They appear on late night television and on the internet promising to reduce your tax debt, stop garnishments, remove tax liens and settle your debt for pennies on the dollar. Oh, if only it were true. Pay a company a few thousand dollars and voila, your tax debt is reduced from $100,000 to $5,000. How’s that for a great return on investment!
Here is how the scam works: One day you receive a letter from the Internal Revenue Service indicating that you owe $50,000 to the IRS. It turns out that in 1999 and 2000 you failed to file a tax return and now with penalties and interest you owe them this money. Your first impulse is to panic as you have never owed anyone this much money and on the salary you make it will take the rest of your life to pay this debt. You decide to ignore this letter and hope the IRS will go away, until next month when you receive a second letter, and then a month later a third. Finally, six months later, you receive a certified letter from your bank and your employer – the IRS is going to take what little money you have in your bank account and they are also going to garnish a large part of your wages. By now you are losing sleep and are considering moving to Bolivia. Good idea.
Then lying awake at three o’clock one morning the face of an angry female attorney appears on your screen telling you she will fight the IRS for you and that she will win! She promises to reduce your debt and stop the IRS from taking your stuff! All you need to do is call the following toll free number and, by the way, have your credit card ready! Step one of the scam is complete. You are in debt, you are losing sleep and you have her number.
Step two begins with a simple Tax Advisors telephone call to someone called a tax advisor – in reality a commissioned salesperson. What you do not know is that this salesperson has financial problems of his own and that the only way he can pay them is to get your credit card number and sell you their bogus services. The salesperson will discuss your situation with you, not to determine how best to help you, but to figure out how much you would be willing to pay and how much he can put on your credit card. It will be a large figure.
He will be very positive about their ability to reduce your debt and stop the garnishment. He will repeat that your $50,000 debt can easily be settled for $3,000 given your financial situation, and it will only cost you $5,000. And the levy on your bank account will never happen! So you give them your credit card number, they charge you five grand and you go to sleep that night feeling much better. After all, a total cost of eight grand is better than $50,000. Step two of the scam is complete.
Step three – your tax advisor (who yesterday was stocking shelves in Home Depot) asks you to send him dozens of documents, bank statements, car loan paperwork, your lease or mortgage, everything. It takes a few weeks but you get it together and mail it to them. A month goes by and you hear nothing so you call. Unfortunately your tax advisor is not in at the moment but will return your call. A few weeks goes by, nothing. You call again. Your tax advisor is no longer working there and your account has been transferred to tax advisor #2 who will return your call. A few weeks goes by, nothing. You call again and finally get to speak to someone. They tell you that they are new to your case and that they will need the following documents to effectively evaluate your situation. It takes a week or so, but you finally get them into the mail. A month goes by and you call to find out what is going on only to be told that your tax advisor is on vacation and will get back with you when he returns. Another month goes by – nothing. By now it has been almost six months since you hired this firm to help you. The IRS has since taken all the money in your bank account and your wages have been garnished every week leaving you with nothing.