IRS Tax Debt Settlement: Help or Ripoff?
March 31
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IRS tax debt settlement by Pete Low

If your IRS tax debt is more than you can pay, you're probably looking for someone to help you negotiate with the IRS, settle the debt, and keep penalties and interest at a minimum while you try to come up with the money.

That's a good thing. There are people and companies who can help you do just that. Tax lawyers, CPAs, or Enrolled Agents can all help, in varying degrees, depending on their specialties.

So before I turn this page over to a guest poster, I just want to make clear that not everybody is out to scam you, if you need help with IRS back taxes, or are needing a payment plan or a settlement. You're much better off hiring a trusted professional and getting things settled, than ignoring the IRS while hoping your tax debt will magically go away as more penalties and fines add up.

The key is to check on who you hire, before agreeing to anything. Ask lots of questions, like who will be handling your case, how they'll decide what to recommend, and what the possible outcomes are. Look at their Better Business Bureau record, search online to see if their name is connected with words like "scam" or "rip-off," and be skeptical of any promises that sound too good to be true.

Because along with all the good companies and individuals who can help you deal with the IRS and get you into a settlement or payment plan, there are companies like the one this fellow worked for. He emailed me his story, so you can see how rip-off companies work from the other side. You can guess why he wants to remain anonymous, by the time you get to the end.

Email from a Former IRS Debt Settlement Salesman:

About four years ago, a former college roommate who was an EA [Enrolled Agent] told me about a new company that offered him more money, and they were looking for salespeople too. It was totally a sales job, they wanted good closers, aggressive, won't take no, the usual. All commission, but they promised a certain number of good leads. Sounded legit. The office was this sorry little room with phones and computers, but the owner told me that was temporary until they moved into their regular headquarters, which they never did, by the way.

What they did was run radio and TV ads for people in debt to the IRS, promising that they could reduce your debt and solve your tax problems. My old roommate the EA said this was for real, he'd represented tons of people like this, the IRS wasn't as bad as people said so we could get them to compromise, work out payment plans, etc. for people.

So they gave us these leads from the ads and a script, which I tweaked a lot--they didn't care what you said as long as you closed. We were supposed to ask for payment of $3,900 up front, get it right over the phone, ask for their bank account and authorize an ACH withdrawal.

It was one thing talking to rich people wanting timeshares but these were people already in debt. I thought it would never work. But you could play on their desperation. They were naturally scared more of the IRS than any other creditor, so I sold them this story about how they had to get it taken care of right away, penalties and interest were adding up, criminal charges for not filing an accurate tax return, we needed to get started helping them right away and as soon as they authorized the money and the power of attorney, they wouldn't have to deal with the IRS anymore. We'd negotiate, solve their problems. Some of them would be crying on the phone.

The key was not give them time to think, catch them while they were hot. It was straight commission, no health insurance, no vacation, no sick days. Lot of pressure to close. There were more salesmen than EA's, and one lawyer who was the boss, and I think maybe a CPA, but way more salesmen, and we were doing a good job, signing up clients right and left.

That's when it started going downhill. The boss never hired more EA's. I'd start the paperwork, which was to get a power of attorney from the client, real simple, and then hand it over to one of the EA's for the real tax work, but they were swamped. So nothing got done. After a while, it got to the point it wasn't about doing taxes, it was taking these people's money, stalling them with all kinds of excuses, maybe if you were lucky saying their case was complicated and they needed to send more money. If they asked for a refund, we were supposed to stall them more and finally give them a partial refund, meanwhile signing up more people to keep the money coming in.

Okay, that wasn't like timeshares, where at least they got something for their money and they were rich and had money to burn anyway. It was just ripping off poor people, and I hated it. Tried to tell myself they deserved it for being greedy and having a get-rich-quick business that tanked or whatever, but some of them had medical bills, got laid off from blue-collar jobs, just no way you could justify ripping them off any more.

IRS tax debt settlement

The boss was ripping us off too. He was paying us slower and slower, said he was holding back commissions because of higher refunds, but it was turning into a Ponzi scheme. What's funny is that we were paid under the table, no 1099s, so I don't want to think what kind of accounting was going on. About then my roommate the EA quit. I figure they were paying him worse than me, because no commission for him and all the work. He said we weren't qualifying the people, most of them couldn't get an OIC [offer in compromise] but we were promising them that because it was expensive. See, I'd been telling people all about how they could settle their debt because that's what I was supposed to say. I didn't know it wasn't true in every case.

Finally the whole office shut down. Literally. We were standing outside, the boss was late, the door was locked, he said go in to get our stuff and leave. I was never paid $14,500 I was due for the last quarter. They switched to quarterly payments at the end. Plus $18,000 they'd been "holding back" for as long as a year.

So the employees got ripped off just as much as the customers, but you bet the customers don't see it that way, and they're talking about a class action suit so I don't want to give any names. I don't know, if they didn't give me a 1099 maybe I didn't even work there.

But anyway, the problem is people are stuck between a rock and a hard place. Nobody wants to go up against the IRS alone so if they're trying to settle debt problems, they need to hire somebody. My roommate says there are EA's and CPA's and lawyers who do this kind of thing legit, he's got a legit job now. Even the legit ones still have to run ads and sell to get clients, it's competitive, but people need to take the time to look into whatever company they hire and think before they hand over their money.

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10:05 p.m. March 31
I'm sorry but I just don't think anyone is that naive. Trying to claim the employees of this kind of company are victims, that just won't fly. They new they were promising debt settlement and things they couldn't deliver and taking people's money. I think people should be warned but don't claim to be a victim when you were the one taking their money.


10:21 p.m. March 31
It's possible somebody not familiar with taxes didn't know.


10:33 p.m. March 31
Then don't sell debt settlement. Salesmen need to know what they're selling.


11:09 p.m. March 31
I don't know if it's the same company but it sounds familiar only the amount was more. They needed $4,500 to start. The agent called us back twice in one day, and the next morning, with this urgent news about special opportunities to erase debt and settle and everything. We had over $20,000 in tax debt from a real estate venture and interest being added all the time, so the $4,500 looked good if we could pay that and a few thousand more and get it all settled. Nothing ever happened after those first calls. I called and they wouldn't call back because


11:13 p.m. March 31
because they had our money. They'd tell us to wait, the IRS was slow. It took a year to realize we'd been had and then we had to start all over with a CPA and lawyer, but he actually listened and called us back and worked for us.

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