There seems to be no shortage of offers from tax settlement companies claiming to reduce your tax debts to “pennies on the dollar.” Usually, these companies boast infomercial advertisements late at night offering quick tax relief for consumers facing significant back-tax liabilities.  Do some of these companies help people? Sure. But, by and large, if it sounds too good to be true, it is.

What Are They Really Selling?
They are selling what is called an offer in compromise or (OIC). In layman’s terms, this is an agreement between the taxpayer AND the IRS to settle the taxpayer’s liability for less than the full amount owed. The IRS will only do this if they believe that the taxpayer is offering an amount that is more than or equal to the amount that they would be able to claim through a monthly payment plan or seizure of property. The key component here is that the offer in compromise is really just an agreement between YOU, the taxpayer, AND the IRS. The tax settlement company really has absolutely no control over the settlement process. Essentially, they are selling you something they cannot control.  Even more, usually the upfront fee for using their services is not refundable. Yikes!

Disregard Upfront Promises
If the upfront guarantee to shave your tax debts is catching your attention, then stop right there.  These companies are just using marketing tactics to entice potential customers to use their product.  It is absolutely impossible for these companies to guarantee you that much tax relief without knowing the type of tax liens you face among other important factors.

Credentials Matter
If the person from the tax settlement company is not highly qualified in the area of tax with a CPA, EA, or Tax JD credential, then it is not worth your time to discuss further.  Just to be clear, customer service representatives are not tax experts and have no basis whatsoever to make any claims that you will be able to save x amount of dollars by using their service.  Qualified tax professionals must follow an ethical code of conduct which prohibits this type of advertisement.

Review Track Record
Find out how long the company has been in business, review company press releases, the Better Business Bureau (BBB) reports, news reports and any affiliations they may have with industry associations.  This research will allow you to determine the credibility of the company.

Frequent Company Changes Are Concerning
If the company has frequent name changes, management changes & a high turnover of staff, then ask the company about it.  This likely means that they have a poor brand which they are trying to disguise and you should not hire them.

More Tax Relief Questions?

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