Chicago, IL-April 3, 2009 - The continuing downturn in the economy means that many cash-strapped Americans are anxiously looking forward to receiving a tax refund check from Uncle Sam. During this tax season, the Better Business Bureau of Chicago and Northern Illinois advises taxpayers to be on the lookout for schemes and scams that plague families struggling to make ends meet.
With more families facing financial hardship, the promise of a tax refund is a welcome sight. Unfortunately, some schemes tied to the tax season will leave consumers even worse off in these tough economic times.
“In a declining economy, a tax refund can provide much-needed cash for families enduring financial hardship,” said Steve J. Bernas, president & CEO of the Better Business Bureau of Chicago and Northern Illinois. “The BBB is advising people to be extremely wary of tax-related schemes that will cost them unnecessarily at a time when they can least afford it.”
Beware Tax Reduction Schemes
Some companies claim that they can help consumers reduce the amount of money they owe in taxes or fines to the government. These claims often sound too good to be true and TV ads might include endorsements from customers who state the company worked with the IRS on their behalf and was able to reduce the amount owed to pennies on the dollar. Unfortunately, consumers who may have paid thousands of dollars to such companies and were devastated to learn that the company didn’t keep its promise to reduce the amount owed and, in some cases, never even contacted the IRS.
BBB Advises: For consumers who have a tax debt with the IRS, the BBB suggests first seeking the advice of an IRS enrolled agent, Certified Public Accountant (CPA), or a tax attorney to determine if they qualify to file for an offer in compromise, or some other type of payment arrangement.
While the IRS will work directly with the taxpayer and negotiate an offer in compromise—which essentially reduces the taxpayer’s debt—the taxpayer has to demonstrate that he or she is in extreme financial hardship. The Web site, www.irs.gov, has more information on the IRS’s rules for an offer in compromise. Another option is to create an installment plan for paying off the debt—which can be set up between the taxpayer and the IRS without the need to pay a company thousands of dollars. Each year, the IRS accepts about three million installment agreements.
If a taxpayer does decide to enlist outside help when dealing with the IRS, he or she should be wary of exaggerated claims and large upfront fees, and always check out the business’s report with BBB at www.bbb.org.
For more trustworthy advice from your BBB on being a savvy consumer and navigating the 2009 tax season go to www.bbb.org.