Tax Relief Companies Took $77.7M and Returned Only $8M

The letter looks official. It mentions your tax debt, says your case has been reviewed, and promises you can settle for a fraction of what you owe. All you have to do is call today. For someone who has been dreading an IRS bill for months, it sounds like a way out.

In the case described in this guide, the FTC says that way out cost consumers $77.7 million. And when the operators settled in June 2026, the cash they agreed to surrender was a small fraction of that figure.

I am Nitesh Kumar Gupta, founder and editor of The Scam Exposed. This guide covers what the FTC alleged against a Las Vegas operation called American Tax Service, how tax relief scams work, the three sentences that give them away, the free IRS options they charge thousands for, and the checks that take about a minute before you pay anyone.

What the FTC alleged

The FTC and the State of Nevada announced the proposed settlement on 2 June 2026. In October 2025, a federal court had temporarily halted the alleged scheme, run by Terrance Selb and Tyler Bennett through American Tax Service and seven affiliated entities.

The allegations, as described by the FTC:

• Promising settlements before looking at anything. The operators claimed they could settle back taxes for "pennies on the dollar" or a "fraction" of what taxpayers owed, often before evaluating the taxpayer's circumstances.
• Impersonating government. The FTC alleges they impersonated government agencies, including the Internal Revenue Service, and deceptively promised tax debt relief.
• Threats. The FTC alleges consumers were sent threats about their debts.
• Targeting older people. The FTC presented evidence in court that the operators targeted older consumers in upselling fictitious add-on services, often for tens of thousands of dollars at a time.

Under the proposed order, Selb and Bennett would be banned from debt relief services, tax preparation services, telemarketing and impersonation of individuals, governments or businesses. The order carries a $77.7 million judgment, which reflects the amount the FTC says the defendants took. Apart from the roughly $8 million in cash and other surrendered assets, it is suspended because the defendants said they could not pay. It becomes due in full if they are found to have misrepresented their finances.

Two things are worth knowing. The order is a proposal until the court approves it. And litigation is ongoing against the corporate defendants, who are separate from Selb and Bennett. Allegations against them have not been decided.

How big the gap is

The numbers are worth reading slowly, because they explain where the effort belongs.

Enforcement matters, and it arrives years after the money has moved. The cash to be surrendered is far smaller than the amount taken. That is the reason this article keeps repeating one idea: the effort belongs before you pay, not after.

How a tax relief scam works

The details change from company to company, but the shape is consistent. Understanding it makes each step easier to recognise when it arrives.

Step 1: The contact

It arrives as a letter, a call, an ad or a text. The wording suggests you are in a specific kind of trouble and that the sender can help. Sometimes it is made to look as if it comes from a government agency. The FTC alleges that was the case here.

Step 2: The promise

You are told you can settle for "pennies on the dollar" or a fraction of what you owe. The figure is quoted early, sometimes before anyone has asked about your income, expenses or assets. That is the tell. A real assessment cannot exist before your real figures do.

Step 3: The pressure

Calls follow. You hear that your situation is serious, that the window is closing, or that things will get worse if you wait. The goal is to move you from worry to payment before you check anything.

Step 4: The fee

A fee is quoted, sometimes large. In the FTC's account, older consumers were also upsold fictitious add-on services, often for tens of thousands of dollars at a time. Each extra feels small next to the promised saving, which is how the total grows.

Step 5: The silence

Once the money is paid, results are slow, vague or absent. The tax debt is still there, and so are the penalties and interest, while your money has gone elsewhere.

Why people with tax debt are targeted

It needs saying clearly: people who owe back taxes are not targeted because they are careless. They are targeted for practical reasons.

Worry that never switches off

Tax debt hangs over people. A message that promises to make it smaller lands on someone who has been wanting exactly that.

Respect for official bodies

When a message looks like it comes from the IRS or a state authority, it carries weight. Impersonating one is a way of borrowing trust that was never earned.

Complicated rules

Few people know which IRS programmes exist or what they cost. That gap is where a confident sales pitch does its work.

Older people with savings

The FTC presented evidence that older consumers were targeted for expensive add-on services. Retirement savings and the fear of putting a lifetime of work at risk make that group a bigger prize.

The three sentences that identify this scam

Whatever company name is on the letter, the pitch is the same.

"Pennies on the dollar." Nobody can know what you qualify for without your actual figures. A settlement amount quoted before your financial details are reviewed is a sales line, not an assessment.

"Your account has been flagged." The IRS communicates about your account by mail, to you, using letters that reference a specific notice number. A third party calling to say your account is flagged does not have that information.

"You need to act today." Tax debt does not work on same-day deadlines. Urgency is there to stop you checking, which is exactly what this article is asking you to do.

What the pitch sounds like: lines to recognise

Scripts vary, but the same kinds of line come up again and again. If you hear any of these, stop and check before saying yes:

• We can settle your tax debt for pennies on the dollar.
• Your case has already been reviewed and you pre-qualify.
• Your account has been flagged and you need to act before it escalates.
• This offer expires today.
• You do not need to contact the IRS yourself. We will handle everything.
• There is a fee to begin, and then a few extra services to make sure it works.
• Please do not talk to the IRS before we have filed your paperwork.

Notice how each line pushes you to decide quickly and to stop checking independently. Telling you not to contact the IRS yourself is particularly worth noticing, because contacting the IRS is free and is what the free options in this guide rely on.

A typical case

The following is a typical case that shows the common pattern. It is not a specific real person.

A 68 year old man with a back tax bill from a few years of self-employment gets a letter in the mail. It carries an official looking header and says his case "has been reviewed" and that he may pre-qualify to settle for a fraction of what he owes. There is a phone number and a note that the offer closes this week.

He calls. A friendly representative asks how much he owes and says that is "no problem at all", that they settle cases like his every week. Nobody asks about his income or savings. A fee is quoted to begin, and he pays it by card. Over the next two weeks he is called several times about extra services that will "make sure it goes through", each with its own price.

Months later he has paid thousands of dollars and has still not been told his debt is reduced. When he finally phones the IRS himself, he learns that the same payment plan he could have set up online in minutes had been available all along. Every step in this case fits the pattern: contact, promise, pressure, fee, silence.

Red flags

• A settlement amount is quoted before your finances are reviewed. No honest assessment can come first.
• The letter or call implies it comes from the IRS or a government agency. The IRS does not market settlements to you.
• You are told your account is flagged or under investigation by a company that is not the IRS.
• There is a deadline measured in hours or days. Tax debt does not work that way.
• You are told not to contact the IRS yourself. Contacting it is free.
• A large fee is demanded up front. For debt relief sold by phone, advance fees are restricted under the Telemarketing Sales Rule.
• Extra services keep being added. Each one is presented as essential to the result.
• The explanation is vague. Terms like review, evaluation or analysis with no written breakdown of what you are paying for.

Real help vs a tax relief scam

What they were selling is free or cheap

This is the part that stings. The IRS programmes these operations charge thousands for are applications you can make yourself, at no cost or low cost.

Offer in Compromise

This is the real version of "settle for less than you owe". It exists, and it is genuinely used, but qualifying depends on your income, expenses, assets and ability to pay. See the IRS page on the Offer in Compromise for the rules.

The IRS publishes a free Offer in Compromise Pre-Qualifier tool. It takes a few minutes and tells you whether you are likely to be eligible before you spend anything on anyone.

Run it first. If the tool says you are unlikely to qualify, no company can change that, whatever they promise.

Payment plans

Most people who owe do not need a settlement. They need time. The IRS offers short term plans and longer instalment agreements, and you can apply online in minutes.

Currently Not Collectible

If paying anything would leave you unable to cover basic living costs, the IRS can place your account in this status and pause collection. Penalties and interest continue to build, but the collection pressure stops.

Penalty relief

If you have a clean compliance history, first-time penalty abatement can remove penalties on a single tax period. It is often a phone call.

Where to get real help, free

How to check any company before paying

1. Look them up in the IRS preparer directory linked above. Credentials are verifiable in a minute.
2. Ask what your fee buys, in writing, before paying anything. Vague answers about a review or an evaluation are the answer.
3. Ask whether they have run your figures. If they quoted a settlement before seeing your finances, walk away.
4. Search the company name with "FTC" and "lawsuit". Enforcement actions are public, and the FTC lists them under debt relief and credit repair scams.
5. Never pay a large fee up front. Under the Telemarketing Sales Rule, a debt relief company selling by phone cannot charge you before it has actually delivered a result. Our guide to credit card rate reduction calls covers that rule in full.
6. Take your time. A legitimate firm will not mind you checking it. Pressure to decide today is itself the answer.

The letter test

Because the FTC alleges this operation impersonated government agencies, one check is worth having.

A genuine IRS notice arrives by post, references a notice or letter number in the top right corner, and relates to a specific tax year. You can look that number up on the IRS website and read what it means.

Marketing material that mimics a government agency will not survive that check, because there is no notice number to look up.

Two more things the IRS does not do: it does not begin contact with a phone call demanding immediate payment, and it does not ask for payment in gift cards, wire transfers or cryptocurrency.

How families can help without frightening anyone

Protecting a parent does not mean turning them into someone who trusts nobody. A few habits do most of the work.

• Make it easy to ask. Many people feel embarrassed about owing tax or nearly falling for a pitch, and that embarrassment keeps them quiet until money has gone. Say plainly that no letter is too small to check.
• Offer to read the letter together. Look for the notice number and look it up on the IRS site. It takes a few minutes.
• Run the free tools together. The IRS Pre-Qualifier and the online payment plan page are both quick, and doing them together keeps your parent in control.
• Agree a rule before anyone pays. No payment to any tax relief company until a second person has looked at it.
• Put the real numbers somewhere visible. The IRS on 1-800-829-1040 and the Taxpayer Advocate Service, next to a trusted family member's number.

For a wider view of money scams that target older adults, read the 5 costliest scams hitting older adults.

If you already paid one of these companies

If you are 60 or older, or helping someone who is, the National Elder Fraud Hotline offers free help on 1-833-372-8311. Our guide to the first 48 hours covers the dispute deadlines in detail. And please do not let shame stop you speaking up. These are professional operations running tested scripts. Falling for one says nothing about your intelligence.

Expect the second approach

The number to remember

$77.7 million taken. Over $8 million in cash surrendered, nearly $10 million with other assets.

Enforcement matters, and it arrives years later and returns a fraction. So the useful move is the free one you can make today: run the IRS Pre-Qualifier tool, or contact the Taxpayer Advocate Service, before you pay anybody anything.

Quick quiz: scam or not?

A letter says you can settle your tax debt for pennies on the dollar and gives a number to call today. Scam or not?

Treat it as a scam. A settlement cannot be quoted before your real figures are reviewed. Look up your options on irs.gov instead.

You receive a letter from the IRS with a notice number in the top right corner, and you find that number explained on irs.gov. Scam or not?

Likely genuine. A notice number you can look up on the IRS website is the sign of a real notice. Follow the instructions in it, and contact the IRS on a number from irs.gov if you have questions.

A company says not to contact the IRS yourself because they will handle everything and need a fee up front. Scam or not?

Warning sign. Contacting the IRS is free, and advance fees for debt relief sold by phone are restricted. Check credentials in the IRS preparer directory before paying anything.

Frequently asked questions

Help us warn others

Got this call or letter? Search the number on The Scam Exposed and leave a comment on its page to warn others. Every comment helps the next person who looks that number up before calling back.

Share this with a parent or grandparent. A two minute read today can save a family thousands of dollars tomorrow. Scammers count on people not talking about this, so talking about it is one of the best defenses we have.

How we researched this article

The facts about American Tax Service come from the FTC's June 2026 press release and the linked court filings. The allegations are the FTC's and Nevada's, and the settlement is a proposed order pending court approval. The guidance on tax relief options comes from IRS and Taxpayer Advocate Service pages linked in the text. The typical case is a composite of the common pattern, not a specific person. We update this guide when new information is published.

This article is for general information and awareness only. It is not legal, tax or financial advice. For questions about your own tax debt, contact the IRS at 1-800-829-1040, the Taxpayer Advocate Service, or a credentialed tax professional.

Sources

• FTC, Nevada Will Require Tax-Relief Scammers to Pay Cash and Turn Over Assets Worth Nearly $10 Million, 2 June 2026
• FTC, Proposed Stipulated Order (American Tax Service)
• FTC, State of Nevada Sue to Stop Tax Debt Relief Scammers, October 2025
• FTC Legal Library, FTC and Nevada v. American Tax Service LLC et al.
• Nevada Attorney General, Settlement requiring tax-relief scammers to surrender assets
• IRS, Offer in Compromise
• Taxpayer Advocate Service