How to spot a tax relief scam, and what the FTC has shut down
The FTC and the IRS publish the same warning signs: a promise to settle for a fraction before anyone has looked at your finances, a fee demanded up front, and mail dressed up to look official. The free checks come from the IRS itself.
THE CLOCK — NO DEADLINE ON THIS PAGE, BUT THE SCAMS USE YOURS
High-pressure tax relief selling leans on real IRS deadlines. Nothing about hiring help changes the dates on your notices, and no company can make a statutory deadline go away. If a letter or caller says you must act by a date, check that date against the IRS notice itself.
What the regulators say to watch for
In August 2026 the FTC published a consumer alert for people struggling with tax debt. Its advice is short. Ignore promises from businesses that say you qualify for a tax relief program or that they will settle your debt for a fraction of what you owe, because only the IRS or your state's revenue department can decide what you qualify for. Do not do business with anyone who tells you to pay their whole fee up front. And know that no company can promise a particular result.
The IRS says much the same about its own programs. Its 2026 Dirty Dozen list of tax scams includes aggressive or misleading offer in compromise marketing, which it calls OIC mills, and says they often overpromise results and charge high fees to taxpayers who do not qualify. Its offer in compromise page tells taxpayers to check the qualifications of any tax professional they hire.
RED FLAGS, FROM THE FTC AND THE IRS
- “Pennies on the dollar” or “a fraction of what you owe”, said before anyone has reviewed your finances
- A claim that you already qualify for a relief program
- The whole fee demanded up front
- A promised outcome. No company controls what the IRS decides
- Letters dressed up to look like they came from the IRS or a state tax agency
- Claims that your account is red flagged, high risk or under investigation, used to rush you
- Add-on services pushed after you have paid
The FTC's advice if you spot one is to report it at ReportFraud.ftc.gov.
What the American Tax Service case alleged
In October 2025 the FTC and the State of Nevada sued American Tax Service and its operators, and a federal court temporarily halted the scheme. The FTC alleged that the operators claimed they could settle back taxes for pennies on the dollar, often before evaluating the taxpayer's circumstances; mailed letters that impersonated the government to generate calls; told some people the IRS was investigating them or had red flagged their account; did little of the promised work; and refused refunds.
In June 2026 the FTC announced a proposed settlement with the two individual operators. They agreed to turn over cash and assets, with a much larger judgment suspended on their inability to pay, and to be banned from debt relief services, tax preparation, most outbound telemarketing and impersonation. The FTC said the operators had targeted older consumers with fictitious add-on services. Litigation continued against the corporate defendants.
It was not the first case of its kind. In 2013 the FTC settled with American Tax Relief LLC, which it described as its first action against a tax relief company, after a court found the defendants had falsely told consumers they qualified for relief programs and falsely claimed to have already reduced thousands of people's tax debts.
The free checks the IRS provides
The most useful protection against an OIC mill costs nothing. The IRS links an Offer in Compromise Pre-Qualifier tool from its offer in compromise page, and says to use it to confirm you are eligible and prepare a preliminary proposal. It is a starting point, not a decision; only the IRS accepts or rejects an offer.
The IRS's own eligibility rules screen out many people before any calculation. You must have filed all required returns and made required estimated payments, not be in an open bankruptcy, and, as an employer, have made the required deposits. An offer is generally approved only where it represents the most the IRS can expect to collect within a reasonable period.
For people who are stuck rather than shopping, the Taxpayer Advocate Service is free, independent within the IRS, and the place the FTC itself points to. For a state balance, the FTC points to your state's revenue department.
Questions worth asking anyone you pay
Honest help in this area starts by finding out what is actually owed and why, from the IRS's own records, before saying anything about outcomes. That means transcripts for every year, a list of unfiled returns, and a financial statement. Any conversation that skips to a settlement figure has skipped the part that decides it.
Ask who will do the work and what authority they hold. The IRS says enrolled agents, CPAs and attorneys have unlimited rights to represent taxpayers before it, including in collection matters and appeals, and that other preparers have limited rights or none. It publishes a directory of federal tax return preparers with credentials and select qualifications.
Ask for the scope and the fee in writing before anything starts, and what happens to the fee if the work turns out to be unnecessary. And ask which resolution they expect and why, in terms of your numbers. If the answer arrives before they have seen the numbers, you have your answer.
Where this comes from
The statutes behind this page, so you can check any of it rather than take it on trust.
- 16 CFR Part 461
- The FTC's Rule on Impersonation of Government and Businesses, one of the rules the FTC said American Tax Service violated by mailing letters that looked like they came from tax authorities.
- 16 CFR Part 310
- The Telemarketing Sales Rule, which the FTC also said was violated through misrepresentations made in sales calls.
- IRC §7122
- The offer in compromise statute. Only the IRS decides whether an offer is accepted.
This page explains what the IRS or the Massachusetts Department of Revenue does and cites the statute. It is not advice about your situation, which depends on facts none of this knows. Tell us what your letter says and what date is on it. Please do not send Social Security numbers or tax documents through the form.
Offer in compromise
The IRS may settle a liability for less than the full amount. The figure is not negotiated — it is calculated from your assets and your future income, and the calculation is what decides whether an offer is worth making.
Is this IRS letter real?
The IRS almost always starts with a letter in the mail, and a genuine letter can be checked without using anything printed on it. The fastest check is your own IRS Online Account, which shows the same balances and notices the IRS holds.
Getting organized first
Most of the cost of resolving a tax problem is assembling the facts. Doing that first, before hiring anyone, means you pay for judgment rather than document chasing, and you can tell whether the advice you get fits your numbers.
Taxpayer Advocate Service
An office inside the IRS whose job is to help when normal channels have failed: economic harm, a delay of more than 30 days, or a promised response that never came. It costs nothing, and Massachusetts has its own counterparts.
Questions about spotting a tax relief scam.
- Are tax relief companies legit?
- Some provide real help, and some are the subject of FTC action. The FTC's advice is to ignore claims that you qualify or will settle for a fraction, avoid anyone demanding the whole fee up front, and remember that only the IRS or your state decides what you qualify for.
- What is an OIC mill?
- The IRS's term, in its 2026 Dirty Dozen list, for aggressive or misleading offer in compromise marketing. It says OIC mills often overpromise results and charge high fees to taxpayers who don't qualify, and that taxpayers can check eligibility using free IRS tools.
- How can I check if I qualify for an offer in compromise?
- The IRS links a free Offer in Compromise Pre-Qualifier tool from its offer in compromise page, and says to use it to confirm eligibility and prepare a preliminary proposal. The basic conditions include all required returns filed and estimated payments made. Only the IRS decides whether an offer is accepted.
- What happened in the American Tax Service case?
- The FTC and Nevada sued in October 2025, alleging pennies-on-the-dollar promises, government impersonation mailers and threats. In June 2026 the FTC announced a proposed settlement with the two individual operators, who agreed to turn over cash and assets and accept bans. Litigation against the companies continued.
- Where do I report a tax relief scam?
- The FTC takes reports at ReportFraud.ftc.gov. The IRS asks that suspected IRS-related phishing be sent to phishing@irs.gov, and accepts reports of tax scams and schemes through IRS.gov/SubmitATip.
Tell us what the letter says and what date is on it.
Scope and price in writing before anything starts. Where what you need is something we do not do, you will be told that instead.
Please don't send Social Security numbers or tax documents through this form.