Should You Use Tax Relief Companies if You Owe Back Taxes?

Preview: Whenever one of my articles has the phrase “walk away” in it, you know where I’m headed.

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 Internal Revenue Service  (IRS) hardship programs.  According to the Federal Trade Commission (FTC), 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 Internal Revenue Service 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.

Some taxpayers who filed complaints with the Federal Trade Commission reported that, after signing up with some of these companies and paying thousands of dollars in upfront fees, the companies took even more of their money by making unauthorized charges to their credit cards or withdrawals from their bank accounts. read more »

In part one of this blog on the top twelve scams or the “Dirty Dozen” identified by the Internal Revenue Service (IRS),  I talked about the first six -  identity theft, phishing,  return preparer fraud, hiding income offshore, “free money” and Social Security scams, and false/inflated income and expenses. This blog discusses the next six scams: false form 1099 refund claims, frivolous arguments, falsely claiming zero wages, abuse of charitable organizations and deductions, disguised corporate ownership, and misuse of trusts.

7. False Form 1099 Refund Claims – The taxpayer files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return. They believe that the federal government maintains secret accounts for U.S. citizens and taxpayers can gain access by using this form. read more »

The Internal Revenue Service (IRS) has been increasing tax examinations  for the wealthier tax payers and is becoming more aggressive.  This is based on internal pressure to collect more because revenue has decreased.

In 2011 to catch under reporting of income, IRS agents are now reviewing credit card statements and cross-checking data against tax returns. They are trying to catch those who spend a lot but report low income.  They are using audits on taxpayers that may generate smaller amounts such as $500, as an example to others in that group as taxpayers often share their experiences with friends and co-workers. read more »

On February 25th I wrote this article summarizing the IRS’ new tax lien policy and what it meant to consumers who wanted to get Federal tax liens removed from their credit reports.  The IRS’ announcement, which can be seen here, doesn’t specify whether or not their new rules regarding withdrawals are retroactive.

Today we may have been given a clue as to their willingness to withdraw tax liens that predate their new tax lien policy announced February 24, 2011.  I spoke with a gentleman from Texas who didn’t want to be identified.  I’ll call him Paul for this piece. read more »

On February 24th the IRS announced new policies regarding the collection of unpaid taxes and liens. Specifically, if the tax payer pays their liens “in full” the IRS will “withdraw” them. What does this mean for consumers’ credit reports?  Simply put, tax liens are now the only derogatory item on a credit report that will be removed once it has been paid, as long as you play your cards right.

Do you have an IRS tax lien on your 2013 credit report? Visit here to see your full report online now.

An unpaid tax lien can remain on a credit file indefinitely per the Fair Credit Reporting Act.  In the old days, pre February 24th, even when paid the lien remained on file for an additional 7 years and was only shown as “released.”  And, a released tax lien is just as bad for your credit as an unpaid tax lien.  This new IRS policy suggests that if you pay your liens in full they will be removed from your credit files much sooner, and this was confirmed by all three credit reporting agencies and their trade organization, the Consumer Data Industry Association (CDIA).  According to Norm Magnuson, Vice President of Public Affairs for the CDIA, “I’ve confirmed that all three credit reporting agencies remove withdrawn IRS tax liens.”

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