TL;DR: On August 13, 2026, the FTC warned consumers about tax debt relief companies that promise to erase debt for “pennies on the dollar”, charge fees and often do little or nothing. The FTC reached a nearly $10 million settlement with the owners of American Tax Service, which it says mailed letters impersonating the government.
What happened
The FTC consumer alert says some companies promise to settle tax debt for a fraction of what you owe before reviewing your situation. They charge service fees but often do little, and may leave you owing more to federal, state or local tax authorities.
The FTC says American Tax Service (ATS) mailed letters that impersonated the government and demanded a call by a set date or risk property seizure. It also advertised on TV, radio, online and podcasts, which led to sales calls full of false promises. The agency reached a nearly $10 million settlement with ATS’s owners.
Why it works
Tax debt creates fear and shame, and a government-style letter with a deadline feels like an official demand. A promise of a big discount is attractive when you do not know what relief you can really get.
The FTC’s red flags include claims that you “qualify” for a relief program without a real review, offers to settle for a fraction of what you owe, demands for the full fee upfront, and guarantees of a specific result.
Background: our explainers on IRS impersonation scams and spear phishing. See also FTC Halts Credit Repair Scheme Tied to Nearly $200 Million and Doxo to Pay $2.1M Over Bill-Pay Ads Posing as Official Sites.
What the FTC advises
- Only the IRS or your state’s tax agency can decide what you qualify for.
- Walk away from any company that wants full payment before doing work.
- No legitimate company can guarantee an outcome because every case differs.
- For free help, use the IRS Taxpayer Advocate Service for federal problems, or contact your state’s comptroller or revenue department, and report scams at ReportFraud.ftc.gov.
If you have already sent money
Contact your bank or card issuer immediately and ask to stop or recall the payment, then report it at ReportFraud.ftc.gov and, for internet-enabled crime, to the FBI’s Internet Crime Complaint Center. Our guides on how to report a scam to IC3, how to reverse a wire transfer scam and US bank impersonation scams walk through the steps, and what to do after a scam, wherever you live covers the first 24 hours. Scammers often start with details taken from past leaks, so run our free digital footprint check to see what of yours is already exposed.
Frequently Asked Questions
What did the FTC say about American Tax Service?
The FTC says ATS mailed letters impersonating the government demanding a call or risk property seizure, and reached a nearly $10 million settlement with its owners.
Can a company really settle my tax debt for pennies on the dollar?
Only the IRS or your state tax agency decides what you qualify for. Be wary of anyone promising a specific result before reviewing your situation.
Should I pay a tax relief company upfront?
The FTC advises walking away from any company that wants full payment before doing work.
Where can I get free help?
The IRS Taxpayer Advocate Service helps with federal problems, and your state comptroller or revenue department helps with state taxes.
Sources
Related Reading
- FTC Halts Credit Repair Scheme Tied to Nearly $200 Million
- Doxo to Pay $2.1M Over Bill-Pay Ads Posing as Official Sites
- Cell Phone Return Scam: Nanaimo RCMP Warns of Fake Labels
- US Scam News: October 2026 Roundup and Warnings
- Average Loss per Victim by Scam Type (2025)
- What to do after a scam, wherever you live