9 Tax Relief Scams to Avoid

When you owe money to the IRS or your state tax agency, it’s better to address it sooner rather than later. Unpaid tax bills can accrue interest and penalties, leaving you with more to repay. Not to mention, you could get hit with a property lien. 

You might have seen ads for companies that tell you they can make your tax debt go away or help you settle it for less than what you owe. If you’re searching for help with an outstanding tax bill, it’s important to know how to distinguish legitimate companies from tax relief scams. 

9 tax relief scams 

Tax relief scams can take different forms and some are easier to spot than others. The worst tax relief companies offer to help you, take your money, and leave you in the lurch. 

That’s not what you want if you’re already stressed over a tax bill. Here are some scams you might encounter when looking for legitimate help with tax debt. Knowing what to look for can help you spot a scam—and avoid it.

Offer in Compromise scams

The IRS Offer in Compromise program is designed to help people who owe back taxes. This program lets you settle your tax debt for less than what you owe. Anyone can apply and if the IRS accepts your offer, you can pay the agreed amount in a lump sum or periodic payments. 

Now, here’s where the scam comes in. According to the IRS Dirty Dozen 2023 roundup, Offer in Compromise “mills” tell unsuspecting consumers that they can settle their tax debt only with expert help. And, of course, that help is offered in exchange for a fee.

Advance fee scams

Advance fee scams are a variation on Offer in Compromise scams. With this type of tax relief scam, the company tells you that to help you with your tax debt, you’ll first need to pay an advance fee. 

For example, they might ask for $500 or $1,000 to secure their tax relief services. Asking for upfront fees is a common hallmark of tax relief scams, credit repair scams, and other scams involving financial help. 

Tip

LendEDU reviewed 21 tax relief companies to formulate our best tax relief recommendations. All of them offer a free consultation, during which you can understand the scope of the tax relief services you’ll receive and the associated costs. If a tax relief company requires an upfront fee for consultation, don’t proceed and consult our list instead.

Email or text phishing scams

Phishing scams can target potential victims with promises of tax relief but never deliver. Instead, scammers target you with emails or texts designed to steal your personal or financial information. 

You might get an email from a tax relief company telling you they can cut your tax debt in half. All you have to do is click a link in the email and enter some information about yourself to start the process. The problem is that the link contains malware, which allows scammers to access your data. 

Money-back guarantees

Money-back guarantees are another common tactic associated with tax relief scams. You may come across a company that asks you to pay an advance fee but promises to return it to you if they cannot settle your tax debt. 

You pay the fee, trusting in the money-back guarantee. Only when no tax debt relief is forthcoming and you ask for a fee refund does the company refuse to give you the money. Or worse, you find it’s closed up shop altogether and disappeared. 

Government relief scams

Some tax relief scams attempt to lure you in with the promise of federal benefits that can help eliminate what you owe. For example, you might get a back taxes scam call telling you that you can get a federal tax credit against the balance if you owe money to the IRS. 

The scammer might tell you that the tax relief credit is part of an economic recovery package Congress recently passed. All you need to do to take advantage of it is confirm your name, date of birth, and Social Security number. But once you’ve done that, the scammer has everything they need to commit financial fraud in your name. 

IRS agent scams

Tax relief scams can also involve people who pretend to be IRS agents. They may call you to tell you they’ve reviewed your tax file and are willing to negotiate an Offer in Compromise. If you can pay half of what you owe, they’ll forgive the rest. 

Sounds good, right? There’s just one problem—the IRS will never call you about tax debt. All official communications are handled by mail. So if you’re wondering, why am I getting tax debt relief calls? the answer is that there’s a scammer on the other end of the line. 

Tax loan scams

Taking out a personal loan to pay tax debts could make sense if you’d rather owe a lender instead of the IRS. Tax loan scams promise to help you pay off your debt, but there’s usually a hidden catch. 

Either you’re asked to pay a steep origination fee for the loan, which never materializes, or you get the loan to pay your tax debt, and the lender pulls a bait and switch—leaving you with a much higher interest rate than you were expecting.

Audit scams

An IRS tax audit is right up there with root canals on the list of completely unenjoyable things. If you owe back taxes, it’s possible the IRS could launch a full audit of your tax record to see if you’ve underpaid or engaged in activity that might be viewed as fraud. 

Some tax relief scams involve companies that offer help if you’re selected for an audit. Similar to other types of tax scams, you might be persuaded or even pressured to pay an upfront fee for help. Once it’s time for the audit, you’re left to manage on your own while the tax relief company makes off with your fee.

State tax debt scams

Tax relief scams aren’t limited to federal tax debts; you could also be targeted by companies that advertise help in dealing with state tax bills. 

These scams can look like any of the above, only the wording changes. For example, if you’re targeted with a tax relief voicemail scam, you might be told that you qualify for a state tax credit that can help you resolve your unpaid debt versus a federal one. 

At the end of the day, the scam’s goal is the same: to get you to part with money or information. 

Read More

Tax Debt Forgiveness With the IRS or State

Tax relief red flags

Tax relief scams often have “tells” or giveaways that they’re not legitimate. Beware of any company that:

• Asks for an upfront fee
• Requires you to pay fees using nontraditional methods (for example, they only allow you to pay via CashApp or prefer crypto)
• Asks you to verify your personal or banking information over the phone
• Sends you unsolicited emails or texts regarding tax debt relief
• Leaves voicemails telling you that you qualify for federal or state tax relief benefits
• Makes promises or claims that seem too good to be 
• Threatens or intimidates you to get you to pay

Be skeptical of companies that have no online presence. If you can’t verify who they are with the Better Business Bureau or you can’t find any tax relief reviews from past customers, that’s a sign that the company is fake. 

Tips to avoid tax relief scams

Knowing how to recognize tax relief scams is one of the best ways to avoid them. Here are some additional tips to keep in mind. 

Screen calls

Phone calls are one of the most common methods tax relief scammers use to target victims. If you get a call from a number you don’t recognize, don’t answer. If you get repeated unwanted calls from a suspected scammer, you can report them to the Treasury Inspector General and the Federal Trade Commission (FTC). 

Never share your financial information with a person who calls you. If you’re concerned about the caller’s legitimacy, hang up and call the company or organization’s customer service number directly. 

Chloe Moore

CFP®

Be wary of payment requests

No reputable tax relief company should ask for money before rendering services. If you’re pressured to pay an advance fee or you’re asked to use an unusual payment method, don’t be afraid to question the reason for the request. If you get pushback that’s a hint that you’re not dealing with a legitimate company. 

Go straight to the source

If you owe federal taxes, the IRS offers several programs that can help. Your state tax agency likely has similar options. Talk to the IRS or your state tax authority to learn what you can do to get caught up. 

Ask the expert

Chloe Moore

CFP®

The IRS has several resources on its website for recognizing tax scams, what to do if you were scammed, how to report tax scams or fraud, and how to get help if your identity is stolen. Before you consider a company to help you settle tax debt, review the IRS website for these tips and research the companies.

FAQ

Why am I getting tax debt relief calls?

If you’re receiving unsolicited calls about tax debt relief, it may be because your information was obtained from public records, data brokers, or online activity. Scammers often target people who might be struggling financially or have had recent interactions with the IRS. 

Remember that the IRS does not initiate contact with taxpayers via phone or email to demand payment or offer relief; these calls are likely scams attempting to access your personal information or pressure you into paying unnecessary fees.

What are the worst tax relief companies?

The worst tax relief companies often use aggressive marketing tactics, make unrealistic promises, or charge excessive fees without delivering meaningful help. They might claim to have special relationships with the IRS or guarantee that they can eliminate your tax debt. 

To avoid these companies, research their track records with the Better Business Bureau (BBB) and read customer reviews. 

Look for companies that have been subject to government actions or lawsuits for deceptive practices. If you feel uncertain, seek help from a reputable tax professional or consult an organization such as the National Association of Tax Professionals.

Is tax relief legit?

Tax relief can be legitimate, but it depends on the company you’re working with. Reputable tax relief companies can help you negotiate with the IRS, set up payment plans, or reduce your tax debt under programs such as the IRS Offer in Compromise. 

However, not all companies offering tax relief are trustworthy—many engage in scams or deceptive practices. Before committing to their services, it’s essential to verify that the company is reputable, has licensed tax professionals or enrolled agents, and has a transparent fee structure.

What should I do if I suspect a tax relief scam?

If you suspect a tax relief scam, avoid giving out any personal information or making payments. Hang up on unsolicited calls and block the number. Report the incident to the FTC and the IRS to alert them of the potential fraud. 

You can also contact your state attorney general’s office for additional guidance. If you’ve already shared information or paid money, consider placing a fraud alert on your credit file and monitoring your financial accounts for any suspicious activity.