A company promises to settle your IRS tax debt for "pennies on the dollar" — then takes your money
Fraudulent tax relief companies promise to settle your IRS back-tax debt for a fraction of what you owe. They charge large upfront fees ($3,000–$10,000), do little or nothing, then disappear. The IRS has real programs — no middleman needed.
Also known as: tax relief scam, IRS debt settlement scam, tax resolution scam, pennies on the dollar tax scam, OIC mill
Already happened to you? Do this in the next few minutes
- 1 Call your bank or card's fraud line right now. Use the number on the back of your card — not any number from the message or caller. Ask them to stop or reverse the payment and freeze the account.
- 2 If you paid by gift card, wire, or an app (Zelle, Venmo, Cash App): contact that company immediately and report it as fraud. Acting fast sometimes recovers the money.
- 3 Report to the FBI at ic3.gov and the FTC at reportfraud.ftc.gov. The sooner, the better.
What to do right now
- 1 Do not pay any upfront fee to a tax relief company — it is illegal under FTC rules to collect advance fees for debt settlement services before delivering results
- 2 Contact the IRS directly at 1-800-829-1040 or go to IRS.gov to understand your actual options — Installment Agreements and Offers in Compromise are accessible for free
- 3 If you want professional representation, hire only an IRS-authorized Enrolled Agent, CPA, or licensed tax attorney — verify credentials at irs.gov/tax-professionals
- 4 Verify any tax relief company through the Better Business Bureau (bbb.org) and your state's Attorney General before paying anything
- 5 If you already paid upfront fees and received no service, file a complaint with the FTC at reportfraud.ftc.gov and your state Attorney General
- 6 Report to the FTC at https://reportfraud.ftc.gov and the FBI's IC3 at https://www.ic3.gov.
Red flags
- ⚠ You receive an unsolicited call or mailer from a company with an official-sounding name like 'Tax Mediation and Resolution Agency' or 'Federal Tax Relief Services'
- ⚠ They promise to settle your entire tax debt for 'pennies on the dollar' or a 'fraction' of what you owe — before ever reviewing your actual tax situation
- ⚠ They demand a large upfront fee ($3,000–$10,000) before doing any work
- ⚠ They claim to have special relationships with the IRS that give them access no one else has
- ⚠ They pressure you to act now, claiming your situation will get much worse without their immediate help
- ⚠ Legitimate tax resolution options (Offer in Compromise, Installment Agreement) are free to apply for directly at IRS.gov — you don't need a paid middleman
Sources
- FTC Consumer Alert — Tax Debt Relief Scam warning: companies promising to settle back taxes (Aug 13, 2026)
- FTC/Nevada — Tax-Relief Scammers (American Tax Service) Required to Pay $10M Settlement (Jun 2026)
- FTC Consumer Alert — Looking for debt relief? Here's how to avoid a scam (Mar 2026)
- Michigan AG — Tax Debt Resolution Scams: signs and red flags
- Nevada AG / FTC — Attorney General Ford and FTC Sue Tax Debt Relief Scammers (2025)