S6E9: Stay Alert - Common Tax Scams and How to Avoid Them

Disclaimer: The information in this video should not be viewed and is not intended as tax/financial advice. Consult with an expert before making any decisions regarding your finances. 

🚨 Don’t Get Scammed This Tax Season! 🚨

Scammers are out in full force—but you don’t have to fall for it. In this video, I’m breaking down how to spot fake IRS debt relief offers, avoid phishing scams, and take control of your tax situation the legit way. Learn the truth about why you don’t need a third-party to fight for your financial future.

IRS Links: 
https://irs.treasury.gov/oic_pre_qualifier/
https://www.irs.gov/payments/offer-in-compromise

Transcript

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The things to sort of watch out for. To tell the difference between the good guys and the scammers. I would start with the typical thing. You know, look at the reviews, look at the Better Business Bureau, see what kind of history they have. Look at the quality of their website. Although don't let that fool you. People can whip up really good websites now with AI very fast, so not necessarily that one as much anymore. Also, if somebody comes to you saying very simply in their headline, we can reduce your debt, your IRS tax debt, they don't know if they can do it or not. So they're coming at you with a bait and switch potentially. Because what they also will add sometimes is immediately reduce your tax debt. And the bottom line is nobody does it immediately. That is absolutely, utterly impossible. What is possible is that you can provide some information. And welcome back to Cash Flow, everybody. I hope you're having a good week. We are knee deep in tax time and I want to talk to you about some scams that are out there that are specific to tax time and one in particular that I want you to be aware of and know that it's kind of true, but you don't have to do it the way they're telling you to do it. So first of all, welcome back. Second of all, I'm sure you've all gotten the texts or the emails that say one of these two things. Either you're eligible for a refund, click here, and we'll make sure we get the money deposited in your account. And then they go ahead and they get your ach information for your bank, and they're not depositing anything in your account, they're going to drain your account. So most people are aware of those and know to kind of stand clear of them, which is cool. But the other one that does scare people a lot, and I've had people call me about these, so I just wanted to cover it with you, is, hey, you owe us money and we're about to prosecute you to get the money back and put you in jail. And, you know, love the irs. And it looks really official and the only kind of unofficial thing about it is that it'll come to you in a text sometimes. But you also get these emails at times, too, and they're really scary and they make them look official, which is infuriating. But one thing you can know for a fact, the IRS is not going to contact you by email with anything about money they owe you or money you owe them. Don't click any of the links on anything you get like that. If there's anything you need to talk about, the IRS will also deal with it in regular mail, or you'll have a portal that you've set up yourself that you know you can log into and get all the information you might need. So you don't really have to worry about clicking on something like that. And then finally something you can do to kind of help everybody else, if you do get one of those emails or texts you can forward them to. Let me get the address right here. It's called phishing with a phone@irs.govphishingrs.gov but that's kind of the rudimentary stuff. That's the stuff that quite frankly, most of us are all used to, but one that pops up, that's not necessarily a scam, but it is a way to make money for other people that should be going into your pocket potentially. And this is along the lines, I'm sure a lot of you got contacted for the new requirements that were on, then they were off, then they were on, then they were off about boi, which was basically a requirement to register your business and the ownership in your business by a certain date. I think that's been delayed a few times now. We have a conversation on that a few episodes back and that's a real thing. You do have to register your business, but it's not tax related. And with taxes there is a real thing and the official title of it is called Offer in Compromise. And it's a way that with the IRS it's possible that you could reduce your debt and get on a payment plan. So what happens is there are people out there and they're not necessarily scammers, but there are folks out there who will say to you, hey, the IRS has a fresh start forgiveness program and we can help you get it and deal with it and click here or call us and we'll handle it for you. You. And while that might be true, it's important to know that the IRS does not recommend or refer any third party clients to help you in either a fresh start program with the IRS or this Offer and compromise, which are two ways to kind of reduce how much or how quickly you have to pay the IRS if you have a really big tax bill. So I just, I want to sort of make you aware of the fact that there are people out there who will say, I'll do this for you. But what will happen is if, say you have a fifty thousand dollar tax debt and they help you get this reduction or this payment plan, they're going to charge you an amount untold at the beginning. Of course that is going to cost you something, and it doesn't need to cost you anything because these are all things that you can very easily do directly with the government yourself. So I just want to tell you kind of where you can go to find particularly this offer in compromise and then what you can do to potentially get your debt, your IRS tax debt reduced a little bit or onto a payment plan. Now, again, all this, this is not tax advice. Talk to your own tax professional about any of this. But my biggest advice to you is don't go to any website that doesn't end in Gov. And the only reason I'm saying that is it doesn't mean that anybody that doesn't end in Gov is a scammer or trying to take all your money. But of all the people out there legitimately trying to help people, there are probably 70% who will charge you something like $25,000 to help you reduce your $50,000 debt down to $25,000. And they'll bury it so far in documents, in fine print that you think you're getting into a great deal and by the time you're done, you owe a fortune. Okay? And then there are other legitimate people who, you know, tell you up front, here's what it will cost you for me to do this for you and you know, we're not going to charge you till it's done kind of thing. The things to sort of watch out for, to tell the difference between the good guys and the scammers. I would start with the typical thing. You know, look at their reviews, look at the Better Business Bureau, see what kind of history they have, look at the quality of their website. Although don't let that fool you. People can whip up really good websites now with AI very fast, so not necessarily that one as much anymore. Also, if somebody comes to you saying very simply in their headline, we can reduce your debt, your IRS tax debt, they don't know if they can do it or not. So they're coming at you with a bait and switch potentially. Because what they also will add sometimes is immediately reduce your tax debt. And the bottom line is nobody does it immediately. That is absolutely, utterly impossible. What is possible is that you can provide some information that goes to the irs, you can answer some questions, and I'm going to go through what those questions are and then the IRS will say, yep, you qualify for something. And I'll tell you what those somethings are in a minute. But if anybody comes to you at all with a headline that says immediate tax relief, if you call us right now, it's a scam. And scam is probably a strong word. I would call it a scam, but other people might just call it, you know, a money making opportunity for somebody who is going to do something for you and charge you for it that you could easily do for yourself. So let's talk about what this debt reduction fresh start type thing is. The one I want to focus on is the one that I use with my clients most often. Not to get their debt reduced, but that's also allows them to get a payment plan sometimes when there's an amount that kind of hits them by surprise. So the program is called Offering Compromise and we're going to drop the link down here so you can click on this and see if you qualify. But let's just take an example of a client or a person who says, hey, I had a great year last year. It was my first profitable year in business and since it was going so well, I used all the cash and reinvested it in the business and we're off to the races. And then April 15th comes along and their tax accountant tells them, or they do their own taxes and it says, hey, you owe us $10,000. And you're like, wait a minute, I didn't necessarily take any money out of the business. I left it there so I could spend it this year on stuff. And that basically means that in an LLC or in an S corp, you still made the money even if you didn't give it to yourself. So you're going to have that bill and you're going to have to pay it. It's a personal tax bill. So that you don't panic. There is available this offering compromise and everybody has access to it. And if you go to the link here, it takes you to a questionnaire. And when you fill out that questionnaire, it's going to ask you a few questions and I'll tell you what those are and what the the people who are more likely to get help than not. But when you fill out that questionnaire, one of three things can happen. One is they say, okay, yep, we'll reduce your debt and give you a payment plan for what? For the reduced debt. And that can be up to 50% reduction. I mean if they can really. And possibly even more. I don't have an example of any more than that, but possibly even more. So that's thing one, they can reduce your overall tax debt and give You a payment plan. The second is they don't reduce your tax debt, but they do give you a payment plan. And the third is that they say, no, like, nope, you got to pay us everything and you got to pay us now. So what are the answers to the questions that distinguish between which of those three paths you get to go? So let me tell you what the questions are and then I'll be able to tell you a little bit more about, you know, which ones lead to the no. Which ones lead to the yeah, I'll let you get a payment plan, but I won't reduce it. And which ones lead to the full reduction and tax payment. So again, if you go to the link, you're going to see a questionnaire. The questionnaire starts with a question that says, have you ever filed bankruptcy? They love no to this question. Okay. If it's a yes, most likely they might put you in the I'm not, we're not going to do this together column. Okay? That's the only thing in conjunction with some other answers that don't make sense, that would put you squarely in the no column alone. It might not put you in the no column, but the no, with some sketchy answers to the next questions might end you up in the no column. So now we're down to the other two piles here. Actually, no, we're not. There's still options for it to be a no. Have you filed all your returns? If you say no, it falls off the plate. You have to get your returns filed and caught up. If you have any required payments from before, have you made them? Yes, you're going to ask for tetra debt relief here now. But are all your other tax payments up to date? And then the third is if you have employees, have you paid all your employer taxes? So that's going to be, you know, the best answers there are. No, I haven't done bankruptcy. Yes, I've filed all my tax returns. Yes, I've made any prior payments I've needed to. And yes, I have federal. I've paid all my employee taxes. Here's the thing, and this is another way to tell this from the scammer people, is the IRS doesn't even let you do this until you actually have a tax debt letter from them. So you filed your return. You've said, I owe you, you know, $5,000. You haven't sent your check. And they then send you a letter saying, hey, here's what you owe us. And also in that, by the way, there's a link to the same website that I'm sending you. So we have that. So a good way to get a no is to answer those questions the wrong way, have your taxes up to date, have paid them before, you know, all your old debts cleared, and then, then you can move on to this next section, which is pretty much related to your financial wherewithal. And it does two things here. It asks you some questions, and what it's really trying to figure out is, can you afford to make payments? If I take all your income and I subtract all your expenses, how much do you have left over every month? And the higher that number is, the less likely you are to get debt forgiveness. So say for an example here, I make$1,000 a month, and all of my living expenses are$980 a month. Then you know they're going to say, oh, my gosh, you're really in need. So that puts you in the oop, this person might need help column. But if you put down, my income is $10,000 a month and my expenses, you know, housing, medical, child care, all of that is, you know,$4,000. So they're going to see $6,000 that you get to kind of choose how you want to spend it. They're going to say, yeah, no, we're not giving you, we're not going to give you any relief on the amount of your debt. Okay, but they might still let you do this middle option, which is we're not going to give you relief on your debt, but hey, we'll put you in a payment plan. Okay? So that's that one. The next question they're going to ask you is, what are all of your assets that you don't have loans against? Right? So your car. Say you have a car, and there's no car loan. So you have a house and you've got your mortgage is part of it, but you got a lot of equity in your house. If they see that you've got assets that are significant enough to cover your loan, then they're not going to reduce the loan amount. Most likely. Now, when I say they're not going to reduce the loan amount, in both of those cases, it does not mean you can't still get a payment plan. Almost anybody who's answered the bankruptcy and have you paid your taxes question the right way can get a payment plan. And the way they do this is kind of weird. They basically say, what do you want your payment to be? And what I suggest is you pop something reasonable in there based on what you can actually afford to pay them and how long you want to be paying this thing. I've seen them go as long as four, five, six years. For people who really got a huge tax bill and were just taken completely by surprise. Normally, you know, it's two to three years. So what you want to do is figure out what, what payment can I make? And there's a prompt that'll come up and say, how much do you want to pay? You drop that in there. If they agree with it, they'll say, okay, here's your payment plan. Give us your bank information. You know, you're on a.gov website, so it's okay to give them that information. And then you're off to the races with that payment plan and they'll just take it out every month till the debt is gone. Now, the one thing I would caution you about here again, going back to the original question, is that will take you 10 or 15 minutes of your time, right? These folks that are calling you and saying, hey, I'll get your tax debt relieved right away, you know, call me, I'll take care of it. And they go, oh, my God, I bring this debt down all the time for all these people, and you're going to be another one. We'll have this done in, you know, two days. And then they'll ask you all these questions that basically is the same questions you would be answering yourself right on the website. And then they'll key punch them into the website and then they'll get the answer from the IRS and they'll tell you what happened. So they're basically taking some, anywhere from a little bit of money to a lot of money to literally act as your key puncher into the IRS website. So what I'm encouraging you is you really don't need those folks to help you out. You know, now kind of what the questionnaire looks like, what it feels like, you can look at it, you can put, put your numbers in it, get your answer. If they don't like your offer, if you say something like, I'll pay you $2 a month for the next 150 years, they're going to come back and, you know, call bullshit on that right away. They really want to see you make, based on your numbers, a really, you know, reasonable attempt to get the debt paid down. So, anyway, I hope this helps. I want to make sure that you aren't caught in some of these scams and, and some of them that aren't really scams but kind of do take money that you don't need taken and be ready for that during this tax season. They really start to kick up. Now that we're coming up on April 15th, they really kick into gear right after April 15th. And then they don't die down, really, until the September, October timeframe. So just have your heads up for that. Just like anything else, there are people out there trying to take advantage of entrepreneurs, and you now know how to protect yourself from it. So I hope you have a great week. Thanks for popping in, and we'll see you next time on Cash Flow.