We’ve all heard, ad nauseum, the constant television and radio commercials from tax relief companies claiming they can settle your tax debt for “pennies on the dollar” while prompting you to call some 1-800 number. These companies often refer to the IRS “Fresh Start” program and mislead taxpayers by saying they qualify for an IRS hardship or settlement program, a determination that is ultimately made by the IRS. The Federal Trade Commission (“FTC”) has identified the serious issues arising with these companies and summarizes them as follows:

Tax relief companies use the radio, television and the internet to advertise help for taxpayers in distress. If you pay them an upfront fee, which can be thousands of dollars, these companies claim they can reduce or even eliminate your tax debts and stop back-tax collection by applying for legitimate IRS hardship programs. The truth is that most taxpayers don’t qualify for the programs these fraudsters hawk, their companies don’t settle the tax debt, and in many cases don’t even send the necessary paperwork to the IRS requesting participation in the programs that were mentioned. Adding insult to injury, some of these companies don’t provide refunds, and leave people even further in debt.

These companies are NOT law firms. That means you are not receiving any legal advice regarding the best course of action to take for your case and there is generally no attorney-client privilege afforded to you. Take Optima Tax for example. Their website disclaimer specifically says “We do not assume tax debt, make monthly payments to creditors or provide tax, bankruptcy, accounting or legal advice.”

So what are you paying for if you hire one of these tax relief services? I will defer to the FTC’s summary above.

Tyler DeWitt is the managing attorney, licensed in Tennessee and Florida, for DeWitt Law, PC, with offices in Memphis, Tennessee and Brentwood, Tennessee. Tyler focuses his practice on resolving IRS and state tax issues, including back taxes, audits, criminal tax issues, offers in compromise, and employment tax issues. DeWitt Law offers a free consultation and is licensed to practice before the IRS in all 50 states. Request a free tax consultation today.