FTC Consumer Alert

Federal Trade Commission Bureau of Consumer Protection Division of Consumer & Business Education

Owe Back Taxes? Tax Relief Companies 

Can Result in More Pain than Gain

We’ve helped thousands of people settle their tax debts 

for a fraction of the amount owed. 

We can stop wage garnishments, bank levies, tax levies, 

property seizures, and unbearable monthly payments. 

We can significantly reduce your tax debt. 

Call for a free consultation.

Fact or fiction? 

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 IRS hardship programs. 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 IRS 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 (FTC) 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.

If you owe back taxes and don’t know how you’re going to pay the debt, the FTC, the nation’s 

consumer protection agency, says don’t panic, take a deep breath, and consider your options. If you 

are having trouble paying bills, it’s often better to try to work out a payment plan with the creditor 

yourself than to pay someone else to negotiate a plan for you. The same is true when you owe money 

to the IRS or your state comptroller. 

IRS Help for Taxpayers

If you can’t pay your taxes or your payments are late, the IRS charges you penalties and interest. 

It also has several tax relief programs to help people who owe back taxes: 

•	 An Installment Agreement is generally available to people who can’t pay their tax debt in 

full at one time. The program allows people to make smaller monthly payments until the entire 

debt is satisfied. 

•	 An Offer in Compromise (OIC) lets taxpayers permanently settle their tax debt for less than 

the amount they owe. The OIC is an important tool to help taxpayers in limited circumstances; 
taxpayers are eligible only after other payment options have been exhausted and their 

ability to pay has been reviewed by the IRS.

In very limited circumstances, the IRS may offer a penalty abatement to people who 

haven’t paid their taxes because of a special hardship. If the taxpayer meets very narrow 

criteria, the IRS may agree to forgive the penalties. An interest abatement is even more limited 

and is rarely provided.

 According to the IRS, you can apply for an Installment Agreement, OIC, or a 

penalty or interest abatement without the help of a third party. If you prefer third-party 

assistance in negotiating with the IRS, only certain tax professionals — Enrolled Agents 

(federally-authorized tax practitioners who can represent taxpayers before all administrative 

levels of the IRS), Certified Public Accountants (CPAs), and attorneys — have the authority 

to represent you. Their services should involve a face to face meeting where they explain your 

options and their fee structure. 

You can contact the Taxpayer Advocate Service, an independent organization within the 

IRS that provides free help to people who are experiencing financial difficulties or who need 

help resolving a problem with the IRS. Call 1-877-777-4778 or visit irs.gov/advocate.

State Tax Relief Programs

The process for tax settlements with the states is very similar to the process with the IRS, 

although it varies from state to state. In some states, for instance, a taxpayer’s penalties can 

be waived, but interest can’t. In other states, interest can be waived, but penalties can’t. And 

in some states, legitimate tax debt can’t be reduced at all. For more information, contact your 

state comptroller. For a state-by-state listing, visit the National Association of State Auditors, 

Comptrollers and Treasurers (NASACT) at nasact.org.

Taxpayer Tips

If you owe back taxes and you are having trouble meeting your tax obligation: 

•	 read your notices from the IRS or your state comptroller. Ask about collection 

alternatives.

•	 save yourself some aggravation by ignoring promises from companies that say you are 

“qualified” or “eligible” for a tax relief program to resolve your tax debt. Only the IRS 

or your state comptroller can make that determination. 

•	 walk away if a company requires a fee in advance for tax relief services. Check them 

out with the IRS. 

For More Information

The FTC has free materials about dealing with debt and other money management issues 

at ftc.gov/moneymatters.

The IRS has information on the collection process and payment options at irs.gov.
October 2010

Publication 594, The IRS Collection Process, has information on options available to taxpayers, 

and the IRS YouTube channel has a video at youtube.com/irsvideos#p/u/38/h8FKcoGArr4.

The FTC works to prevent fraudulent, deceptive and unfair business practices in the 

marketplace and to provide information to help consumers spot, stop and avoid them. To 

file a complaint or get free information on consumer issues, visit ftc.gov or call toll-free, 

1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a new video, How to File 

a Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints into the 

Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of 

civil and criminal law enforcement agencies in the U.S. and abroad. 

1-877-FTC-HELP FOR THE CONSUMER

FEDERAL TRADE COMMISSION ftc.gov