Over 6 billion results come up on Google when you search “debt relief scams.” According to data provided by the Federal Trade Commission (FTC), consumers incurred losses of almost $8.8 billion due to fraudulent activities in 2022. This figure represents a significant increase of over 30 percent compared to the preceding year. As taxpayers facing financial difficulties seek to manage and alleviate their debt burdens, financial experts caution the American public about the prevalence of fraudulent tax debt relief schemes.
Only recently, The Federal Trade Commission disbursed payments exceeding $3.3 million to consumers who suffered losses due to the deceptive practices of a student loan debt relief enterprise. The company employed fraudulent tactics to extract illegal upfront payments from consumers by falsely claiming to be associated with the U.S. government.
How to Spot Tax Debt Relief Scams
Numerous scammers prey on unsuspecting people worried about their tax problems, such as their credit card debt, issues with mortgages, student loans, and filing bankruptcy. Tax Relief Professionals at Ideal Tax observe that the absence of favorable reviews is a red flag to watch out for when determining which websites to contact for assistance.
Additionally, you should doubt a company's credibility if it makes bold claims about how much money it can save you without providing any information on the conditions necessary to qualify for IRS tax relief.
The Risks of Tax Debt Relief Companies
If you owe taxes and are having trouble making payments, tax debt relief may be an option to consider. However, you need to exercise caution. Legitimate tax-settlement organizations rarely offer anything you can't do yourself, and scammers use the promise of assistance to steal victims' money. The biggest risk of utilizing a tax debt relief company, the Tax Relief experts say, is failing to resolve your IRS debt successfully.
According to the experts, instead of providing tax help, the wrong tax company can add insult to injury and make your tax problems worse, so clients must know their rights and conduct thorough research when seeking professional help with the navigation of tax relief.
Consider The Cost
The cost of how much a tax relief company charges is also an essential factor to consider. Some companies charge a percentage of the total tax debt you have, most likely 10%. Others may charge a flat fee, like 1,000 dollars. It's important to compare costs between companies as these payments are nonrefundable.
Take Advantage of The IRS Fresh Start Program
Some people who owe money to the IRS can get help with their taxes through the Fresh Start Initiative Program. It is a way for the Federal Government to stop the IRS from taking advantage of people who owe back taxes. The IRS uses compound interest and fines to punish people who owe back taxes.
The IRS Fresh Start program aims to relieve debt collections for payments such as financial penalties and tax liens. However, there are certain requirements a person or business must have met to be eligible for taking advantage of the IRS Fresh Start program. According to the Tax Relief Professionals at Ideal Tax, here's how the program works and the eligibility criteria.
How Does The IRS Program Work?
The Fresh Start Initiative is not a single tax relief program; it is a set of resolution options allowing individuals and small businesses to pay their debts in manageable ways. Four options within the IRS fresh start program exist for tax debt relief. These include the offer in compromise (OIC), installment agreements, currently non-collectible, and penalty abatement.
Am I Eligible for The IRS Fresh Start Program?
According to the experts, there are specific qualifications a person needs to have to participate in the IRS Fresh Start Program. Eligibility for the fresh start program must meet the following criteria:
- For sole proprietors, Income must have dropped by 25%.
- For singles, Annual income must be below $100,000.
- Married ones must have an annual income of less than $200,000 and owe less than $50,000 in tax debt.
- Taxpayers must have a clean history with zero missed payments with the IRS.
- Collection Information Statements such as Form 433, a financial document that includes your income and expenses. The IRS uses this to determine your eligibility.
- One must be able to pay the tax liability within 60 months or before collection statutes expire.
Does It Work?
Highlighting the advantage of this IRS provision, The Tax Relief Professionals at Ideal states that the IRS has granted forgiveness to many individuals, thereby allowing them to achieve financial independence from their tax liabilities. Although specific eligibility requirements must be satisfied, the Initiative has the potential to be highly advantageous in mitigating the exacerbation of debt.
They further note that non-participation of an individual or business with significant debt can lead to severe consequences, including the imposition of penalties and interest fees. Taxpayers may also face the possibility of wage garnishments and liens. A crucial requirement for eligibility under the Fresh Start program is being current on your tax filing obligations with accurate withholding amounts.
Hence, getting assistance from a licensed tax professional is recommended to get your filings in line and negotiate with the IRS. With several different programs on offer, it is imperative to pick the program that best suits your financial situation.
Amaka Chukwuma is a finance and lifestyle writer with a real knack for the craft. She's been at it for over four years, making her mark on places like FinanceBuzz and The Buttonwood Tree, not to mention some cool collaborations with various brands. Her. Her work with Wealth of Geeks has been widely appreciated, with syndication across multiple platforms and publications. Amaka's got a BA in Linguistics. When she's taking a break from her writing adventures, you'll probably find her digging into some delicious pies or exploring the food scene. Want to see what she's up to or get a taste of her work? Hit her up on LinkedIn and Twitter.