A Look Inside Tax Relief Companies
A taxpayer recently described to me his experience at a tax relief company. You know the ones – late night TV ads, radio spots, settle your tax debt for pennies on the dollar, new tax laws where the IRS must settle with you; all untrue, of course. His tax case involved over $200,000 in delinquent taxes and civil fraud claims. The taxpayer spent over 9 months with this tax relief company, and they accomplished very little – other than increasing the ire of the IRS and interest continuing to accrue.
The taxpayer dealt with an accredited professional only one time in nine months while working with the relief company. The rest of the time, he communicated with Support Specialists and Case Managers. He spent a lot of time (and money) on emails, telephone calls, letters and misdirection, with no real progress towards resolution. Making matters worse, he spent north of $10,000 in nine months; the only thing he could rely on – like clockwork – was an invoice each month.
So, I thought to myself – what are the qualifications of a tax relief employee? Enter lightbulb. Job postings should tell it all. I selected perhaps the most well-known (Optima Tax) and this is what I found (from real job posting, 09/23/2020):
“Tax Associate“. A taxpayer’s first contact, the very first telephone call, is with a “Sales Associate”, later misleadingly named a “Tax Associate”. One of the Tax Associate’s job functions is to “close the transaction” (really, close the “sale”) and “submit a [sales] package… to Tax Resolution Staff”. The job requirements mandate “at least two (2) years of recent [sales] experience” and “salesmanship” skills. Plainly, from a taxpayer’s first telephone call, he or she is a “sales” lead, nothing more, nothing less. A taxpayer calls a relief company for immediate professional tax help; instead, they might as well be calling for a timeshare.
“Investigations Support Specialist“. A level or two up is an “Investigations Support Specialist”. His or her job function is to “handle legal, confidential IRS documents”, “communicate with the IRS” and “provide timely follow up on [tax] levies releases”. This person maintains a taxpayer’s confidential IRS records, speaks to the IRS on the taxpayer’s behalf and relays important deadlines concerning IRS enforced collection actions, like bank levies (even a day late on a final IRS levy notice can produce devastating results).
According to the post, a prospective Support Specialist must possess 1–2 years of customer service or call center experience and get this, “NO TAX KNOWLEDGE IS REQUIRED!”. That quote is verbatim, including the all caps and exclamation mark. Presumably, there is some tax training involved but to what extent we do not know. What we do know is that a customer service person, with no prior tax knowledge, is handling confidential records, communicating with the IRS and responsible for tracking hard deadlines of significant economic impact. That should not leave one with a warm and fuzzy feeling.
“Case Manager“. Thus far, a taxpayer’s journey begins as a “sales” lead before being handed off to a customer support person, where no tax knowledge is required and who maintains confidential records. Finally, a taxpayer lands in the lap of a Case Manager. Surely, the Manager – who is a lead on a taxpayer’s case, managing others and juggling multiple tasks – possesses some prior tax knowledge or tax experience. Nope. The posting tells us that a tax relief Case Manager is responsible for “ensuring security from… [IRS enforced collection actions] to prevent levies” and “conducting financial analysis“. Both tasks are central to effective tax representation. Yet, the qualifications are “knowledge of Salesforce [a software program] and Microsoft Office applications [Word, Excel, and the like]”. Predictably now, according to the post, “Case Managers” may be hired without any tax knowledge and experience at all; the posting again reads: “NO TAX KNOWLEDGE IS REQUIRED!” And yes, under caps and exclamation.
It is no secret that tax relief companies have been on the wrong side of the law in the past. The most infamous case was that of American Tax Relief in 2014. Under a $16 million settlement with the Federal Trade Commission, defendants at American Tax Relief were ordered to turn over millions of dollars in assets to over 18,000 consumers, including bank accounts, jewelry, and a quite nice 2005 Ferrari.
It is hard to fathom competent tax representation without tax knowledge or experience. To start, if there are possible tax crimes in play, those without prior tax knowledge and experience could disclose potentially damaging information to the IRS. Without knowledge and experience, it is difficult to negotiate with the IRS without the real possibility of an inadvertent admission. Second, competent financial analysis requires a good understanding of different financial nuances and valuation techniques. And importantly, there is no “tax relief privilege”, so any communications with its personnel are not protected; that is, they may be forced to testify against a taxpayer. That is unlike the attorney-client privilege or Koveled CPAs.
Finally, the tax code and its regulations are tens of thousands of pages long and very complex. They are not a Grisham novel. And a taxpayer is not a “sales” lead nor should they be treated as such. The IRS is very serious about tax compliance and enforcing the tax laws through both civil and criminal means. A taxpayer does not call a tax professional to take part in a timeshare; he or she is calling to defend him or herself against the most powerful creditor in the world. The very reason a tax professional is being hired is for his or her tax knowledge and experience. At tax relief companies, it seems likely that the taxpayer may possess the same base tax knowledge as a Case Manager giving advice. And if Google is not far away, he or she may have a little more.