As tax day approaches, California Attorney General Edmund G. Brown Jr. today urged Californians to avoid “phony tax-relief companies” that charge taxpayers up to $3,000 in up-front fees to reduce or eliminate back taxes owed to the Internal Revenue Service (IRS), but provide no actual relief.
“Every tax season, phony tax-relief companies emerge to exploit cash-strapped Californians who owe back taxes to the IRS,” Brown said. “Taxpayers should be on high alert, avoid paying up-front fees to these companies and never ignore notices from the IRS.”
Throughout the tax season, tax-relief companies advertise on the radio, television and internet promising help for taxpayers in distress. For an up-front fee ranging from $2,000 to $3,000, these companies claim to reduce or even eliminate tax debts to the IRS and stop back-tax collection.
However, soon after collecting up-front fees, these companies typically inform taxpayers that they do not qualify for a relief program or that the IRS has rejected their attempt to reduce or eliminate the back-tax debt. Often these companies never even contact the IRS directly. Rather than reduce or eliminate the amount owed in back taxes to the IRS, these companies increase taxpayers’ debt burden.
Brown offered the following tips to taxpayers who owe back taxes and are having trouble paying:
- Don’t ignore notices from the IRS. Call and ask about collection alternatives, as you may be eligible for a monthly payment plan. In some cases, it is possible to pay less than the total amount you owe.
- Don’t trust promises from companies that imply that you are “qualified” or “eligible” for an IRS program to resolve your back-tax debt. Only the IRS can make that determination.
- Don’t pay up-front or advance fees for tax-debt relief services.
Taxpayers with problems paying back taxes can also contact the Taxpayer Advocate Service, an independent organization within the IRS dedicated to providing free assistance to individuals who are experiencing financial difficulties, need help resolving IRS problems, or believe the IRS is not working as it should.
Taxpayers can call the Taxpayer Advocate Service at 1-877-777-4778.
Taxpayers can also seek help from local Low Income Taxpayer Clinics, which represent low income taxpayers before the IRS; assist taxpayers in audits, appeals and collection disputes; and can help taxpayers respond to IRS notices and correct account problems. To learn more about these local services and the Taxpayer Advocate Service, visit: http://www.irs.gov/advocate.
If you are a California taxpayer who has been scammed by a company or individual offering tax-debt relief services, you can contact Brown’s office at 1-800-952-5225 or file a complaint online at: www.ag.ca.gov/consumers/general.php.
The IRS Office of Professional Responsibility oversees enrolled agents, attorneys, certified public accountants, enrolled actuaries, and appraisers. To report practitioner misconduct, email the IRS at: [email protected]
Last month, Brown issued an alert to taxpayers seeking tax-refund anticipation loans, commonly marketed as early tax refunds, warning them about deceptive advertisements, numerous fees and triple-digit interest rates. This alert followed two successful lawsuits against tax preparers who deceptively marketed refund anticipation loans:
- In June 2009, Brown won a $1.3 million lawsuit against Liberty Tax Service that bars the company from using false or misleading advertising to sell tax refund loans.
- In January 2009, Brown won a $4.85 million settlement with H&R Block, which prohibits the company from marketing refund anticipation loans as early tax refunds.