Desperate for tax relief? Why are some solutions worse than the problem?

Ralph
00:00:00

Have you ever felt like you're drowning in tax debt, searching for someone, anyone, who can throw you a lifeline? Maybe you've seen those ads promising to "erase your tax debt" or "settle with the IRS for pennies on the dollar." Sounds amazing, right? But what if I told you that some of these quick fixes might not only fail to help you, but could actually make your situation worse? Then today's episode is for you if you've ever wondered: Are there better ways to handle tax debt without falling for those too good to be true solutions? Stick around, because I'm going to show you a better way.

Podcast Announcer
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In a world where crushing debt keeps you trapped, where living paycheck to paycheck has become your new normal, and where the dream of retirement seems impossibly out of reach, there's hope. Join financial evangelist Ralph Estep Jr. A man who's walked through the fire of financial failure and emerged stronger on the other side.

Welcome to Ask Ralph, the show where real world experience meets biblical truth to break the bondage of financial despair.

Get ready to take control of your money, break free from the financial stress and align your resources with God's purpose for your life. This is Ask Ralph with Ralph Estep Jr.

Ralph
00:01:12

Have you ever felt like you're drowning in tax debt, searching for someone, anyone, who can throw you a lifeline? Maybe you've seen those ads promising to "erase your tax debt" or "settle with the IRS for pennies on the dollar." Sounds amazing, right? But what if I told you that some of these quick fixes might not only fail to help you, but could actually make your situation worse? Then today's episode is for you if you've ever wondered: Are there better ways to handle tax debt without falling for those too good to be true solutions? Stick around, because I'm going to show you a better way.

Hi there, and welcome to the Ask Ralph show. This is the place where we bring financial wisdom together with Christian faith to help you achieve financial freedom and grow closer to God in the process. I am so glad you're here today. Now before we dive in, let's take a quick look back at yesterday's episode. We tackled a really big question and that is, Wait, what are estimated taxes, and do I actually have to pay them? If you've ever been confused about quarterly tax payments or if you've wondered if they even apply to you, that episode is a must listen. It's packed with practical advice that's going to help you avoid penalties and manage your taxes more efficiently. Be sure to check it out after this episode.

Now on to today's listener question, this one comes from Lisa in Ohio. And she writes this. "Hi Ralph, I'm feeling overwhelmed. I owe a significant amount in back taxes, and I've been getting calls and emails from companies that say they can make my tax debt disappear. It sounds great, but I'm worried it might be a scam. I feel stuck and I don't know who to trust. What should I do?"

Lisa, I can hear the stress in your words, and let me tell you, you are not alone. Tax debt can feel like a heavy weight on your shoulders, and it's easy to feel desperate for a solution. But I do need to tell you there is good news. There is hope. You don't have to fail for these schemes, and today, I'm going to explore better ways of how to approach your situation with wisdom, with integrity, and with faith.

Now before we go any further, I want to remind you that this show is all about your questions. If you've got a financial challenge or you need guidance, just like today's question, just head over to justaskralph.com and send me your question.

And don't forget, every Tuesday night at 7:00 PM, that's Eastern time, we host a live show where you can ask your questions in real time. You get to that, by going to askralphpodcast.com/live. A lot of people ask me that question. It's really that simple. You go to that website and it'll put you right into the live show.

And I would love to hear from you. Now, maybe you're feeling stuck, you're feeling overwhelmed, or you're just unsure what to do next. I want to offer you something more personal. You know, maybe the live show or sending in a question just isn't enough. Because I'd love to connect with you directly. What you could do is you can head over to askralph.com. When you get there, the top of the page, you'll see a button that says, book a call with Ralph and you can book a call with me. And whether it's a tax question, maybe it's a debt question, or a budgeting question, or you just need some clarity on your financial situation, I am here to help you. And when we talk, here's what I'm going to do.

It's going to be very specific. We'll create a personalized plan that addresses your unique challenges and helps you move forward with confidence.
So don't wait, listen, take the next step today. Visit askralph.com and schedule your call and let's work together to master your finances.

You know Lisa, your question reminds me of an important truth. When we're in a tough spot, when we're challenged with something like you're going through with this tax debt, we're often tempted to take shortcuts or make decisions out of fear. But here's the thing. As Christians, we're called to approach our finances differently. We need to approach them differently than the world would approach them. We need to approach them with wisdom, we need to approach them with responsibility, and most of all, we've got to trust in God's provision, which brings me to today's Bible verse, which I believe speaks directly to this situation. And this Bible verse and I've used it on the show many times is from Proverbs chapter 3 verses 5 and 6 and it says this. "Trust in the Lord with all your heart, and do not lean on your own understanding. In all your ways acknowledge him, and he will make your paths straight." And this verse is so powerful because it reminds us that when we're overwhelmed, whether it's with tax debt or another challenge, we don't need to rely solely on our own understanding. That will get us in trouble. It'll lead us down paths we don't want to go to. So we don't want to lean on that or rush into decisions out of desperation. Instead, we need to trust in God's wisdom and seek His guidance.

When it comes to tax relief, it's tempting Lisa to lean on promises that seem like a quick fix. You're seeing those ads and you're thinking, Ralph man, I can get out from this tax burden. This is so beautiful. But these solutions you got to remember, they often have hidden traps and trust me, I deal with this every day. But if you trust in God, it means taking thoughtful, measured steps that are aligned with both our financial goals and our faith.

Well today, I just want to share that I am so grateful for this reminder in scripture today. Because even in moments of financial stress, even when we feel like there's nowhere to go, we have a God who is faithful and He provides wisdom when we ask for it. So let's hold onto that truth as we move forward.

Well Lisa, let me tell you a story. I'm actually going to tell you two stories today that I think you'll relate to. A while back, I worked with someone and we'll call her Tessa. You know, I don't use real names on this show. Now, Tessa was a small business owner who had fallen behind on her taxes and Lisa, a lot like you. And that stress was keeping her up at night. She felt embarrassed and she didn't know where to turn. And I remember Tessa tell me about this after the fact, because we ended up meeting because of this. And one day she saw an ad for a tax relief company and that ad was fantastic.

It promised to reduce her tax debt by 90%. And it sounded like a miracle to her. And she was dealing with the same things you're dealing with Lisa. So she signed up, she paid $3000 bucks upfront, and waited for the company to work its magic. Because there's the first problem. They want that money upfront, and I'm going to talk later in the episode about the things or the red flags to watch out for. But let me continue my story. But then all of a sudden, weeks turned into months. And months turned into a half a year and almost three quarters a year and nothing happened. And Tessa relayed it to me. She said, Ralph, I tried to contact them.

They wouldn't answer my calls. And in the end, and this is the absolute sad part. And I hear this story time and time again. She was left with even more debt. Plus the money she'd lost to that company because they want her to send $3,000 upfront.
And here's what I want you to hear today.

I don't want this to happen to you. So, let me take some time and let's break down the risks and explore some better options. So the first risk. If you're desperate, you get into these situations, is these exorbitant fees. Because here's the deal. Many tax raise companies are going to charge you a huge upfront fee. Sometimes it's thousands of dollars.

Like in your case, Lisa. With Tessa. 3000 bucks up front. Before they'll even talk to you. They might do a brief consultation. They'll do a Zoom meeting or a telephone call. They'll ask you to send them a few documents, but then they send you this bill. And the thing you need to understand. Most of the time, that money is nonrefundable. And that creates this,
you're already in the tax hole. Let's picture this for a second. You're already in this situation where you're in this hole because of your taxes. I don't know how you got there, but you're there. I'm not going to judge it. That's where you are. And then they want you to pay them this non-refundable fee.

And then now you're in a situation where you've got less money to address that overall tax debt. Here's my other story for today. I was talking with a client a couple of weeks ago. I think I mentioned on the show a couple of weeks ago about this. I had a client and this is one of my clients I work with all the time. And I guess they were embarrassed to tell me that even though I had done a good job putting their tax returns together, they owed money at the end. And I would give them a voucher and I say, Hey, you know, April 15th or whatever that was, I think we extended their return.

So whatever that was October 15th, I think for them. Here, send this payment to the federal and send this payment to the state. But I just made the assumption they had done that. Well, I guess a couple of weeks ago, I saw this thing pop up on my calendar and I did this Zoom call with a client. And I said to him, I'm not going to use his name.

And I said to him, Hey, what's going on? He says, ah, you know, I think I've got myself in trouble. I said, well tell me what's going on. He says, well, you know, Ralph, I didn't want to talk to you about this, but you know, we've got two or three years worth of taxes that we haven't paid. And I said, no, I wasn't aware of that.

I said, well, what's going on? He says, well, you know, one day the wife and I, we were watching TV during the day or something. I remember he didn't tell me exactly where, and we saw this ad on television. And this ad said, Hey, this IRS is settling tax debt for pennies on the dollar. And they've got this new quote, fresh start initiative. And you know, the wife and I talked and we thought we owed about $30,000. And we said, you know what?

This could really help us. This could get us out of this tax debt spiral. So we picked up the phone, we call them and Ralph, they were the nicest people in the world. They started to talk with us. They said, Hey, send us a copy of this and send them a copy of that. And they send them a couple of years worth of tax returns. And they said, oh, we need to know your income.

You know, send us a profit loss if this particular client owns their own business. Send us a profit and loss statement. And they sent all that stuff. And then he said, Ralph, nine months dead air. I said, well, that's not good. I said, so what happened next? He says, well then we came in this year when we got our tax on.

Now this year was this past October cause like I said, these folks generally file an extension. So he came in. We did their taxes. Again, I gave him the vouchers, assuming they're making these payments. And he says, as soon as we left your office, I said, you know, we're going to owe money again, let me get on the horn and go and get them this information so they can add it.

So we're going to work out some with the IRS. We can do that. I said, okay. I said, what happened next? He said well, I called them and I told them we owed money for a 2023 tax season and they said, oh, okay, well, send us over that information. And he said, Ralph, I sent it over to him and I want to say a two or three days went by and they called me and they said, Hey, that's great, but we need another $9,500. And I said, wait a second.

I said, you owe $30,000. He goes, yeah but Ralph, but then remember we owed another 10,000 this year. I said, okay. So now you owe $40,000. Right. I said, okay, well, how much have you sent them? Well Ralph the first time around, we had to send them $10,250. I'm making up a number. It was over $10,000.

I don't remember exactly what it was. He said it was around $10,000. I said, okay, that's fine. It's a third of what you owe at the time. So he said, well, then I called again and he said, well, we need you to send us another $9,500. I said, wait a second. I said you sent them the information at the front end. They haven't done anything for nine months. Now you've got more taxes to pay.

You send them that information. And the first thing they come back to you, haven't talked to you in months, they come back and they ask you for another $9,500.
So I said, wait a second. I said, so what you're telling me is you now owe 40 grand. You've already paid them 10. Now they want another 10. So you're going to have paid them 20,000 to help you negotiate a $40,000 settlement. Yeah, Ralph. We're worried about it because we're afraid we got scammed. And I said, yeah, I'd be worried about it too.

Why didn't you ask me about this? I could have helped you. So I'm going to talk a little bit later in the show about what you can do legitimately to get this resolved. But I just wanted to share that story because these folks are the typical situation. They're desperate. They're having a hard time. They've got this tax you know, this big amount of taxes sitting there and they don't know what to do about it.

So that's the first thing. They charge exorbitant upfront fees. Second thing. Empty promises. You know, they make these promises. They're going to erase your tax debt or negotiate this massive reduction. You know, they're going to settle for pennies on the dollar.
But here's the deal, the thing you need to understand. The IRS has strict rules. I mean, they have an IRS code book. A lot of people don't understand this. There's the IRS code. Then there's the IRS code book which is like the procedures. So the IRS has a strict set of rules that if you qualify because of X, Y, and Z. You may qualify to get your tax debt relieved.

But you gotta be real about this. And this is what I said to this client I was talking to. It's a very conversation that Tessa and I had to back in the day. I said, guy, wait a second. I said, why do you think the IRS is going to forgive your tax debt? Did you not owe the money? Well, no Ralph, you did the taxes.

We did owe the money. I said. Okay. So why did you think they were just going to wipe it out? Well, Ralph, these people, did you ever see their commercials? I said, yeah, I see these all the time. They're scoundrels. But I said, wait a second. I said, you have assets.
They have a house that's almost paid off. I said, you've got equipment in your business that it's almost paid off. You've got income coming in. I said, what in the world did you think they were going to do? Well, Ralph they didn't ask me those questions. But see that's the reality. The reality is think about like this. The IRS wants to get paid. If the IRS thinks they can get money, they're going to get money.

They're going to find a way to get the money. Look, if you're in a situation, I've dealt with clients in this situation. Maybe you've lost your job. Maybe you have a terminal illness, or maybe you've got a major disability. Yes. In those cases, when you don't have assets, when you don't have income, the IRS is looking like, yeah. You can't get blood from a stone.

Well, the IRS will take that approach and yes, maybe you can settle at that point.
So that's a second thing. Watch out for those empty promises. Third thing, lack of transparency. And this again, my client that I'm talking about right here, same situation. They're vague about their services. They're vague about their fees. They don't tell you what they're going to do. They're just going, oh, we're going to solve your problems. Oh, that sounds great.

What's the timeline for that? What are the requirements for that? What are the rules I have to follow? And the thing is it leaves you in the dark. And you're vulnerable for being taken advantage of and think about it in this case. Nine months, no contact. Zero. Not an email, not a phone call. And when the client will call, dead air Dave. Nobody's calling him back. Not until they sent over another tax bill and the company thought, Hey, this is great.

We can get another 10 grand from this guy.
Number four thing.
Increased debt because worst of all, some companies fail to deliver. And unfortunately, I had to tell you this. I don't have statistics to prove this. But often times they just don't deliver because they sold you a bag of goods that wasn't worth what they sold you the front end. They flat out lied to you. They told you, oh yeah, Ralph, we're going to make this tax debt go away.

We're going to waive the penalties. We're gonna waive the interest. We're going to remove your stress. We're going to give you this wonderful peace of mind and listen, I get it. That's what people want. They don't want to have the tax man coming after them. They don't want to have those levy notices and those threats to attach your wages and file tax liens and all those type of things. You want to get past that. But oftentimes all they do
is prolong the process and it increases the penalties because here's the deal.

You still owe the tax from the day that you owed it. And the IRS is going to continue to tack on penalties, they're going to tack on interest, and they're just going to prolong the process. And all that's going to do is cause you more stress.

So it sounds like I've painted a pretty bleak picture. And to some extent I have, because there is no get out of jail free card. There is no overnight resolution to this. There just isn't. I wish I could tell you that there is, but there's none.
But I do have some good news. There are some better ways to handle tax debt.

And this is the exact conversation I had with this client a couple of weeks ago. Number one thing. You can contact the IRS directly. Now, I'm not telling you that's your best plan. Listen to me very clearly. I think it makes sense to hire somebody like me or a tax attorney, somebody that deals with this every day, go have a consultation with them, spend some of your money, and help them put together a plan. But you can contact the IRS directly because here's the deal.

The IRS offers payment plans. They offer penalty abatement. They offer other options to help you manage that debt. And notice I said debt. I didn't say they're going to write it off. Because here's the bottom line. They want you to pay them. That person sitting on the other end of the phone at the IRS is trying to get the money that you owe.

It's really that simple. So they're going to work with you. They're going to give you options depending upon how much you owe. You can actually do options over the phone. I'll talk about that in a second when I talk about this installment plan. But the IRS has ways to help you. They want you to pay them. So understand that. Second thing you can do. You can set up an installment agreement.

That's basically you take out a loan with the IRS. You already own the money but the IRS will allow you to make a monthly payment plan if you can't pay your balance in full upfront. It's simple. It's free. You don't pay them a fee to say, Hey, Mr. Or Mrs. IRS, or whoever's working there. Can we set up a payment plan?

Oh, well sure you got to send us a fee. Now they do charge a small fee. I think it's less than a hundred bucks to do it because there's paperwork involved. But you're not paying them $10,000 upfront. It's simple. In fact, if you owe and I don't have the number right in front of me, if you owe a certain amount or less, you can actually go right to irs.gov.
If you've got an account with the IRS. And you can do a payment plan right in front of you on your computer screen. You can also call in and do the same thing, but it's right there for you. So don't pay for these services that are just going to rip you off.

Third thing on my list here, and I should have probably started with this one first. This is the time to seek professional help. You need to work with a trusted accountant or maybe it's gotten so complicated that it's beyond the scope of an accountant and you need to talk to a tax attorney. Now I'm not picking on tax attorneys, but they charge a lot of money. So one of the things you might want to do first is go meet with a licensed accountant.

Somebody like myself and say, Hey Ralph, here's what I got going on. What should I do? Now, in my practice, there are some times I can say, okay, here's what we can do. We can set up a payment plan with the IRS. I'm very confident they'll do this. But there've been other times in my practice when somebody is stuff was so jacked up that I said, look, you need to go hire an attorney. Because the IRS is coming after you for tax evasion or something criminal, where they can put the guys with the gold badges and guns come out.

That's not the people you want me to deal with. That's the time where you're going to deal with a tax attorney. But you need to find someone with that has experience in this area and they have the credentials to back it up because that's a way you can resolve this tax debt. All of those things leads me to my fourth thing on my list here. You've got to build a budget. Because if you're going to get into a situation where you're going to do a payment plan with the IRS, you got to look at your finances and you got to find out where you can cut back to make room for those tax payments, because here's a truth, right?

If you didn't have the money to pay them, its probably going to be a struggle to make those monthly payments. So you're going to have to figure out how you're going to make this happen because they are what I call a priority creditor. They want to get paid first. That's just the bottom line. So you've got to look at your budget, you got to make it a priority and you have to also realize that until that debt is paid in full, they're going to charge you penalties.

They're going to charge you interest and they are going to haunt you. You don't want them as your lender. They are a lender of last resort. If you've got other ways to pay this off by taking a home equity loan or going and getting a personal loan at the bank or your credit union, you're better off because they're not going to charge you a penalty.

They're going to charge you interest. Yes. But they're not going to charge you that penalty that just continues to grow. Like I've had many clients say to me, Ralph. I've been making payments to the IRS for two years. And man, they sent me a statement telling me I'm not making any principal payments at all.

Yeah, that's right. They're the lender of last resort. And number five, and this one is crucial. You're listening to this show, you're probably a faithful person. You believe in honesty, stay honest in this. Avoid those shady schemes or dishonest taxes to reduce your tax liability. Ask yourself a very simple question.

My grandmother used to say this all the time. Does it pass the sniff test? I mean, you didn't get into this tax debt overnight. So why in the world do you think they're going to wipe it out overnight? Like I said, there are circumstances when that happens. Dealt with many of those in my own practice with clients over the years. Maybe they have a disability, you know, they were hurt.
They lost their job. They lost their home. I mean, there's a terrible list of things I can go down and in those cases, to be very blunt with you, the IRS is going to look at your situation and say, you know what, Ralph's not going to be able to pay us ever. We can do whatever we want. We can attach his wages, he's not working. We can put a lien on his house, he has no equity. You get the idea.

But when you get these companies that come at you from all directions and I see them all the time, and here's a dirty little secret. I was talking to somebody this morning as I was planning to record the show today. And he said, well, how does these people even know about this stuff? Well, here's the deal. If the IRS goes out and files like a lien on your property or they do a tax lien, that's public record and these companies, they buy those lists. And they market you like crazy because listen, they know your situation. Like my client, Tessa and Lisa you today, they know the situation.

They know you're desperate. They know you're looking for that light at the end of the tunnel. And they just take advantage of you like your prey out there on the hunt, like a lion looking to eat something. I know that's a rough example, but it's so true because that's their goal. Their goal is to get your money. They don't care whether they resolve your tax issues or not. And I'm not saying there aren't good companies out there that help people with tax issues. There are people like myself that do help people with their tax issues. But I don't charge you a percentage upfront. I sit down with the client and say, okay, here's your situation. You haven't filed, let's get the filing done. Here's what it's going to cost to do that. Okay, great. You got your filing done. Now you owe X. Okay, now that you owe X, let's take a look at your budget. What can you afford to pay? And generally what I try to tell clients is if you can get it paid off over 60 months, that's 6 0, generally the IRS will work with you and set up a payment plan.

Now, listen, here's the deal. And I'm not going to go on a tangent here because we're at the end of our time today. But make sure you don't owe the next year, because if you do, if you're in an installment plan and maybe I'll do another show about that, but if you're in an installment plan and then you owe money again, it void your installment plan.

You got to go through that whole thing again. Well now I've covered what I wanted to cover today. And I just want to remind you, every day when I record the show, I also write a blog post. I go deeper in that. I give you resources in that. I give you other things you could consider. So you can find those always at askralphpodcast.com/blog. So if you want to go even deeper, you can go to askralphpodcast.com/blog and go a little deeper.
Well, let's get to today's reflection questions.

I always like to end the show with taking a look back and see where we are. So number one reflection question. Big picture. Have you ever rushed into a financial decision out of fear or out of desperation? Because that's exactly what we're talking about right here. We're talking about fear.
We're talking about fear of the IRS. We're talking about desperation. You got this debt over your head and you just want it to be done. Ask yourself this really difficult question. When you rushed into that financial decision, it was fear, desperation, what was the result? My guess is it wasn't a good result. So learn from that. Second question. How can you apply Proverbs chapter 3, verses 5 and 6 to your financial challenge?

Use the Bible as a resource. Pray about your situation. You don't have to do this alone. God is going to work with you. He'll help you find a resolution to this. So that's number two. And my third and final reflection question for today. What small steps can you take today? Not tomorrow, not next week.

Not next month. Today. To start addressing your tax debt. Because listen, it's not going away. I've had a lot of clients say to me, Ralph, you know, it's great. I haven't heard from the IRS in over a year. Guess what? You're going to hear from them again. It's not just going to go away. Dirty little secret.

A lot of people don't know this. Sometimes the IRS will put your case in what's called uncollectable status. Which just means it goes on a back burner somewhere. Picture this kitchen and a stove. And you got this back burner where you got some like stern or stewing in the back. IRS does the same thing. And then the next time you file a return, or an alarm clock goes off with the IRS to go, oh, Mr.
Jones. You're back in my queue. I haven't talked to you for a year. When you're going to pay us? Oh, and by the way, we added a year's worth of interest in penalties.

So Lisa and anyone else who's listening, remember this. There's no quick fix for tax debt. But there is hope. But here's the thing. There's hope by taking thoughtful, honest steps you can overcome this challenge and you can find financial peace.
So, let me ask you. If this episode has resonated with you, why not take the next step?

Like I said earlier, book a personal call with me, go to askralph.com. If you're in this situation, maybe you're not in a tax debt situation, but you want to prevent yourself from getting in that situation, well book a call with me and let's work together to create a plan for your financial success. Now tomorrow, we're going to talk about another big decision.

And that is cash in or roll over? I'm not talking about my dog Piper, the German Shepherd. What we're talking about there is what's the smart move for your maturing CD. So that's what I'm going to cover on tomorrow's show. So you don't want to miss it. Remember this as I close. My passion is to help you achieve financial success.
I want to see you live out your dreams. And I want to see you grow in your faith. And I know together, we can master your finances from a Christian perspective. So as I always end the show, stay financially savvy and may God bless you abundantly.

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