You Paid a Tax Relief Company. Why Is the IRS Debt Still There?
You paid thousands upfront to settle tax debt for pennies on the dollar and nothing changed. How to check your IRS account, ask for a refund and get free help.
The ad promised to make your tax debt shrink. A friendly salesperson said you qualified, took a fee that ran into the thousands, and asked you to be patient. Months later, the IRS notices still arrive and the balance has grown. Here is how to find out where you stand, how to try to get your money back, and where help costs nothing.
What the company said, and what the IRS and FTC say
| The promise | What the official sources say |
|---|---|
| “You qualify for a tax relief program” | The FTC says only the IRS or your state tax agency decides what you qualify for |
| “We can settle for pennies on the dollar” | An IRS offer in compromise may allow some people to settle for less than the full amount, but it depends on your finances, and the FTC says no company can guarantee a particular result |
| “Pay our full fee now and we’ll start” | The FTC says not to do business with anyone who tells you to pay the whole fee upfront |
| “The IRS will seize your property unless you call us by Friday” | In the FTC’s recent case, letters like this impersonated government tax authorities |
| “Only a specialist can set up a payment plan” | Many individuals can apply for an IRS payment plan online themselves |
The FTC’s August 13, 2026 consumer alert describes how dishonest companies promise to erase debt “for pennies on the dollar” before looking at your situation, and may charge fees without doing the work, which can leave you owing more. Its older guidance on tax relief companies says the upfront fee can be thousands of dollars and that, in many cases, customers end up further in debt.
On June 2, 2026, the FTC and Nevada announced a proposed settlement with the operators of American Tax Service. The FTC alleged the company impersonated federal and state tax authorities and claimed it could settle back taxes for “pennies on the dollar,” often before reviewing a taxpayer’s circumstances. The order carries a $77.7 million judgment, the amount the FTC says was taken from consumers from February 2022 to 2025, suspended after the operators surrender more than $8 million in cash and other assets for consumer refunds.
Step 1: find out what actually happened with the IRS
Before you argue with the company, get the facts from the only party that knows them. Sign in to your IRS Individual Online Account through irs.gov, typing the address yourself. Look for:
- your current balance, including penalties and interest;
- whether any payment plan or offer in compromise was ever submitted in your name;
- any payments that reached the IRS, and when;
- recent notices, so you know whether a deadline is close.
If you cannot use the online account, call the number printed on your most recent IRS notice. Write down what you learn. A company that claimed it was “negotiating” for months while nothing was filed is giving you evidence for a refund request.
Also look at what you signed. If the company had you sign a form letting it deal with the IRS for you and you no longer want that, ask the IRS how to withdraw the authorization, and keep a copy of whatever you send.
Step 2: deal with the debt directly, starting now
The debt keeps growing while you sort out the company, so set up your own route in parallel.
- Payment plans. The IRS payment plan page says individuals can apply online for a short-term plan (180 days or less) if they owe less than $100,000 in combined tax, penalties and interest, and for a long-term monthly plan if they owe $50,000 or less and have filed all required returns. A short-term plan has no setup fee online; a long-term plan set up online costs $29 with direct debit or $69 with another payment method. Low-income taxpayers may have fees waived or reimbursed.
- Offer in compromise. The IRS’s offer in compromise page has a Pre-Qualifier Tool you can use yourself. Each application needs a $205 fee and a first payment unless you meet the low-income qualifications. You can apply through your Individual Online Account or with Form 656-B.
- State taxes. The FTC points people to their state comptroller or revenue department.
Step 3: ask for your money back
Start with the company, in writing, and set a short deadline. Then move to your card issuer or bank if the company does not respond. A clear, factual letter can be short:
“On [date] I paid [amount] to [company] for tax debt resolution services. My IRS account shows that [no offer was submitted / no payment plan was set up / my balance is unchanged]. The services described when I paid were not provided. I request a full refund within 14 days. I am also withdrawing any authorization for your company to represent me. Please confirm in writing.”
Send it by a method that leaves a record, and keep copies of every contract, receipt, email and call log.
If you paid by card
Call the card issuer and explain that you paid for services that were not provided as promised. The CFPB’s credit card dispute guidance says to call right away and to send a written billing error notice within 60 calendar days; the card company then has 30 days to acknowledge it unless it has already resolved the dispute. If the charge is older than that, ask anyway, and ask which dispute route applies, because the CFPB notes a different process may apply in some cases.
If you paid by debit, bank transfer or check
Contact your bank, describe what happened and ask what it can do. The FTC’s guide for people who were scammed says to report the problem to your bank right away and ask for a refund. If the company is still drafting monthly payments, ask the bank how to stop them.
A timeline that keeps you ahead
| When | What to do |
|---|---|
| Today | Check your IRS account or call the number on your notice. Note any deadline |
| This week | Send the refund letter, start any card dispute, and stop recurring drafts |
| Within two weeks | Apply for an IRS payment plan or check the offer in compromise pre-qualifier, so the debt stops growing unchecked |
| Ongoing | Report the company, keep all records, and watch for refund notices from the FTC if your company was part of an enforcement case |
Watch for the second pitch
People who paid one tax relief company often hear from another, sometimes claiming it can “recover” the first fee or that it works with regulators. Refunds in FTC cases are announced by the FTC itself, and the FTC says it will never demand money or ask you to transfer money. Anyone charging you to get your money back is the problem described in the guide to recovery offers after a loss.
The same pattern of a paid promise you could have pursued yourself shows up in student debt too, described in the guide to student-loan relief fees. And if a collector threatens arrest over a debt, this guide to verifying the debt explains how to check it without ignoring a real case.
Where the help is free
- Taxpayer Advocate Service. The Taxpayer Advocate Service describes itself as an independent organization within the IRS whose advocates can help with tax problems you cannot resolve on your own. The FTC lists its phone number as 877-777-4778.
- Low Income Taxpayer Clinics. The FTC says these clinics help people of modest means who have a tax dispute with the IRS.
- Your state tax agency, for state tax debts.
Report the company at ReportFraud.ftc.gov, which the FTC asks people to use for problems with tax relief companies. Reports like yours are how cases such as the American Tax Service action get built.
Sources
- FTC consumer alert, Struggling with tax debt? Here’s what to know (August 13, 2026)
- FTC press release on the American Tax Service settlement (June 2, 2026)
- FTC, Trouble paying your taxes? (tax relief companies)
- IRS, Payment plans and installment agreements
- IRS, Offer in compromise
- CFPB, How do I dispute a credit card charge?
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