Eight Reasons to Avoid Most Tax Relief Companies

You can't miss the ubiquitous advertisements for tax relief companies on TV, internet or radio. But can you trust any of these companies? As veterans of the tax relief industry, we came up with eight reasons why you might want avoid some, if not most, of them:

1. Ridiculous fees. If a tax resolution company is going to charge you $3,000 or more for representation, you deserve the red carpet treatment. You should have direct access to your licensed tax professional and/or have the customer service rep who does your up-front analysis to be with you to the end. (If you're interested, we wrote more about what $4,000 of tax resolution should buy you)
2. Investigation or research fees that don't provide useful info. If you are going to have your IRS record researched by a "tax relief" company for a $495 down payment, you deserve to get good information from the investigation like finding out when your taxes will expire or where you truly stand in the collection process. This "retainer" shouldn't be just a clever prelude to a higher fee or a fabricated call-to-action.
3. Continuation fees. Many tax resolution companies have a tendency to whack you with new fees once you're on board with them, figuring you're more or less locked in. (We wrote more about this phenomenon too, about why reopening fees are problematic.)
4. Bad advice. Plainly and simply, many tax resolution companies will advise you to do the wrong thing. Here's an example where a "professional" botches a tax case.
5. Dishonest advice, i.e. lying. The oldest trick in the tax resolution sales book is to tell someone that they'll qualify for an Offer in Compromise to settle their tax debt when they clearly do not qualify. It's human nature: people just love to hear that they will settle their debts—just like in the commercials! Shady salespeople love to scratch this itch for profit.
6. Misstating urgency and scare tactics. Tax resolution sales people and telemarketers harass those with tax liens, they're notorious for telling you that the sky is falling if you don't hire them immediately. "Your case has reached 'Elevated Status!" barks one company to its prospective clients, cold calling tax liens. Tax relief companies will often manipulate your emotions to make the sale. There's no reason to fake urgency. An honest tax professional should lay out all of the options for you without emotion or scare tactics.
7. Employee turnover. Whether big or small, tax resolution companies are notorious for having high employee turnover. As many of the companies are reliant on "salespeople," employees who can't sell enough cases are fired. Hence, your case keeps getting handed off from representative to representative. In these environments, the institutional memory of your case can deteriorate fairly easily.
8. Going out of business. Running an effective tax resolution business requires a unique blend of great customer service with excellent marketing. Take one of those two elements away and you're out of business! We've documented over 100 companies that have gone out of business in the last couple of years: Dead Tax Resolution Companies - R.I.P.