Scam? The Tax Debt Compromise Program Phone Call

Tax relief phone call scams are common, and criminals use these scam calls to get money and commit identity theft. There really is an IRS tax debt compromise option, however, that could allow you to settle your tax debt for less than the full amount. It’s just important to make sure you’re working with a legitimateoffer from the real IRS. 

There are, thankfully, some ways you can tell if you’re being contacted by the IRS or a con artist. And if you’re not sure how to pay off your tax debt, the real offer in compromise (OIC) may be the solution. (This is an IRS program—Freedom Debt Relief doesn’t handle tax debt.)

Why Am I Getting Tax Relief Phone Calls?

Scam calls surge during tax season, from January to April. Tax debt relief phone calls are one of the more common scams. Criminals contact taxpayers and claim they can negotiate a debt settlement, or even eliminate tax debts—for an upfront fee.

But how did a scammer find your phone number? Unfortunately, there are many ways that criminals can get their hands on contact information. A scammer may have obtained your number through:

• Public records

• A data breach

• Tax lien notices

• Social media

• Data brokers (websites that provide people’s personal information).

Those are just some of the possibilities. Phone numbers are rarely private anymore, and once a scammer has a list of numbers, mass calling is cheap and easy because of robocall technology.

Who do tax relief scammers target?

Scammers often target seniors with tax relief phone calls, because they see older adults as more vulnerable. They also target those with actual tax debt or who have filed a tax return recently, believing that people in those situations may be less skeptical of a tax relief offer. You could be more likely to get scam calls if you fit any of these typical target demographics.

Although certain demographics are at greater risk, scammers usually aren’t picky. They’ll go after anyone.

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What Is the IRS Offer in Compromise?

An offer in compromise (OIC) is a federal program that lets you pay less than the total amount of your tax debt to the IRS. It used to be called the IRS Fresh Start. If you can’t pay your full tax bill, or paying in full would cause financial hardship, then an OIC may be an option. You apply for this program directly with the IRS—Freedom Debt Relief doesn’t handle tax debt.

According to the IRS, you're eligible for an offer in compromise if you:

• Filed all your required tax returns and made all required estimated payments.

• Aren’t in an open bankruptcy proceeding.

• Have a valid extension on your current year tax return if you’re applying for an offer in compromise for the current year.

• Are an employer, and have made tax deposits for the current and past two quarters before you apply.

When you apply for an OIC, the IRS looks at your ability to pay, including your income, expenses, and assets. The IRS generally approves an offer in compromise if the amount you offer is the most it could expect to collect from you within a reasonable time.

For your OIC to be approved, the amount usually needs to be equal to or greater than your reasonable collection potential (RCP)—that’s the dollar amount that could be collected from your bank accounts and by selling the things you own. RCP also includes the value of your future income after basic living expenses.

You must also meet IRS budget guidelines, which are called collection financial standards. In plain speak, there are guidelines that outline necessary living expenses (such as housing, utilities, transportation, and other essentials) and the maximum amount you should be spending on them. If you’re over budget, the IRS may not accept your OIC.

Offers in compromise have two payment options. You choose the one that works better for your situation, and submit your initial payment with your application:

• Lump sum. You submit a payment of at least 20% with your application. If your offer is accepted, you must pay any remaining balance due on the offer in five or fewer installments.

• Periodic payment. A periodic offer lets you pay the amount you’re offering over six to 24 installment payments. In this arrangement, you submit the first payment with your application, and continue making payments while the IRS reviews your offer.

Pros of the IRS Offer in Compromise

An OIC is a great opportunity to get tax debt relief. Here are the benefits:

• You settle your tax debt for less than what you owe. Once you’ve fulfilled the OIC, any remaining IRS liability is wiped away.

• You avoid seizure of your assets or wage garnishment. The IRS can seize and sell property or go after your earnings for unpaid tax debt. If your OIC is accepted, the IRS won’t seize your assets or garnish your bank account.

Cons of the IRS Offer in Compromise

When you’re deciding whether to apply for an OIC, it’s good to know about the drawbacks:

• Many applicants don’t qualify. The program is intended for people who won’t be able to pay their tax debts within 10 years from when the tax was assessed. If the IRS believes you can pay your tax debt, an OIC probably won’t be an option.

• The rules are strict. You must be compliant with your tax reporting over the next five years. If you miss a tax payment or don’t file a required return, the IRS can reverse your OIC and demand full payment.

• The application process is lengthy, and requires a $205 application fee. But if you meet low income guidelines, you can apply without an application fee.

What to Do if You Aren’t Approved for a Tax Debt Compromise

If you don’t qualify for an OIC, you still have some options. The IRS wants to find a resolution that works for both sides, and it works with taxpayers who do their best to pay off tax debt.

The IRS offers multiple payment plans. You could request a short-term payment plan for tax debt that you can pay off within 180 days. This type of plan doesn’t have an application fee.

For large tax debt, you could request a long-term payment plan with monthly payments. There is an application fee, and the amount depends on the type of plan. Long-term payment plans range from three to 10 years, giving you much more time to pay what you owe. Keep in mind that interest and penalties increase the longer you stretch out your debt, so you should still try to pay off tax debt as quickly as possible to save money.

Beware of Tax Debt Compromise Program Phone Call Scams

The IRS warns taxpayers about tax debt compromise scams. In fact, OIC scam mills regularly make the Dirty Dozen list of tax scams published every year by the IRS. During and even before tax season, scammers use robocall systems to make a staggering number of calls.

The Enforcement Bureau at the Federal Communications Commission (FCC) investigated tax scam phone calls, and found that there were 15.8 million calls with prerecorded messages about a “National Tax Relief Program” between Nov. 1, 2023 and Jan. 31, 2024. The Bureau didn’t find any evidence at all of a legitimate National Tax Relief Program existing.

So how do tax debt compromise scams work? Dishonest companies and scammers promise to solve tax debt for pennies on the dollar and remove penalties and interest fees. These fraudsters often advertise their supposed services on TV and the radio. Some of them also go through tax lien notices looking for individuals in tax trouble to contact directly by phone, text message, email, or direct mail.

Scammers may charge fees for information you could find yourself, mislead you into believing you qualify for an OIC when you don’t, claim their services are essential for applying correctly, or steal your sensitive financial information.

Common tax relief scripts

Tax relief scammers frequently use specific phrases, such as a “tax relief department,” “new federal relief program,” or “IRS forgiveness program.” Sometimes, they reference the current presidential administration—there have been reports of calls about a supposed tax forgiveness plan under the Trump administration, the Biden administration, and previous administrations.

Here’s an example transcript of what a typical scam voicemail could say:

“Hello, this is John at U.S. tax relief experts calling about your previous tax filings. It looks like you qualify for a federal relief program that could get rid of your tax debt with no penalties. This is a new program that was recently approved by the current administration to help people in your situation, but you need to enroll this month. So, before you make any arrangements to pa your tax debt, give me a call back at XXX-XXX-XXXX.”

The exact message depends on the scammer and the type of scam. There are all kinds of tax debt relief scams, and scammers also go after people who don’t have any tax debt. Along with OIC mills that over-promise and under-deliver, there are criminals who impersonate IRS representatives. Practically anyone can be the target of a tax scam, but if you owe money to the IRS, you’re at greater risk.

How Tax Relief Robocalls Work

Robocall technology is how scammers call millions of people without ever picking up the phone themselves. By understanding how the scam works, you can be better prepared to recognize it.

A robocall is a call with a pre-recorded message that’s made by an auto-dialer. Auto-dialers are computer systems that automatically make calls to a list of phone numbers. Once scammers obtain phone numbers through any of the methods mentioned above, they load them into an auto-dialer.

The message in the robocall provides a callback number. If you call, you talk to a live “agent.” The agent tries to complete the scam by getting you to pay upfront fees for their supposed tax relief service. But after getting your money, the scammer may file the paperwork incorrectly, or not file anything at all.

Scammers also frequently use caller ID spoofing techniques. Spoofing changes the caller ID information, so it looks like the robocall is coming from a different number. Scammers use these techniques for a few reasons:

• The scammer’s real number may be blocked because it’s on a robocaller list.

• The scammer can use a number that’s local to you, or possibly even the number of a company or government agency.

• Caller ID spoofing could make it more likely that the call is answered.

Why do scammers prefer voicemails for tax relief phone scams?

Scammers prefer voicemails and prerecorded messages over live calls because they can target more people. Robocalling allows scammers to cast a wide net. Live calling, on the other hand, would limit the number of victims a scammer could contact per day.

This method also helps filter out people who are unlikely to pay for a tax relief service. Anyone who recognizes the scam or knows they don’t owe a tax debt probably isn’t going to return the call. Scammers are more likely to get calls back from people who are interested in tax relief, and are potentially more vulnerable to their pitch.

Spot the Red Flags of Tax Relief Fraud

Tax relief scammers use sophisticated methods to swindle taxpayers, but knowing how to spot a fraud could protect you. Here are the red flags to look out for. 

1. Unsolicited contact

Scammers often call, email, or text you to create a sense of urgency and try to get you to pay right away. But the IRS says it will never demand immediate payment using a specific payment method, or without giving the taxpayer the opportunity to appeal. The IRS typically mails bills to taxpayers who owe money. Scams increase during tax season, so be extra cautious if you’re contacted during that time.

2. Robocall technology

Tax-related robocalls are almost a sure sign of a scam. The IRS doesn’t leave prerecorded voicemails or make robocalls. You can confirm that, and learn more about recognizing legitimate contact, on the official How to Know It’s the IRS page. Businesses may use robocalls, but tax relief companies that robocall are usually trying to scam you.

3. A generic greeting

A message that starts off with “Dear taxpayer” or any other generic variation could indicate a scam. The IRS has your name and address, and IRS communications are normally personalized with your information. Scammers may not have your name, or they could just use a generic placeholder so they can send the same form letter to all their targets.

4. Callback number and caller ID don’t match

If the callback number is different from the caller ID, it may be due to caller ID spoofing. This isn’t always the case, but when it happens with a tax relief phone call, it’s another warning sign of a scam.

5. Guaranteed results 

Legitimate tax relief programs can’t guarantee outcomes, because the result depends on the decision the IRS makes. Be wary of tax debt relief programs that promise to settle your tax debt for much less than what you owe.

6. High-pressure tactics

If someone posing as an IRS or tax relief program agent contacts you and tells you to act immediately, put up your guard. People tend to act hastily and without thinking twice when they’re scared, and scammers know this. The IRS, however, doesn’t impose such urgency. 

7. Hefty upfront fees

Be cautious of tax professionals asking for large upfront fees for their services. Some untrustworthy tax relief companies charge a fee to apply for an OIC on behalf of a taxpayer, even when they know the IRS is likely to reject the applicant. You can use the OIC pre-qualifier tool on the IRS website to see for yourself whether you’re a likely candidate for the program.

8. Requests for personal information 

Scammers often ask taxpayers for Social Security numbers, bank details, or other sensitive information. But the IRS doesn’t use text messages or social media to discuss personal tax issues, and does not email taxpayers asking for personal information. If you’re contacted by someone claiming to be the IRS or a tax professional, hang up or don’t answer. Contact the IRS directly. 

Avoid Tax Debt Relief Phone Call Scams

Whenever you receive a call from someone offering to lower or eliminate your tax debt and penalties, be wary. Here’s what the IRS says about how it may contact you:

• The IRS typically contacts you the first time through the U.S. Postal Service. If you want to verify that a piece of mail is from the IRS, you can search for the type of letter, the notice, or the form number on the IRS website. You could also call the IRS at 800-829-1040.

• The IRS only emails you with your permission, with limited exceptions such as criminal investigations.

• The IRS only sends you a text message with your permission.

• The IRS may call you to discuss your case, verify information, or set up a meeting.

• The IRS might send a fax to verify or request employment information.

• The IRS won’t contact you or take payment on social media.

The most important thing to remember is that the IRS prefers to reach out by mail first. If you’ve never received any correspondence from the IRS about debt, or if you don’t think that you have a tax debt issue, then any phone call you supposedly receive from the IRS is likely a scam. In this case, just hang up without providing any information.

If you receive a call about tax settlement, remember that no one can promise you’ll qualify for an OIC. Don’t engage with anyone who guarantees this or says you’ll automatically qualify, and definitely don’t pay them anything. If you want to consider an OIC, find out if you qualify and send an OIC to the IRS yourself.

Technology Solutions to Stop Tax Relief Calls

Robocall technology may make scam calls easier, but there’s also technology that could help you stop these unwanted calls. No solution is perfect, so you may not get rid of all scam calls, but you can at least get a lot fewer.

Start by checking out what tools and services your wireless carrier offers. Many wireless carriers have services to block scam robocalls, including tax relief calls. Here are the services available from the three largest U.S. wireless companies:

• Verizon Call Filter alerts you if a call may be spam, a robocall, or fraud. The service also sends high-risk calls directly to your voicemail. Verizon offers a free version of Call Filter to Verizon customers with a compatible device and a paid version, Call Filter Plus, with more features.

• AT&T has a call and data protection app, AT&T Active Armor. The app is available for free with AT&T wireless service. A paid version is also available, and is included for free with some AT&T unlimited plans.

• T-Mobile has a Scam Shield app to block and report scams. The app is available for free with T-Mobile wireless service, and a paid version is also available.

Most carriers give you the option to report spam and fraud calls, which improves their call blocking. Your carrier may then classify the caller’s number as a scam and block them from contacting you or others in the future.

You could also download a call-blocking app that intercepts scam calls. These apps typically block calls from any numbers in their database that have been reported as scam-related. They also let you report and block numbers yourself. You don’t always need an app to block numbers, though. Many smartphones can block calls from specific numbers or from all unknown numbers.

One other step you may want to take is signing up for the National Do Not Call Registry. You can register your phone number (home, mobile, or both) free of charge online. The registry is a list of phone numbers that telemarketers aren’t supposed to call. If you get an unwanted telemarketing call after your number has been on the registry for at least 31 days, you can report it to the Federal Trade Commission (FTC).

If You’ve Been Scammed by a Tax Debt Compromise Phone Call

If you’ve paid money and/or revealed sensitive personal and financial information to someone you suspect of being a scammer, report the incident quickly. Make a record of all your communications with the tax debt company for when you file your report.

You can report a tax scam to the IRS on its website. For abusive tax promotions or preparers, you’ll fill out and submit form 14242. You can submit the form online, by mail, or by fax.

In addition to the IRS, you could also report the scam to any of the following:

• Your state attorney general’s office

• The FBI

• The Federal Trade Commission (FTC)

• The Better Business Bureau (BBB).

If you seek help in applying for an OIC with the IRS or in making other arrangements on your tax debt, make sure you enlist the right expert. A certified public accountant (CPA), enrolled agent, or tax attorney are the best options to help with your unpaid tax liability, and they can also represent you with the IRS if needed. You can verify a tax professional’s credentials on the IRS Directory of Federal Tax Return Preparers. 

How to dispute tax relief fraud charges

You may be able to get your money back if you’ve already paid a company you suspect is fraudulent. Follow these steps to dispute a fraudulent charge with your bank or credit card company:

• Pull up your banking or credit card account online.

• Find the fraudulent transaction.

• Choose the option to dispute the charge, if you have one.

• Go through the dispute process and provide information about what happened.

If it’s not easily done online or if you’d rather talk to someone about your situation, you can dispute the charge by phone. Call the number on the back of the debit or credit card you used for the payment.

You typically have 90 to 120 days to dispute a charge, depending on your bank or credit card issuer. The amount of time disputes take varies. Some disputes are settled within 30 days, but others take much longer. Card issuers generally have up to 90 days to settle disputes.

How to protect yourself from identity theft

If the scammer obtained any of your private information, they may try to use it for identity theft. Here are a few ways to protect yourself:

• Set up an identity protection PIN (IP PIN) with the IRS. You need to register for an account on IRS.gov, and then you can request an IP PIN. This six-digit number prevents anyone else from filing a tax return using your Social Security number.

• Sign up for a credit monitoring service that notifies you of changes to your credit file. There are plenty of free credit monitoring services online. You may want to check if your bank or credit card issuer offers this service free of charge (many do).

• Monitor your banking and credit card statements for suspicious charges. Keep an especially close eye on any accounts used to pay for tax relief scam services.

Steps to Take if You Suspect a Tax Scam

If you suspect you're dealing with a tax scammer, follow these steps.

1. Do not engage

If you receive a suspicious call, hang up immediately, without providing any further personal information. If you receive an email, text message, or message via social media, do not reply or open any attachments. 

2. Verify the contact

Don’t automatically trust that someone is who they say they are, or that the number, email address, or social media handle they’re contacting you from is as it appears. Scammers nowadays use spoofing, a method with which they can make it seem like they’re contacting you from a legitimate source. Don’t engage. Reach out to the IRS directly.  

3. Report the scam

Report the incident to the IRS by following the agency’s reporting guidelines. This may involve reporting suspected tax fraud via form 14242, as well as notifying the Federal Trade Commission (FTC) and the Better Business Bureau (BBB).

Legitimate Tax Debt Relief Options vs. Scams

The IRS does offer programs to pay off tax debt. You can apply for these programs directly with the IRS (Freedom Debt Relief doesn’t offer tax debt programs). IRS options include:

• Offer in compromise (OIC): If you meet eligibility requirements, you could settle your tax debt for a lower amount than what you owe. There is an application fee of $205 unless you meet the low-income certification guidelines.

• Short-term payment plan: You pay your tax debt within 180 days. Short-term payment plans don’t have setup fees, but you must pay accrued penalties and interest until the balance is paid in full.

• Long-term payment plan: You pay your tax debt in installments over more than 180 days. Long-term payment plans have setup fees that vary depending on the payment method and whether you qualify for low-income taxpayer status. You must also pay accrued penalties and interest until the balance is paid in full.

Here’s a breakdown of how you can tell the difference between legitimate IRS programs vs. tax relief scams.

Freedom Debt Relief can help with many types of debt, including credit card debt, medical debt, and personal loan debt, to name just a few. But you can’t settle tax debt the same way people settle credit card debt. Freedom Debt Relief doesn’t provide any services for tax debt. If you have other types of debt and could use a hand, learn how Freedom Debt Relief works to see if it’s the right solution.

If you’re dealing with tax debt, you can apply for a payment program or OIC directly with the IRS. You may find that you can handle your tax situation on your own. But if you’re not sure how to pay your taxes or if you’re facing wage garnishment, it could be time to seek professional assistance from a CPA or a tax attorney.