Latest Posts
Home > Debt Articles > FTC Warns Consumers to Stay Away From Tax Relief Companies

FTC Warns Consumers to Stay Away From Tax Relief Companies

The Federal Trade Commission has issued the following warning to consumers. It’s good advice.

FTC Warns Consumers to Stay Away From Tax Relief Companies
Get Out of Debt Guy – Twitter, G+, Facebook

Owe Back Taxes? Tax Relief Companies Can Result in More Pain than Gain

We’ve helped thousands of people settle their tax debts for a fraction of the amount owed.

We can stop wage garnishments, bank levies, tax levies, property seizures, and unbearable monthly payments.

We can significantly reduce your tax debt. Call for a free consultation.

Fact or fiction?

Tax relief companies use the radio, television and the Internet to advertise help for taxpayers in distress. If you pay them an upfront fee, which can be thousands of dollars, these companies claim they can reduce or even eliminate your tax debts and stop back-tax collection by applying for legitimate IRS hardship programs. The truth is that most taxpayers don’t qualify for the programs these fraudsters hawk, their companies don’t settle the tax debt, and in many cases don’t even send the necessary paperwork to the IRS requesting participation in the programs that were mentioned. Adding insult to injury, some of these companies don’t provide refunds, and leave people even further in debt.

Some taxpayers who filed complaints with the Federal Trade Commission (FTC) reported that, after signing up with some of these companies and paying thousands of dollars in upfront fees, the companies took even more of their money by making unauthorized charges to their credit cards or withdrawals from their bank accounts.

If you owe back taxes and don’t know how you’re going to pay the debt, the FTC, the nation’s consumer protection agency, says don’t panic, take a deep breath, and consider your options. If you are having trouble paying bills, it’s often better to try to work out a payment plan with the creditor yourself than to pay someone else to negotiate a plan for you. The same is true when you owe money to the IRS or your state comptroller.

IRS Help for Taxpayers

If you can’t pay your taxes or your payments are late, the IRS charges you penalties and interest. It also has several tax relief programs to help people who owe back taxes:

  • An Installment Agreement is generally available to people who can’t pay their tax debt in full at one time. The program allows people to make smaller monthly payments until the entire debt is satisfied.
  • An Offer in Compromise (OIC) lets taxpayers permanently settle their tax debt for less than the amount they owe. The OIC is an important tool to help taxpayers in limited circumstances; taxpayers are eligible only after other payment options have been exhausted and their ability to pay has been reviewed by the IRS.

In very limited circumstances, the IRS may offer a penalty abatement to people who haven’t paid their taxes because of a special hardship. If the taxpayer meets very narrow criteria, the IRS may agree to forgive the penalties. An interest abatement is even more limited and is rarely provided.

According to the IRS, you can apply for an Installment Agreement, OIC, or a penalty or interest abatement without the help of a third party. If you prefer third-party assistance in negotiating with the IRS, only certain tax professionals — Enrolled Agents (federally-authorized tax practitioners who can represent taxpayers before all administrative levels of the IRS), Certified Public Accountants (CPAs), and attorneys — have the authority to represent you. Their services should involve a face to face meeting where they explain your options and their fee structure.

You can contact the Taxpayer Advocate Service, an independent organization within the IRS that provides free help to people who are experiencing financial difficulties or who need help resolving a problem with the IRS. Call 1-877-777-4778 or visit irs.gov/advocate.

State Tax Relief Programs

The process for tax settlements with the states is very similar to the process with the IRS, although it varies from state to state. In some states, for instance, a taxpayer’s penalties can be waived, but interest can’t. In other states, interest can be waived, but penalties can’t. And in some states, legitimate tax debt can’t be reduced at all. For more information, contact your state comptroller. For a state-by-state listing, visit the National Association of State Auditors, Comptrollers and Treasurers (NASACT) at nasact.org.

Taxpayer Tips

If you owe back taxes and you are having trouble meeting your tax obligation:

  • read your notices from the IRS or your state comptroller. Ask about collection alternatives.
  • save yourself some aggravation by ignoring promises from companies that say you are “qualified” or “eligible” for a tax relief program to resolve your tax debt. Only the IRS or your state comptroller can make that determination.
  • walk away if a company requires a fee in advance for tax relief services. Check them out with the IRS.

New Rules Prohibit Debt Relief Companies From Collecting Advance Fees
Starting October 27, 2010, amendments to the FTC’s Telemarketing Sales Rule prohibit companies that sell debt relief services on the phone — including promoters of tax relief and settlement services — from charging or collecting a fee before they settle or reduce a customer’s unsecured debt. – Source

FTC Warns Consumers to Stay Away From Tax Relief Companies by

Share This and Spread the Word

About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Steve Rhode

    I think the FTC TSR looks on the transaction you used in your example as covered by the TSR. Where it captures it is if the consumer used interstate communications by telephony, VOIP, or verbal communications at any point in the sales process.

    “Starting on October 27, 2010, for-profit companies that sell debt relief services over the telephone may no longer charge a fee before they settle or reduce a customer’s credit card or other unsecured debt.” – Source

    The true face-to-face exemption will be for someone who walks to the the office on Main Street and meets with a professional provider of X service. So technically, if a consumer walked into a local JK Harris office and never called prior to that then it may not be covered but I’m sure that is just a fraction of their total clients.

    Steve

  • Joe_debt_jr

    FKtheFTC, I think the TSR is for both interstate and instrastate. I believe the new rule is to protect consumers from tax relief companies from charging such hefty upfront fees before any services has been completed. I think its only fair to channel your energy on those companies out there that abused the consumers by tricking them with their false advertisement you see and hear on tv and radio ads about saving thousands of dollars through IRS programs claiming they can get “Pennies on the dollars” savings thru Offer In Compromise/OIC. FTC only wants full disclosures and for all companies to be fair, not deceptive as to misleading and giving out false hopes or claims that they cannot deliver. I would definitely be upset at these companies that are taking advantages of these poor delinquent taxpayers who saw these ads hoping to get the same results when realty is that IRS OIC program is so complex and hard to get accepted and not everyone are qualified. I can see on the marketing end its the best bait and switch tactic to lure clients in the door, but does that solve consumer complaints? Definitely not. I vote on boycotting any companies that claims they have the highest success rate when it comes to settling IRS debt. Here are some math you might want to take a look at: In 2009 over 9 million deliquent accounts, 6Million was closed and still over 3Million account balances opened and only 52,000 Offer In Compromise was submitted for review to the IRS, and ONLY 11,000 accepted. If the IRS was so opened and willing to accept “Pennies on the Dollar” like one is lead onto be on these ads, why only 52,000 offers submitted our of 9Million deliquent accounts and only 11,000 accepted? I think playing the lottery would have the same standing chance as the IRS Offer In Compromise plan dont you think? So do you see why regulations are coming up left and right? All these companies are just brutally taking advantage of all us americans that are already facing financial crisis. Instead of working together to help eachother get out from all this, everyone is preying on eachother as if its ok to lie, cheat and steal nowadays.

  • FKtheFTC

    Also, the FTC, in its infinite wisdom, doesn’t even realize what they are doing. This new rule covers interstate transactions, where the entire transaction is taken place over the phone. If you meet face to face, the rule doesn’t apply. Hmmm, now who would stand to benefit the most from a rule like this? Hmmm, how about JK(SCAM) Harris. They’re the only ones with locations in most states and they are the biggest scammers in the industry by far. BBB? F rated….Complaints? Hundreds and hundreds and hundreds of them and that’s just the people who report complaints. Government action, class action lawsuits. Oh yea, JK Scammer is the worst company in the industry by far. The search term JK Harris Scam is more popular than the term JK Harris. They must be paying off a lot of politicians to stay in business.

    In fact, it’s companies like JK Harris and their scamming ways that has the FTC changing laws to protect consumers. Oh yea, JK Scammer loves this new law. They will triple their revenue and locations if the FTC is strict in its application of this new law. But what the FTC doesn’t realize, or maybe they do, is that they would be creating a monopoly for JK Scammer which 99% of companies out there would not be able to compete with. It’s almost as if the FTC is on the take or something. What the hell are they thinking???

  • FKtheFTC

    Also, the FTC, in its infinite wisdom, doesn’t even realize what they are doing. This new rule covers interstate transactions, where the entire transaction is taken place over the phone. If you meet face to face, the rule doesn’t apply. Hmmm, now who would stand to benefit the most from a rule like this? Hmmm, how about JK(SCAM) Harris. They’re the only ones with locations in most states and they are the biggest scammers in the industry by far. BBB? F rated….Complaints? Hundreds and hundreds and hundreds of them and that’s just the people who report complaints. Government action, class action lawsuits. Oh yea, JK Scammer is the worst company in the industry by far. The search term JK Harris Scam is more popular than the term JK Harris. They must be paying off a lot of politicians to stay in business.

    In fact, it’s companies like JK Harris and their scamming ways that has the FTC changing laws to protect consumers. Oh yea, JK Scammer loves this new law. They will triple their revenue and locations if the FTC is strict in its application of this new law. But what the FTC doesn’t realize, or maybe they do, is that they would be creating a monopoly for JK Scammer which 99% of companies out there would not be able to compete with. It’s almost as if the FTC is on the take or something. What the hell are they thinking???

    • Anonymous

      FKtheFTC, I think the TSR is for both interstate and instrastate. I believe the new rule is to protect consumers from tax relief companies from charging such hefty upfront fees before any services has been completed. I think its only fair to channel your energy on those companies out there that abused the consumers by tricking them with their false advertisement you see and hear on tv and radio ads about saving thousands of dollars through IRS programs claiming they can get “Pennies on the dollars” savings thru Offer In Compromise/OIC. FTC only wants full disclosures and for all companies to be fair, not deceptive as to misleading and giving out false hopes or claims that they cannot deliver. I would definitely be upset at these companies that are taking advantages of these poor delinquent taxpayers who saw these ads hoping to get the same results when realty is that IRS OIC program is so complex and hard to get accepted and not everyone are qualified. I can see on the marketing end its the best bait and switch tactic to lure clients in the door, but does that solve consumer complaints? Definitely not. I vote on boycotting any companies that claims they have the highest success rate when it comes to settling IRS debt. Here are some math you might want to take a look at: In 2009 over 9 million deliquent accounts, 6Million was closed and still over 3Million account balances opened and only 52,000 Offer In Compromise was submitted for review to the IRS, and ONLY 11,000 accepted. If the IRS was so opened and willing to accept “Pennies on the Dollar” like one is lead onto be on these ads, why only 52,000 offers submitted our of 9Million deliquent accounts and only 11,000 accepted? I think playing the lottery would have the same standing chance as the IRS Offer In Compromise plan dont you think? So do you see why regulations are coming up left and right? All these companies are just brutally taking advantage of all us americans that are already facing financial crisis. Instead of working together to help eachother get out from all this, everyone is preying on eachother as if its ok to lie, cheat and steal nowadays.

    • http://GetOutOfDebt.org Steve Rhode

      I think the FTC TSR looks on the transaction you used in your example as covered by the TSR. Where it captures it is if the consumer used interstate communications by telephony, VOIP, or verbal communications at any point in the sales process.

      “Starting on October 27, 2010, for-profit companies that sell debt relief services over the telephone may no longer charge a fee before they settle or reduce a customer’s credit card or other unsecured debt.” – Source

      The true face-to-face exemption will be for someone who walks to the the office on Main Street and meets with a professional provider of X service. So technically, if a consumer walked into a local JK Harris office and never called prior to that then it may not be covered but I’m sure that is just a fraction of their total clients.

      Steve

  • FKtheFTC

    That’s ridiculous. The IRS lies and tricks taxpayers into not taking full advantage of their deductions, credits and refunds. If you have not filed in the past 5 years and you would be due a refund for 2007, 2008 & 2009, the IRS will just tell you “not to worry about those years” and just file 2005 & 2006. They are sneaky, they lie and they will corner you into a higher payment than you need to pay. The FTC is assuming that every American has the knowledge and background to deal with these things on their own. It’s like telling people not to go to the mechanic because you can fix your car yourself or not to take your computer to the store to get fixed because you can learn how to do it yourself. Get a clue FTC

  • FKtheFTC

    That’s ridiculous. The IRS lies and tricks taxpayers into not taking full advantage of their deductions, credits and refunds. If you have not filed in the past 5 years and you would be due a refund for 2007, 2008 & 2009, the IRS will just tell you “not to worry about those years” and just file 2005 & 2006. They are sneaky, they lie and they will corner you into a higher payment than you need to pay. The FTC is assuming that every American has the knowledge and background to deal with these things on their own. It’s like telling people not to go to the mechanic because you can fix your car yourself or not to take your computer to the store to get fixed because you can learn how to do it yourself. Get a clue FTC

Get My FREE Get Out of Debt Guy Newsletter

It is the smart thing to do.

I promise to keep your email safe and secure.

Close

I want to keep you posted each weekday with just one email about the latest get out of debt news, scam alerts and information to beat back debt.

You can unsubscribe at any time with just one click.

After you subscribe, check your email to confirm your subscription. If the confirmation email does not appear in your inbox in a few minutes, check your spam folder for it. Sometimes it likes to annoyingly hide there.


  • It will keep you posted on the latest scams.
  • You will be alerted to the latest articles.
  • You will wind up smarter than everyone else dealing with debt.