The Internal Revenue Service has renewed its warning about IRS tax relief scams targeting Americans with outstanding tax debt. Officials caution that many tax relief companies advertise false promises of eliminating debts for “pennies on the dollar,” while charging steep upfront fees. The IRS stresses that only its legitimate programs, such as the Offer in Compromise, can determine who qualifies for real tax relief.
The IRS warns that many tax relief companies charge thousands of dollars in upfront fees while offering services that the agency already provides directly. Victims often pay large sums but still owe their original tax debt, which continues to accrue penalties and interest. Some firms even mislead consumers by promising guaranteed settlements that they cannot deliver.
A central tactic in a tax debt relief scam is misusing the Offer in Compromise program. While this is a legitimate tool that can help settle tax liability, most taxpayers do not qualify. Eligibility requires that individuals have all required returns filed, not be in bankruptcy, and demonstrate that they cannot reasonably pay the full amount. The IRS emphasizes that only the IRS can decide if someone is eligible for this program—not outside firms.
Beyond financial loss, scams can put taxpayers at risk of identity theft. Unscrupulous companies often request sensitive personal and financial data under the guise of helping to resolve debt. Once shared, this information can be misused, leaving taxpayers vulnerable to further fraud, denied refunds, or even false bills in their name.
The IRS offers an Offer in Compromise as a legitimate option for taxpayers who cannot fully pay their tax liability. Through this program, the agency may accept less than the full amount owed if the proposed compromise reflects what the IRS could reasonably collect. To be eligible, taxpayers must file all required returns, remain current with estimated payments, and not be in bankruptcy. While this path can resolve debt, the IRS makes clear that most taxpayers do not meet the strict qualifications.
For years, the IRS has placed fraudulent tax relief companies on its annual “Dirty Dozen” list of tax scams. These businesses often rebrand after enforcement actions, continuing to market misleading services that claim to help consumers settle debts quickly. The agency has repeatedly urged consumer protection by warning that any firm guaranteeing approval or promising special deals with the IRS is not trustworthy. Past alerts also highlight that taxpayers can explore official collection alternatives, such as installment payment plans, penalty relief, or delays in collection, without relying on outside promoters.
In a recent statement, IRS Commissioner Danny Werfel stressed the importance of consumer protection in this area: “Too often, we see unscrupulous promoters mislead taxpayers into thinking they can magically get rid of a tax debt. This is a legitimate IRS program, but not everyone qualifies.” The Commissioner reiterated that only the IRS can decide whether a taxpayer qualifies for an Offer in Compromise, and taxpayers should be wary of firms that charge excessive fees or guarantee results.
The Taxpayer Advocate Service, an independent organization within the IRS that assists taxpayers facing hardship, has also urged vigilance. It advises taxpayers to contact the IRS directly or request help from the Advocate Service before paying third-party companies. The office highlights that legitimate assistance can be obtained without risking thousands of dollars in cash or sensitive data.
Experienced tax preparers have echoed these warnings, noting that many promoters convince clients to submit applications they know will no longer qualify. “We’ve seen families lose money to firms that promise to settle a bill for pennies, but all they get is another IRS notice and more penalties,” one preparer said. The advice from professionals is clear: before you request outside help, verify the program details directly on IRS.gov or through trusted services.
Taxpayers who receive an IRS notice about unpaid taxes should proceed with caution before engaging with outside companies. Promises to erase debt or guarantee approval for an Offer in Compromise are strong warning signs. Other red flags include pressure to pay a large upfront fee, vague assurances about “special IRS deals,” or requests for personal financial data that could lead to identity theft.
The IRS advises consumers to first attempt to resolve their tax liability directly with the agency. Options include setting up an installment payment plan, exploring penalty relief, or requesting temporary collection delays. Taxpayers can also appeal certain IRS decisions if they disagree with a determination. Those who encounter suspicious services are urged to file Form 14242, “Report Suspected Abusive Tax Promotions or Preparers,” by mail or online. Reports may help the IRS take enforcement action and protect other taxpayers.
For those struggling to pay or who may not be eligible for compromise programs, the IRS and the Taxpayer Advocate Service offer several official collection alternatives. These include installment agreements, partial payment options, and hardship delays that give taxpayers more time to manage bills without incurring excessive interest or losing expected refunds. By turning to trusted resources, consumers can find safe ways to request help, submit forms properly, and contact the IRS to address their obligations.
For trustworthy information and official IRS programs, taxpayers should rely on government resources and established watchdogs rather than outside promoters. The following links provide accurate details about eligibility, applications, and consumer protection against scams:
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