How to Avoid Tax Relief Scams (2025)

Last Updated: December 2025

The tax debt relief industry has a serious problem: companies that overpromise, underdeliver, and leave desperate taxpayers worse off than before.

The FTC, state attorneys general, and the IRS itself have taken action against numerous tax relief operations for deceptive practices. Before you hire anyone to help with your tax debt, you need to know what to look for — and what to run from.

The Anatomy of a Tax Relief Scam

Here's how the typical scam works:

Step 1: The Hook

You see an ad or receive a call promising dramatic tax debt reduction. Common phrases include: - "Settle your tax debt for pennies on the dollar!" - "New IRS Fresh Start program — qualify today!" - "We've helped thousands eliminate their tax debt!"

Step 2: The Sales Call

A high-pressure salesperson (not a tax professional) gets you on the phone. They: - Create urgency ("The IRS could garnish your wages tomorrow!") - Make promises before reviewing your finances - Push you to sign up immediately - Quote a large upfront fee ($3,000-$15,000+)

Step 3: The Signup

You pay the fee and sign paperwork, including IRS Form 2848 (Power of Attorney) giving them access to your IRS records.

Step 4: The Handoff

After you pay, you're handed off from the salesperson to a "case manager" — often someone with minimal training. Communication becomes sporadic.

Step 5: The Application

They submit an Offer in Compromise or other resolution that was never realistic based on your finances. Meanwhile, interest and penalties continue accruing.

Step 6: The Rejection

The IRS rejects the offer (as it was always going to). The company tells you there's "nothing more they can do" or tries to upsell you on additional services.

Step 7: The Aftermath

You're out thousands of dollars in fees, your tax debt has grown, and you're back to square one — or worse.

Red Flags to Watch For

🚩 "Pennies on the Dollar" Promises

This phrase has become synonymous with tax relief scams. While Offers in Compromise can settle debt for less than owed, only about 21% are accepted in 2024. No one can promise you'll settle for pennies without first analyzing your specific financial situation.

What legitimate professionals say: "Based on your finances, you may be a candidate for an Offer in Compromise. Let's see if the numbers work."

🚩 Guarantees Before Analysis

If someone guarantees a specific outcome before reviewing your: - Income and expenses - Assets and equity - IRS account transcripts - Complete financial picture

...they're lying. The IRS uses a strict formula (Reasonable Collection Potential) that requires detailed financial information to calculate.

What legitimate professionals say: "I can't promise anything until I review your situation. Many factors affect what options you qualify for."

🚩 Large Upfront Fees

Scam companies often charge $5,000-$15,000 or more before doing any work. If things don't work out, you don't get that money back.

Red flag fee structures: - Demanding full payment upfront before any IRS analysis - Fees that seem wildly high for the service ($8,000 to set up a payment plan) - Pressure to pay immediately or lose a "special rate" - No itemization of what the fee covers

What legitimate professionals charge: - Varies by complexity, but typical ranges: - Simple installment agreement: $500-$1,500 - Offer in Compromise: $3,500-$7,000 (complex, time-intensive) - Currently Not Collectible: $500-$2,000 - Many offer initial consultations for free or low cost - Some work on payment plans for their fees

🚩 Pressure Tactics and False Urgency

Scammers create panic to prevent you from thinking clearly: - "The IRS is about to levy your bank account!" - "This special program is only available for a limited time!" - "If you don't act today, you'll lose your chance!"

The reality: The IRS collection process takes time. You'll receive multiple notices before any levy. There's no "secret program" that expires tomorrow. You have time to research and make an informed decision.

🚩 Vague Credentials

When you ask who will actually work on your case, scam companies often: - Give you a salesperson's name, not a credentialed professional - Claim to have "tax specialists" or "tax experts" (not real credentials) - Refuse to provide the name or credentials of the person handling your case - Use impressive-sounding but meaningless titles

Who can actually represent you before the IRS: - Enrolled Agents (EA) — Licensed by the IRS - Certified Public Accountants (CPA) — State-licensed - Tax Attorneys — State bar-licensed lawyers

Ask for the specific name and credential of the person who will handle your case, then verify it.

🚩 Contact Initiated by Them

Be suspicious if: - You receive an unsolicited call about your tax debt - Someone claims to know you owe the IRS (how would they know?) - You get a letter that looks official but isn't from the IRS

Legitimate companies don't cold-call people about tax debt they couldn't possibly know about.

🚩 Requests for Unusual Payment Methods

No legitimate tax professional will ask you to pay via: - Gift cards (iTunes, Amazon, etc.) - Wire transfer to an individual - Cryptocurrency - Cash sent by mail

These are hallmarks of scams because the payments can't be traced or reversed.

What the FTC Has Found

The Federal Trade Commission has taken action against numerous tax relief companies. Here are patterns they've identified:

False Success Rates

Companies claiming "95% success rate" or similar when the actual IRS OIC acceptance rate is around 21%.

Fake Government Affiliation

Letters designed to look like official IRS correspondence, or claims of special relationships with the IRS.

Bait and Switch

Advertising OIC settlements, then putting people into simple payment plans (which they could have set up themselves for free).

Phantom Services

Charging thousands of dollars and doing little to no actual work on the case.

No Refund Policies

Taking large upfront payments with no recourse if the promised results don't materialize.

FTC guidance: Tax debt relief companies that charge fees before performing services are violating the Telemarketing Sales Rule — though many structure their businesses to evade this.

How to Verify a Tax Professional

Before hiring anyone, take these steps:

1. Check Credentials

For Enrolled Agents: - IRS Preparer Directory: irs.gov/tax-professionals - National Association of Enrolled Agents: naea.org

For CPAs: - Your state Board of Accountancy website - AICPA credential verification

For Tax Attorneys: - Your state bar association website - U.S. Tax Court practitioner search

2. Check Complaints

• Better Business Bureau (BBB): bbb.org
• State Attorney General consumer complaint database
• Google "[Company Name] complaints" or "[Company Name] scam"
• FTC enforcement actions: ftc.gov

3. Ask the Right Questions

Before signing anything, ask:

• "What is the name and credential of the person who will work on my case?"
• "What is your realistic assessment of my options?" (If they guarantee outcomes, walk away)
• "How is your fee structured? What happens if the IRS rejects my offer?"
• "Can I see a written fee agreement before paying anything?"
• "How long have you been doing this work?"
• "Can you provide references from past clients?"

4. Get a Second Opinion

If something feels off, get another consultation. Many legitimate professionals offer free or low-cost initial assessments.

What Honest Professionals Do Differently

Not everyone in the tax resolution industry is a scammer. Here's what legitimate professionals look like:

They Analyze Before Promising

They'll review your IRS transcripts, income, expenses, and assets before telling you what options are realistic.

They Explain the Odds

If your OIC has a 30% chance of acceptance, they'll tell you that — not promise 100% success.

They Suggest Alternatives

If an OIC isn't realistic, they'll recommend payment plans, penalty abatement, or hardship status instead of pushing forward with something that won't work.

They Have Verifiable Credentials

Enrolled Agent, CPA, or attorney — and they'll provide their credential numbers.

They Charge Reasonable Fees

Fees are proportionate to the work involved and often structured with milestones rather than 100% upfront.

They Might Tell You to Do It Yourself

For simple situations (small debt, straightforward payment plan), an honest professional might tell you to use the IRS website and save your money.

They Communicate Clearly

You know what's happening with your case. They respond to questions. You're not left in the dark for months.

Free and Legitimate Help Options

Before paying anyone, know that free help exists:

Taxpayer Advocate Service (TAS)

An independent organization within the IRS that helps taxpayers resolve problems. Free. - Especially helpful for hardship situations - Can cut through IRS bureaucracy - Find your local advocate: taxpayeradvocate.irs.gov

Low Income Taxpayer Clinics (LITCs)

Free or low-cost representation for qualifying taxpayers (generally income ≤250% of poverty level). - Staffed by attorneys, CPAs, and Enrolled Agents - Handle OICs, installment agreements, audits, and more - Find a clinic: irs.gov/advocate/low-income-taxpayer-clinics

VITA (Volunteer Income Tax Assistance)

Free tax preparation for qualifying individuals. While primarily for filing returns, some sites can help with back tax issues or refer you to appropriate resources.

IRS Itself

You can set up payment plans, request penalty abatement, or even submit an OIC directly through the IRS without any third party. - Online Payment Agreement: irs.gov/payments - Offer in Compromise Pre-Qualifier: irs.gov/oic

What to Do If You've Been Scammed

If you've already paid a company and suspect you've been taken advantage of:

1. Document Everything

Save all contracts, emails, receipts, and correspondence.

2. Request Your IRS Records

Get your IRS transcripts to see what (if anything) the company actually did on your behalf.

3. Revoke Power of Attorney

If they have Form 2848 on file, submit a new one revoking their authority (or call the IRS).

4. File Complaints

• FTC: reportfraud.ftc.gov
• State Attorney General consumer protection division
• Better Business Bureau
• IRS: Report suspected fraud

5. Consider Disputing Charges

If you paid by credit card, contact your card issuer about a chargeback for services not rendered.

6. Consult a Legitimate Professional

Get an honest assessment of your situation and what options you actually have going forward.

Key Takeaways

1. "Pennies on the dollar" is a red flag — Real OIC acceptance is about 21%
2. No one can guarantee results before analyzing your finances
3. Large upfront fees are dangerous — Legitimate fees are proportionate to work
4. Verify credentials — EA, CPA, or Attorney — check the databases
5. Pressure tactics = run — You have time to make informed decisions
6. Free help exists — TAS and LITCs before paying thousands
7. The IRS itself is an option — Many resolutions don't require a third party

Before You Hire Anyone

Use this checklist:

☐ Verified credential (EA, CPA, or Attorney) in official database
☐ Clear explanation of your options with realistic odds
☐ Written fee agreement with itemized services
☐ No guarantees of specific outcomes
☐ No extreme pressure to sign immediately
☐ Willing to answer questions about their process
☐ Checked for complaints (BBB, state AG, Google)
☐ Considered free options first (TAS, LITC, DIY)

Need Honest Help?

We understand the tax relief industry has earned a bad reputation. Our approach is different:

• We analyze before we promise — Your situation determines your options
• We're honest about odds — If OIC isn't realistic, we'll say so
• We recommend alternatives — Payment plans help most people
• We verify credentials — Licensed Enrolled Agents and CPAs
• We might tell you to DIY — If your situation is simple, we'll save you money

📞 Call: (XXX) XXX-XXXX
Monday - Friday, 9AM - 5PM EST
Free consultation, no obligation.

Sources

• FTC Consumer Alert: Tax Relief Scams
• IRS Dirty Dozen Tax Scams
• FTC v. American Tax Relief (case study)
• IRS Data Book FY 2024
• National Taxpayer Advocate Annual Report

This guide is for educational purposes only. If you believe you've been the victim of a scam, consult with a legitimate tax professional or file a complaint with the appropriate authorities.