Tax Resolution Scams

Tax Debt Resolution

Houston Tax Attorney

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Tax Resolution Companies

Are you looking for the “best tax resolution company“? Well look no more because there is no such thing as a good tax resolution company! I felt compelled to write this post due to numerous clients who have come to me after being ripped off by one or more of these companies. One client in fact was charged tens of thousands for her tax resolution case and ended up with almost $200,000 levied by the IRS. The tax matter was resolved – but not in the taxpayer’s favor.

What is a Tax Resolution Company?

A Tax Resolution Company is any national company claiming to specialize in tax resolution services that advertises heavily on the radio, television, or internet. If you’ve search on Google for terms such as “Tax Resolution Companies” or “Tax Relief”, you’ll notice that the first few results have an “ad” button next to it. These are paid advertisements. To get an idea of what these companies are paying for Google ads, here is a list of some commonly searched keywords and the cost per click for the business:

  • Tax resolution companies – $47.92
  • Tax relief – $42.31
  • Tax resolution services – $43.27
  • Tax relief attorneys – $58.39
  • Tax relief services – $52.34
  • Tax debt help – $61.72
  • Tax relief help – $73.52

Remember, this is the cost per click. Every time someone searches for one of these phrases and clicks on an ad, this is what the company pays to Google Adwords. In addition to online ads, these companies also advertise on the radio and print. As you can imagine, tax resolution companies spend hundreds of thousands to millions in advertising. These companies have to charge ridiculous amounts for their services to stay in business.

Common False and Misleading Advertising Tactics Used by Tax Resolution Companies

“Fresh Start Program.” Many tax resolution companies advertise about the IRS’s “new” fresh start program, which is not actually new at all. It refers to programs such as installment agreements and offer in compromise. These are not new programs and have been available for many years.

BBB Accreditation. What happens when a client files a BBB complaint? The tax resolution company simply refunds the money. However, this does not repair the harm caused to you by mishandling of your case. You may have lost important legal rights such as your right to petition tax court within the 90 day period, or to request a Collections Due Process hearing within the 30 day window. When the company’s BBB ratings start to decline, they’ll shut down the company and start a new one with a fresh A+ rating.

As Seen on “CNN, FoxNews, etc.” If a tax resolution company pays for advertising on CNN, FoxNews or similar news outlets, they are allowed to state on their website “as seen on CNN” etc. While it’s not technically false (it was seen on CNN), it is misleading. It makes it seem to an unsophisticated client that CNN or FoxNews is endorsing this business, which is not true.

But what about all the positive reviews on Google, Yelp, TrustPilot and elsewhere? These are often posted by the company, their employees, or a marketing company.

OK, but what about all the 3rd party websites that say good things about tax resolution companies? If you Google “Best Tax Resolution company”, you’ll find a number of sites.  These websites or articles are written by individuals that either directly or indirectly receive money from tax resolution companies for their reviews.

  • Example 1. The article appears to be an impartial ranking of tax resolution companies. But there’s more than what meets the eye. The owner of this website is compensated by the tax resolution companies that are posted on the website. In fact, it says so in extremely small print at the bottom of the website. Who actually reads the fine print anyway? It states: “The owner of this website may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear).”
  • Example 2: I’ll admit, this one looks very convincing.  I could see myself falling for this if I wasn’t a tax attorney. “Consumeraffairs.com” seems like a legitimate website, similar to “consumerreports.org”. The website states “top 10 best rated tax relief” which leads the unwary customer to believe that there is some sort of independent ranking methodology. This couldn’t be further from the truth. The owner of this website also receives money from tax resolution companies in exchange for placement on their website. At the bottom of the webpage in fine print (where even the most boring of tax attorneys wouldn’t look), it states “Advertisements on this site are placed and controlled by outside advertising networks. ConsumerAffairs.com does not evaluate or endorse the products and services advertised.”

Fine, you’ve convinced me. I guess I’ll go with one of the companies warning me about tax resolution companies. This scam, which I call the wolf in sheep’s clothing, is a little more ingenious than the others. The tax resolution company tries to disguise themselves as one of the “good guys” and warns consumers about the “bad” tax resolution companies.

  • Example 3: This tax resolution company writes an article about other tax resolution companies that were shut down for defrauding consumers. I have had many former clients from this company. All have reported to me that the company took large sums of money for “investigation fees” and then demanded significantly more fees after the investigation. After paying the fees, the person handling their case either did nothing with the case or did not provide the relief that was promised. At worst, they blew important deadlines which caused the client significant economic harm.

How do Tax Resolution Companies Operate?

Advertise, advertise, and then advertise some more. As you can see, this business model depends heavily on advertising. The goal is to get as many potential customers to call as possible. When you call one a tax resolution company, your call will be handled by a telephone operator working in a call center. This person probably isn’t any more qualified to give you tax advice than your gardener. You’ll pay a small investigation fee, usually with a money back guarantee. After a few weeks, you’ll speak to a salesman who will sell you on their services. Their goal will be to get the maximum amount of money from you through fear tactics and false promises. The case might then be sold to a contractor, who will in turn sell the case to a subcontractor. You have no idea who will be ultimately working on your case. Something that should cost no more than a few thousand at most is going to cost you $10,000 or even as high as $30,000. You could’ve cut through the two or three middle men and hired a tax attorney directly.

Who Should I Hire?

Find a local tax attorney. Tax resolution companies often advertise that they are “local” when they are in fact not. Consult with a local attorney who has experience handling tax debt. It’s important to be local because not all IRS matters can be resolved with a letter or telephone call. Also, attorneys are subject to their state’s disciplinary code. They have much more to lose from being dishonest or producing shoddy work than a tax resolution company. Tax resolution companies are not subject to any professional codes, which allows them to operate and advertise with impunity.

Conclusion

‘Caveat emptor’ is a Latin phrase often used in contract law that means “let the buyer beware.” Ultimately, you are responsible for choosing who you entrust your financial security to. Whether you choose to hire a “tax resolution company” or a local tax attorney or CPA for your back tax matter is your decision.

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