If you’re struggling with tax debt, it can feel overwhelming to figure out what to do next. Although you can work directly with the IRS, many taxpayers rely on tax relief companies to help navigate the program and handle communications on their behalf.
But not all tax relief companies are created equal. Some companies are reputable and transparent. Some companies rely on high-pressure sales tactics and unrealistic promises. If a company guarantees results or offers a price before reviewing its financials, that’s a big red flag.
This space can attract bad actors, so it’s important to know how to vet providers before committing. The right company will help you move forward with confidence. Choosing the wrong one can cost you time and money.
Here’s how to tell the difference, including signs of a legitimate tax relief company and red flags to look out for.
What does a tax saving company do?
Tax relief companies help individuals and businesses resolve tax issues with the IRS or state tax authorities. These companies typically examine your tax balances, IRS notices, filing history, and communicate with the IRS on your behalf.
Based on your situation, your tax professional may recommend the most appropriate relief option. Common programs include penalty reductions, installment agreements that allow you to pay your balance over time, and offers in compromise that allow you to resolve your tax debt for less than the full amount owed.
If you are facing significant financial hardship, we may also suggest applying for Currently Not Collectable (CNC) status. This designation temporarily suspends IRS collection activities for as long as you remain eligible.
Working with a tax relief company may help reduce your overall tax burden or create a manageable repayment plan. However, it’s important to remember that you can apply for these programs directly through the IRS on your own.
Ultimately, the IRS, not the tax relief company, will determine whether you qualify for relief.
Hint: Before hiring a company, consider reviewing the IRS programs yourself. If your case is complex or involves a large tax liability, it may be worth seeking professional help.
Five green flags for legitimate tax relief companies
When evaluating tax relief companies, look for the following signs of reliability and transparency:
- Easy-to-understand explanation of the service
A legitimate tax relief company should clearly explain what they do, what services they provide, and which IRS programs apply to your situation.
You should take the time to review your financial and tax history before proposing a solution. Be wary of companies that promote specific programs without understanding your situation.
Hint: The Federal Trade Commission (FTC) advises consumers to ignore claims of “eligibility” for relief programs in advance. Only the IRS or state tax authorities can make that determination.
- Transparent pricing
Reputable companies are upfront about their fees. It should clearly explain how much you’re paying, what services are included, and whether the cost is a flat rate or based on complexity.
The FTC warns against companies that ask for large upfront fees before evaluating your situation. Ambiguous pricing, hidden costs, and verbal contracts are all big red flags.
“Be wary of claims about high upfront fees, vague or verbal terms (or) special IRS ‘insider’ access that doesn’t exist,” says Mark J. Stroll, a certified public accountant.
- qualified professionals
Reputable tax relief companies typically employ qualified professionals such as certified public accountants (CPAs), enrolled agents (EAs), and tax accountants. These individuals are authorized to represent you before the IRS.
A reputable company should clearly identify who will handle your case and provide their credentials upon request.
- realistic expectations
Legitimate companies set realistic expectations about what is possible. It does not guarantee a specific result or promise to eliminate your tax liability.
Approval of relief programs is determined by the IRS or state authorities, not the employing company. Promising to “cancel” debt without reviewing your finances is a big red flag.
“Reputable companies set realistic expectations,” Stroll says. “They won’t promise to pay off your debt before looking into your finances.”
- strong communication
A reputable company will provide regular updates about your case and respond quickly to your questions. IRS notices should be clearly explained and kept informed of what is happening at each step. You need to feel informed every step of the way, without feeling confused or pressured.
5 red flags to watch out for
To avoid tax relief scams, it’s often important to recognize the following warning signs:
- Guaranteed to settle your tax debt “penny on the dollar”
- High upfront fees without financial assessment
- Missing credentials
- Pressure tactics that create a false sense of urgency
- Bad reviews or unresolved complaints
Questions to ask before hiring a tax relief company
Asking the right questions will help you assess whether a tax relief company is reliable and suitable for your situation.
- Who will handle my case?
- What services are included in the price?
- What are the possible outcomes?
- How will you communicate updates?
- How long does the process take?
Look for clear and transparent answers to these questions. If a company avoids details or pressures you to sign right away, consider it a red flag.
conclusion
If you’re dealing with unpaid taxes, unfiled returns, levies, or other IRS issues, a tax relief company may be able to help you work toward resolution. However, this industry can attract predatory players, so it’s important to know how to identify legitimate providers.
Look for a company that offers transparent pricing, hires qualified professionals, sets realistic expectations, and communicates consistently. Avoid businesses that guarantee results, charge high upfront fees without checking the situation, or use high-pressure sales tactics.
Remember, you can always work directly with the IRS and apply for relief programs on your own. It will ultimately be approved by the IRS or state tax authority. But the right professional may be able to help you understand your options and move forward with confidence.
What to Look for in a Legitimate Tax Relief Company Frequently Asked Questions
Are tax relief companies worth it?
If you are having trouble resolving your tax issues on your own, it may be worth using a tax relief company. These companies are especially helpful if you have a complex financial situation, owe a large amount of taxes, or need help navigating the tax relief application process.
How can I find out if a tax relief company is legit?
When determining whether a tax relief company is legitimate, look for a company that employs qualified professionals such as CPAs, accountants, or tax advisors, discloses fees and services upfront, and does not guarantee specific results. You can also check to see if the company is certified by the Better Business Bureau and read reviews online.
Can a tax relief company guarantee results?
Tax relief companies cannot guarantee results. Only the IRS or state auditor can determine what tax breaks you are eligible for.
What are the biggest red flags?
One of the biggest red flags of a tax relief scam is a promise to settle your tax debt for “penny on the dollar.” High-pressure sales tactics and high upfront fees are also red flags.
Can I negotiate with the IRS myself?
Yes, you can contact the IRS yourself or apply for tax relief programs such as penalty relief, installment agreements, OIC, and CNC status without having to contact the IRS or hire a company.
