Stressed About Paying Your Tax Debt? Watch Out For Scammers Who Want to Profit

If you are one of the approximately 40 million taxpayers who owed a balance to the IRS on Tax Day, chances are that stress about being able to pay your taxes went up. Scammers are counting on that stress to target potential fraud victims. 

With April 15 in the rear view, many taxpayers may find themselves unable to pay hefty tax bills due to financial hardship or other reasons. To make matters worse, not paying your taxes can lead to penalties and interest payments that accumulate over time. Scammers often seek to capitalize on consumers’ financial woes, and this can apply doubly so when it comes to concerns around tax debt. 

To combat this, the National Consumers League (NCL) is issuing a fraud alert to warn consumers about tax-related scams, particularly those involving misleading “Offer in Compromise” (OIC) schemes. These scams falsely promise to settle tax debts for “pennies on the dollar,” often leading to significant financial losses. 

Understanding the Scam 

The IRS’s Offer in Compromise program allows eligible taxpayers to apply to settle their tax debts for less than the full amount owed. However, qualifying for an OIC requires meeting strict criteria, including demonstrating financial hardship. Scammers, often referred to as “OIC mills,” mislead consumers through tactics like:  

• Guaranteeing tax debt settlements without assessing individual eligibility; 

• Charging hefty upfront fees for services that may not be necessary or effective; 

• Filing OIC applications on behalf of taxpayers who clearly do not qualify, leading to automatic rejections; or 

• Claiming to halt all IRS collection activities immediately, which is not always possible.  

These deceptive practices can not only fail to resolve tax issues but also may leave consumers worse off. 

The proliferation of these scams underscores the importance of vigilance and informed decision-making when dealing with tax debt solutions. 

Protecting Yourself 

To reduce your risk of being a victim of these scams: 

• Verify Eligibility: Use the IRS’s free Offer in Compromise Pre-Qualifier tool to assess your eligibility before engaging any third-party services. 

• Be Skeptical of Guarantees: No company can guarantee acceptance into the OIC program. Be wary of promises that seem too good to be true. 

• Avoid High Upfront Fees: Reputable tax professionals typically charge reasonable fees and provide clear explanations of their services. 

• Consult Trusted Professionals: Seek advice from certified tax professionals or directly contact the IRS for guidance. 

Reporting Scams 

If you suspect you’ve encountered a tax scam:  

• File a complaint at Fraud.org: We will share your complaint with our network of consumer protection agency and law enforcement partners. 

• Report to the IRS: Use Form 14242 to report suspected abusive tax promotions or preparers. 

• Contact the Treasury Inspector General for Tax Administration (TIGTA): Report scams online or call 1-800-366-4484. 

• Inform the Federal Trade Commission (FTC): File a complaint at ReportFraud.ftc.gov.