Tax Matters – Tax Relief Companies Accused of False Advertising

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192 – November/December, 2016

 

BY JOHN ALAN COHAN, ATTORNEY AT LAW

Have you heard those scary radio ads by tax relief companies promising to help taxpayers in distress? The ads warn consumers about unexpected IRS bank levies to recover unpaid or disputed taxes. You are informed that “experts” can help stop the IRS levy and successfully settle your tax dispute for pennies on the dollar, or even obtain total “tax forgiveness.”

But here are the facts: The IRS doesn’t suddenly levy your bank account. They must first determine that you owe back taxes, usually through an audit, and you can contest this determination in IRS Appeals or by seeking audit reconsideration. Levies occur only if you have ignored notices sent by the IRS. (See discussion below)

Tax relief companies, which also advertise on TV and the internet, will charge thousands of dollars in up-front fees. They will ask you to complete IRS Form 656, “Offer in Compromise” (OIC), without checking to see if you are eligible for the OIC program. The form requires extensive and burdensome financial disclosures. Because of the IRS’s strict guidelines for debt forgiveness, the IRS rejects about 90% of the Offers in Compromise.

Moreover, taxpayers can readily submit Form 656 on their own without help from a tax relief company. A tax attorney or C.P.A. can advise you in advance whether you have a reasonably good chance of prevailing in the OIC program. Filing Form 656 will remove the bank levy or wage garnishment temporarily, but once the offer is rejected, the levy is reinstated.

According to the Federal Trade Commission, many consumers have complained that after paying thousands of dollars in up-front fees, some of the tax relief companies took even more of their money through unauthorized charges to their credit cards or withdrawals from their bank accounts.

An advisory from the California Department of Justice warns: “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.”

Click here to read the complete article
192 – November/December, 2016