Are Tax Debt Relief Companies Legitimate?

So you may have seen those ads on TV where a company will offer to solve your tax liabilities and you’ll pay pennies on the dollar or they’ll announce the start of a new fresh start program for taxpayers and make all these wow promises. And I don’t want to call out everybody in an industry by saying that they’re illegitimate, because there are a couple of them that are really good at tax relief.

But unfortunately, most of the big ones, and most of the ones you see on TV, in fact, almost all of the ones you see on TV, are not that legitimate. The biggest problem that they have is a lot of the people in those industries aren’t attorneys.

So, in order to practice in front of the IRS, you either need to be an attorney, you need to be a CPA, or you need to be what’s called an enrolled agent. And an enrolled agent sounds like you’re sworn into the government, but the reality of the situation is all you have to do is take a test, and once you take the test and you get your certification, then you’re free to practice.

The biggest problem with a lot of these tax debt relief companies is although they claim that they’re supervised by attorneys, there’s usually one attorney and they’re usually working all of these cases without any real oversight and without really doing anything. And I say that not to despair the industry, I say that from experience, because a lot of the clients that we get in here that come from tax debt relief companies, They get charged like 10 grand and the company doesn’t actually do anything for them, but just makes the situation worse.

So the biggest problem with tax debt relief companies is you don’t know who you’re dealing with. You talk to one person, that person usually is a salesperson. They’re trying to get you to do something. They’ll break down things in stages. They’ll promise to do an investigation and they’ll give you a small fee and then they quote some extraordinarily high price to get the thing resolved, which is called sucker pricing in the industry. And they’re just not scrupulous. And a lot of them operate with these huge advertising budgets, and they just prey on people.

So when you’re hiring someone to solve your tax problems, number one, you actually want somebody who’s knowledgeable and who’s an expert. You want to make sure that the person that you hire is the person that is actually going to solve the problem for you.

Number two is, why not have somebody with a professional license? Why not have somebody who is beholden to the State Bar Association or the Board of Accountancy or something where there’s an actual level of oversight. We still get clients who do this occasionally, some people will look me up on the State bar website, check my bar license, which I don’t have any problem with. But you can’t do that with a tax resolution company. You don’t know who you’re dealing with. You don’t know what qualifications they have. You don’t know if they have a background in tax resolution. All they have to do is pass a test.

So the long and short of it is there are some good ones that exist out there, but you need to be really careful whom you’re dealing with and about who you’re engaging. Be careful about promises and be careful about pricing that sounds too good to be true.

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