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Beware of tax settlement scams

You owe money to the Internal Revenue Service. You didn't plan on this happening, but you came up short. You're behind, and the problem is only getting worse.

Then you get a phone call from a company saying they can settle your debt for you. The cost seems incredibly small. You're excited at the prospect of putting it behind you and stopping the IRS from collecting the full amount -- which you can't afford to pay off right now, anyway.

Be wary. This is a very common scam.

In some cases, the company knows in advance that you're probably not going to qualify. However, they also know you'll do anything to try to get rid of that debt. They prey on your frustration and sense of urgency, charging you a fee to see if you can reduce your debt. It turns out, as they knew all along, that you can't. Now you still owe money and they took the fee to tell you what you already knew.

This isn't to say that you can't reduce the amount of debt that you owe. The IRS does work with people who are in dire straights and have no way to pay all of their debt. They may give you an "Offer in Compromise" that can reduce the payment so that a partial payment wipes out the entire debt. They may give you a repayment plan so you can make affordable payments for the next decade..There are options.

The key, then, is to understand the legal process as you work with the IRS. Don't fall for a scam. Just look into the realistic options you have, make sure you know what official steps to take, and find out how you can legitimately put that tax debt behind you.

Source: CNBC, "The 3 Most Common Types of Tax Fraud," Carlo Dellaverson, accessed Aug. 24, 2017

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