Consumer Fraud Task Force Urges Consumers To Be Wary Of Firms Promising To Reduce Tax Debt

February 04, 2011
Milwaukee, Wis., Feb. 4, 2011As tax season opens, the Consumer Fraud Task Force is warning consumers to be wary of any company that claims it can reduce tax debt in exchange for advance fees.

Just three months ago, the Federal Trade Commission sued American Tax Relief of Beverly Hills, Calif., asserting it had bilked consumers out of more than $60 million by falsely claiming it could reduce consumers’ state and federal tax debts. A federal judge immediately froze the company’s assets and placed it in receivership.

“American Tax Relief is an example of a company that promised the moon, but delivered almost nothing,” the Task Force warns. “It isn’t alone. There is no shortage of businesses still preying on people desperate to get out from under tax debt.”

Companies like American Tax Relief often use national marketing campaigns to tout their services, saying they can reduce or even eliminate tax debt and stop the collection of back taxes by applying for Internal Revenue Service hardship programs.  But in reality, very few consumers qualify for the programs, which are available only under limited circumstances.

Instead of making advance payments to tax relief companies, the Task Force urges consumers to deal directly with the IRS. Under an installment agreement, the IRS allows consumers to make monthly payments to settle their debts.

A so-called “offer in compromise” can, in certain situations, let taxpayers settle their debt for less than the amount they owe. Persons interested in learning more about the programs may contact the IRS at 877-777-4778 or

Consumers who do not want to deal directly with the IRS might want to seek help from a professional, such as an accountant or tax attorney.

Records on file with the Better Business Bureau (BBB) and government agencies reveal numerous complaints from people who believe they were taken in by the claims of tax relief businesses. A resident of Stormville, N. Y., told the BBB that American Tax Relief had taken $15,000 of his money and “never did anything.” A consumer from Pioneer, Ohio, said the same company “ripped me off for $5,500.”

A man from High Ridge, Mo., told the BBB that he paid the company $6,000 in an effort to reduce a $50,000 IRS tax debt, but said the company did little except tell him repeatedly, “We’re handling it.”  Ultimately, he said, penalties caused the debt to swell to more than $75,000.  It was an IRS tax advocate – not American Tax Relief – that finally helped reduce the debt to $25,000.  “I don’t think American Tax Relief did anything,” he said.

In recent months, a new FTC rule went into effect prohibiting debt relief companies and mortgage modification firms from charging advance fees. The FTC is studying how this rule should apply to businesses taking advance fees for tax debt reduction work.

The Task Force is a coalition of local, state and federal government agencies and nonprofit business and consumer groups in Missouri and Illinois that work together to protect consumer and donor rights and guard against fraud.

Previous Task Force releases have warned consumers about timeshare resale companies, home remodelers, work-at-home scams, sweepstakes offers, online auctions, credit repair scams, foreclosure scams, extended auto service contracts and fire and police organizations. It also has offered advice in such areas as debt management.

To obtain information, or if you think you may be the victim of a scam, you may contact members of the Task Force:

Federal Trade Commission - (877) FTC-HELP (877-382-4357);
U.S. Postal Insspection Service - (877) 876-2455;