment Agreement Request. If you owe under $10,000, the IRS has to accept such a request. Even if you owe $10,000 or more, the IRS still can agree to the request. However, you will still be responsible for any late payment penalties assessed, as well as for interest if you do not make your full tax payment by the due date (even if the Installment Agreement Request is approved).
You also may be eligible for an “Offer in Compromise” (OIC), which allows a taxpayer to settle a tax debt for less than the amount owed. This is only available in certain circumstances, and typically the debtor must have exhausted all other payment options. Through the Fresh Start initiative, the OIC program now applies to more taxpayers than it did previously.
Finally, in some cases, if you have a special hardship, you may be eligible for a penalty abatement. This does not release you from the tax debt you owe, but it can erase the penalties you owe on top of the tax debt. However, this happens relatively rarely and only in limited circumstances.
Handling Tax Relief Scammers
Now that you have a sense of some of the options that may be available to you for managing federal tax debt, what can you do about a tax relief company that is making false promises to you or behaving in a fraudulent manner? In short, you can file a complaint with the IRS whenever tax relief companies do any of the following:
  • Make a promise to you about relief from your tax liability;
  • Misrepresent to you the amount of time it will take to process your application for debt relief; and/or
  • Omit important information on any financial statements submitted to the IRS.
You can also discuss your case with an Oak Park consumer protection lawyer. An advocate at the Emerson Law Firm can speak with you about your options today. Contact us for more information.
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