Are Tax Relief Companies Legit? A Look at Whether Tax Relief Really Works and When It’s Worth It

Tax relief companies promise to help you settle your tax debt for less, but do they actually work—and are they legit?

In some cases, yes. Reputable companies can negotiate with the IRS or state taxing authorities on your behalf, potentially reducing the amount you owe, setting up manageable payment plans, or minimizing penalties. For people with complex tax issues or large debts, these services can provide real relief.

But not all companies deliver. Many charge high fees without guaranteeing results, and some are outright scams. Even when a company is legitimate, the cost of its services may outweigh any savings you receive. Before signing up, it’s crucial to understand how tax relief works, when it’s effective, and whether it’s the right solution for your situation.

Table of Contents

1. How do tax relief companies work?
2. How much do tax relief companies charge?
3. Are tax relief companies legitimate?
   1. How to identify the best tax relief companies
   2. Signs of the worst tax relief companies
4. Do tax relief companies really work?
5. Are tax relief programs worth it for you?
6. Alternatives to tax relief companies
   1. CPA or tax settlement attorney
   2. Settling with the IRS by yourself
7. Pros and cons of tax relief companies
8. FAQ

How do tax relief companies work?

Tax relief companies help taxpayers deal with the IRS or state taxing authorities to resolve tax debt and related issues. They may negotiate on your behalf to reduce what you owe, minimize penalties and interest, or help you apply for hardship programs if you qualify.

These companies don’t offer a one-size-fits-all solution. Instead, they assess your financial situation and recommend the best course of action—whether it’s a settlement, a payment plan, or another form of relief.

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For a deeper dive into how tax relief actually works and what to watch out for, check out our guides on What Is Tax Relief? and Tax Resolution Services Explained.

How much do tax relief companies charge?

Based on our research, tax relief companies can cost between $250 and $7,500, depending on which services are used.

These tax relief services can help save money owed for taxes, interest, and penalties for some taxpayers. However, the fees might outweigh the benefits in other instances. 

Tax relief companies’ typical fee structures are commonly as follows:

• Flat fees: Some companies charge a one-time fee for their services. Do not agree to pay this upfront, as that’s not an acceptable practice.
• Percentage of savings: Others might take a percentage of the amount saved in negotiations. Before agreeing to it, take time to evaluate how much this might cost you. Again, don’t pay this fee upfront.

Are tax relief companies legitimate?

Some are—but not all. While there are reputable tax relief companies that can genuinely help reduce or manage your tax debt, there are also plenty of scams and bad actors in the industry. That’s why it’s crucial to do your homework before signing anything.

Start by checking the company’s track record. Look at customer reviews, Better Business Bureau (BBB) ratings, and any history of complaints or legal action. Reputable companies will have mostly positive reviews, clear pricing, and no history of shady practices.

Also be cautious about what the company promises. No one can guarantee the IRS or a state agency will reduce your debt or accept a specific settlement. If a company promises huge savings or guarantees results, that’s a red flag. The Federal Trade Commission warns that some tax relief companies charge high fees but never deliver.

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For more red flags, see our guide to tax relief scams to avoid.

How to identify the best tax relief companies

The best tax relief companies won’t pressure you. Instead, they’ll take time to learn about your situation, offer a free consultation, and explain realistic next steps.

Look for companies that:

• Offer free initial consultations
• Have transparent fee structures
• Clearly explain your options (including if you’re not a good fit for their services)
• Have strong BBB ratings and real customer reviews

You should also ask whether fees are flat or based on savings—and what happens if they can’t help. A reputable company will have clear contracts and refund policies.

Signs of the worst tax relief companies

Some companies make big promises but don’t follow through. Avoid companies that:

• Guarantee a specific outcome or amount of savings
• Charge large upfront fees before doing any work
• Refuse to provide written contracts or fee disclosures
• Have unresolved complaints or legal issues

It’s also smart to consult with a licensed tax professional—like a CPA or tax attorney—before signing anything. They can help you understand whether hiring a relief company makes sense or if you have better (and cheaper) options.

If you’re considering a tax relief company, red flags to watch out for include guarantees and unsolicited phone calls, texts, or emails.

Do tax relief companies really work?

They can—but not always.

Tax relief companies work when:

• You owe $10,000 or more in back taxes.
• Your tax situation is complex (e.g., audits, liens, unfiled returns).
• You’re eligible for IRS relief programs like Offer in Compromise or penalty abatement.
• You don’t have the time or expertise to deal with the IRS yourself.

They often don’t work when:

• You owe a small amount or can easily set up a payment plan on your own.
• The IRS rejects your relief application, leaving you with no savings and a large fee.
• The cost of services cancels out any reduction in what you owe.

Real-world examples

✔️ When it works:
Sarah owed $12,000 and paid a $3,000 fee. The IRS reduced her bill to $8,000, saving her $1,000 overall.

❌ When it breaks even:
James owed $12,000, paid $4,000 to a relief company, and had his bill reduced to $8,000. His total cost? Still $12,000—so no real benefit.

🚫 When it doesn’t work:
Alan owed $12,000, paid $2,000, and the IRS didn’t reduce a thing. He ended up spending more than if he’d just paid the bill himself.

👉 Bottom line: Tax relief companies can help, but only if your situation qualifies and the savings exceed the fees. It’s not a guaranteed win.

Are tax relief programs worth it for you?

That depends on what you’re looking for—and how much you’re willing to spend to get it.

If you owe less than $10,000, it may not make sense to hire a tax relief company. The costs could outweigh the benefits, especially if your situation is straightforward.

But for some people, the peace of mind alone is worth the price. Having experts handle the IRS on your behalf can relieve stress, even if the financial savings aren’t huge.

Ask yourself these questions:

• Is it worth the cost? If the company charges $3,000 and you save $2,000, is the tradeoff acceptable to you?
• Do you need expert help? Offers in compromise and penalty abatements can be complex. If you’re unsure how to proceed, professional help might be worth it.
• Have you considered alternatives? You might be able to resolve your issue by contacting the IRS directly or speaking with a CPA or tax attorney. The IRS Fresh Start program is also a good place to start.

A tax relief company isn’t the only option—and it’s not the best choice for everyone. But if you’re overwhelmed, owe a large amount, or need help navigating complex negotiations, it could be the right call.

Alternatives to tax relief companies

Not all tax-related challenges require a tax relief company. Sometimes, more cost-effective options are available. Below are alternatives to consider:

CPA or tax settlement attorney

Certified Public Accountants (CPAs) and tax attorneys can provide personalized advice and assistance. While still requiring payment, these professionals can offer services tailored to your specific situation, potentially saving you money compared to a tax relief company.

Working with an individual professional allows for a more transparent and personal relationship, giving you more insight and control over the process.

Here are several ways tax relief companies differ from tax professionals:

	Tax relief companies	CPAs or tax attorneys
General tax resolution	Yes	Yes
Complex tax resolution	Maybe	Yes
Credentials in tax law	Maybe	Yes
Custom solutions	Maybe	Yes
One-on-one support from an assigned expert or team	Maybe	Yes
Cost	Often expensive	May offered cost-effective solutions

Settling with the IRS by yourself

If you owe back taxes, you can research tax laws, read notices from the IRS or your state comptroller, and ask them about collection alternatives. You can also work out a payment plan with the IRS or your state comptroller.

Exploring these alternatives provides options beyond tax relief companies. If you’re unsure which path to take, consulting with professionals or resources such as the IRS’s Taxpayer Advocate Service may provide clarity.

Pros and cons of tax relief companies

When considering tax relief companies, weighing the potential benefits and risks is essential. Below are the primary pros and cons that can help you make an informed decision:

Pros

• Professional expertise

  Having experts on your side can make navigating complex tax laws and negotiations with the IRS more manageable. Their experience in the field may lead to more favorable outcomes.

• Potential savings

  Tax relief companies may considerably save you by negotiating settlements and reducing penalties.

• Time and stress reduction

  Handling tax issues can be time-consuming and stressful. Tax relief companies can manage the process for you, offering peace of mind and freeing up your time.

Cons

• Costs can outweigh benefits

  Tax relief companies’ fees may exceed your savings, especially in cases with minimal tax debt.

• Potential scams

  Not all companies are legitimate. Some may charge upfront fees without providing the promised services, leaving you further in debt, as the Federal Trade Commission warns.

• Limited success in some cases 

  Even legitimate tax relief companies may not succeed in all scenarios. The qualifications for various IRS programs are strict, and not everyone will be eligible.

Understanding these pros and cons can help you evaluate whether tax relief services suit your situation. Always proceed cautiously, and consider seeking direct help from the IRS or your state comptroller.

FAQ

Can I negotiate my tax debts instead of using a tax relief company?

Yes, you can negotiate your tax debts yourself. It might be more time-consuming, but you can work with the IRS or your state comptroller to set up a payment plan or negotiate a settlement. 

If you qualify for services, resources such as the IRS’s Low Income Taxpayer Clinic or the Taxpayer Advocate Service can assist you.

How do I know whether a tax relief company is legitimate?

Determining a tax relief company’s legitimacy requires careful research. Look for:

• Online reviews and ratings from trusted sources.
• Better Business Bureau accreditation.
• Transparency in fee structure.
• A history of successful negotiations. Be skeptical of companies making unrealistic promises or asking for full payment upfront.

How can I avoid scams related to tax relief?

To avoid scams related to tax relief:

• Ignore promises that you “qualify” for specific programs without thoroughly reviewing your situation.
• Be cautious with companies that charge pricey monthly “maintenance fees” that could add up over time.
• Don’t agree to work with any tax relief company requesting full payment upfront, which is an unacceptable practice.
• Consult a tax professional, like a CPA or tax attorney, for an unbiased opinion.
• Report any suspicious activities to the FTC.

Example

A massive scam in India targeted thousands of Americans by posing as U.S. tax authorities. As reported by the U.S. Department of Justice in 2016, the perpetrators ran fake call centers, demanding unpaid taxes and extorting millions of dollars. 

The scam, which netted over $150,000 a day, is a stark reminder of the importance of vigilance and skepticism in dealing with unsolicited tax-related communications.

Can tax relief companies remove all my penalties and interest?

No, tax relief companies cannot guarantee the removal of all penalties and interest. Every taxpayer’s situation is unique, and only the IRS or your state can determine what, if anything, it will waive. 

Tax relief companies may negotiate reductions in penalties or interest, but it is essential to be cautious of any company promising to eliminate these costs. They cannot realistically make these promises, so you should be suspicious.