Tax Relief AnswersAre Tax Relief Companies Legit? How to Spot a Scam
The short answer
Some tax relief companies are staffed by licensed enrolled agents, CPAs or attorneys who do real work, and some have been halted by courts at the FTC's request for taking large fees and delivering little. The way to tell them apart is to check the license of the person who will handle your case, in the IRS directory of credentialed preparers, with your state board of accountancy or with your state bar. The FTC's consumer page on tax relief companies lists the warning signs.
What the FTC and the IRS have said
- The FTC (consumer page, April 2023): only the IRS or your state tax agency decides whether you are eligible for a program, and no company can promise a particular outcome. It warns against paying the whole fee up front and against monthly "maintenance" fees, and it tells consumers to ask how a company bills and whether it gives refunds.
- The IRS (Dirty Dozen list, IR-2024-91, April 3, 2024, now marked archival): it warned about "OIC mills" that advertise settling tax debt for "pennies on the dollar" and said "these mills often charge excessive fees." It pointed taxpayers to its free Offer in Compromise Pre-Qualifier and added: "The program is legitimate, but it's not for everyone." Read the IRS release.
- FTC enforcement: in a 2010 case, the FTC said one company falsely claimed it could settle back taxes for a fraction of what was owed and charged up-front fees of about $3,200 to $25,000. In a June 2, 2026 settlement, the FTC and Nevada said another operation promised "pennies on the dollar" before reviewing taxpayers' finances and impersonated government agencies, including the IRS. Both cases describe allegations; the 2026 order carries a $77.7 million judgment, mostly suspended.
Steps to check a firm
- Ask for the name and credential of the licensed person who will sign Form 2848, the IRS power of attorney, for your case.
- Search that name in the IRS directory. It lists enrolled agents, CPAs and attorneys who hold a valid preparer tax identification number.
- For a CPA, confirm the license with the board of accountancy in the state that issued it. For an attorney, confirm admission with the state bar or the state court that licensed the attorney.
- Before paying anyone to tell you about an Offer in Compromise, run the free IRS Pre-Qualifier yourself.
- Ask for the total fee, each phase's cost and the refund policy in writing, as the FTC advises.
- Read the contract before you sign. If anyone pushes you to sign during the first call, stop.
Signs of a real firm, and signs of trouble
| A real firm usually | A scam often |
|---|---|
| Names the licensed person on your case | Gives only a first name or a "case manager" |
| Reviews your income, expenses and assets before recommending anything | Says "you qualify" before seeing any numbers |
| Tells you which IRS option fits and that you could apply yourself | Talks about a special or new program |
| Puts every fee and refund term in writing | Wants the full fee now, by card or wire |
| Explains that the IRS decides | Promises a "guaranteed" result or "pennies on the dollar" |
Our red flags page covers ten promises in detail, with the truth beside each one.
Where to report a problem
Report a tax relief company to the FTC at ReportFraud.ftc.gov. The IRS accepts reports of abusive tax promoters and preparers on Form 14242. If a company took your money and you are not sure anything was filed, sign in to your IRS Online Account to see your balance and recent activity yourself.
FAQ
Are all tax relief companies scams?
No. Some are run by licensed enrolled agents, CPAs or attorneys; the FTC has taken action against others for false promises and large upfront fees.
How do I check whether a tax professional is licensed?
Search the person's name in the IRS directory of credentialed preparers, and confirm a CPA license with the state board of accountancy or an attorney's admission with the state bar.
What is an OIC mill?
It is the IRS's term for promoters who advertise settling tax debt for "pennies on the dollar" and charge high fees for an Offer in Compromise the taxpayer may not qualify for.
Where do I report a tax relief company?
Report it to the FTC at ReportFraud.ftc.gov, and report abusive tax promoters to the IRS on Form 14242.