Settle Your IRS Debt for Pennies and Lift the Tax Lien Off Your Credit Report
Tax liens have been off all three credit reports since April 2018. A firm charging you to lift one is selling a fix for nothing.
The letter has a case number, a deadline and enough official formatting that you read it twice. It says you may qualify to settle your back taxes for a fraction of what you owe, and that clearing the debt will lift the tax lien that’s holding your credit down. If you owe the IRS and your score is already rough, that sounds like two problems solved with one phone call.
The second half of that promise stopped being true more than eight years ago.
What the pitch is
Tax relief mills are sales operations built on top of a real IRS program. The lead comes from a mailer, a radio spot or a podcast ad. A telemarketer tells you that you probably qualify to settle for “pennies on the dollar” and collects a fee, often before anyone has looked at your finances.
The FTC’s freshest example is FTC and State of Nevada v. American Tax Service LLC, No. 2:25-cv-01894, in federal court in Nevada. The FTC filed on October 17, 2025, and the court issued a temporary restraining order and appointed a temporary receiver. The complaint says the company impersonated the IRS and state tax agencies, sent threatening letters to get people to call, told some of them their accounts had been “red flagged,” and had been pocketing consumers’ money since at least 2019. The Nevada Attorney General’s office says it went after older consumers with costly add-on services.
On June 2, 2026, the FTC announced a settlement with the two operators, Terrance Selb and Tyler Bennett. The judgment is $77.7 million, which the FTC says is what they took from consumers between February 2022 and 2025. They’re banned from debt relief, tax preparation, nearly all outbound telemarketing and impersonation. The case against the company entities is still going. A settlement is not an admission of wrongdoing.
On August 13, 2026, the FTC put out a consumer alert, “Struggling with tax debt? Here’s what to know,” aimed squarely at this pitch.
Why it sounds good
Because the program underneath it is real. Congress gave the IRS power to settle a tax debt for less than the full amount in 26 U.S.C. § 7122. That’s the Offer in Compromise, and some people really do settle.
Tax debt also scares people in a way a credit card balance doesn’t. The IRS can take money from a paycheck or bank account without suing you first. When something that powerful is sending you notices, hiring a firm that says it does this every day feels less like a purchase and more like hiring protection.
The credit piece is what closes the sale. You’ve heard for years that a tax lien is one of the worst things that can sit on a credit report. Getting both fixed in one package makes the fee sound small.
Why it falls apart
There’s no lien on your credit report to lift. In 2015, Equifax, Experian and TransUnion settled with more than 30 state attorneys general and agreed to the National Consumer Assistance Plan. Starting July 1, 2017, a public record needed a name, an address, and a Social Security number or date of birth before it could show up on a credit file. That wiped out all civil judgments and about half of tax liens right away. The CFPB says that by April 2018, no tax liens remained. If one is still showing on your report in 2026, that’s an error. You can dispute it for investigation under the Fair Credit Reporting Act, 15 U.S.C. § 1681i, for free.
The lien that does exist lives somewhere else. When the IRS files a Notice of Federal Tax Lien, it’s a public document meant to warn creditors. The IRS itself says it “may limit your ability to get credit,” because lenders and title searches find it in the public record, not on your credit report. The IRS releases a lien within 30 days after the debt is paid. No outside firm can speed that up or make it go away by talking to a credit bureau.
The odds are not pennies. The IRS’s own FY2025 Data Book says taxpayers sent in 38,797 offers and the IRS accepted 5,464, worth $98.1 million. That’s about one accepted for every seven received. The numbers don’t line up perfectly, because an offer accepted in 2025 may have been filed in 2024, but the ballpark is right. Divide the dollars by the offers and the average accepted deal was about $18,000. That’s not what people picture when they hear “pennies.” CNBC reported on September 18, 2026 that acceptances have dropped sharply since 2023. An offer gets scored on a formula built from your income, assets and allowable living expenses. A sales floor can’t talk you into qualifying.
Do the division on the settlement too. The $77.7 million judgment is suspended except for about $8 million in cash plus other assets, nearly $10 million in all by the FTC’s count. That’s roughly 13 cents on the dollar. The only real “pennies on the dollar” in this story runs in the defendants’ favor.
The cost nobody mentions is the second debt. The fee usually goes on a credit card or a personal loan. Your tax balance was never on your credit report. The card you used to pay the firm is. It counts toward your utilization and your payment history like any other balance, while interest and penalties keep piling up on the tax debt the firm said it was handling.
What to do instead
Everything these firms charge for, you can start for free.
- Check if an offer is even realistic. The IRS has an Offer in Compromise Pre-Qualifier tool on irs.gov. It runs the same kind of math the IRS uses. To be eligible at all, you need to have filed all your required returns and not be in an open bankruptcy.
- Know the real fee. The application fee is $205 and it’s non-refundable. If you meet the low-income guidelines, you don’t pay the fee or the initial payment.
- Get free help. The FTC’s alert points people to the IRS Taxpayer Advocate Service for federal tax problems and to your state revenue department for state taxes. The FTC is blunt: only the IRS or your state decides what you qualify for, and you should walk away from anyone who wants the whole fee up front.
- Check your reports. Pull all three at AnnualCreditReport.com. Federal law, 15 U.S.C. § 1681j(a), guarantees one free report from each bureau every 12 months, and the bureaus offer them weekly as their own policy. If you find a tax lien or civil judgment, dispute that item for investigation and say exactly what’s wrong. Results vary.
I know what it’s like to be the person these callers are looking for. After the 2008 crash I fell behind on every bill, and I was told to file bankruptcy. I didn’t. I dealt with my creditors one at a time and worked it out. The IRS has its own version of that door, and it doesn’t cost anything to knock.
My own position, plainly: CreditShield is a free do-it-yourself credit app, with a one-time $47 Full Access upgrade. It helps you dispute errors on your reports. It can’t do anything about a tax debt, and neither can any company that promises to fix your credit while it’s at it.
Sources
- FTC, Nevada Will Require Tax-Relief Scammers to Pay Cash and Turn Over Assets Worth Nearly $10 Million to Settle Charges They Misled Consumers about Tax-Relief Services — Federal Trade Commission, 2026-06-02
- FTC, State of Nevada Sue to Stop Tax Debt Relief Scammers from Falsely Impersonating the Government — Federal Trade Commission, 2025-10-17
- American Tax Service LLC, et al., FTC and Nevada v. (case page and timeline) — Federal Trade Commission, updated 2026-06-02
- Attorney General Ford Announces Settlement Requiring Tax-Relief Scammers to Surrender Nearly $10 Million in Assets for Consumer Relief — Nevada Attorney General, 2026-06-03
- Struggling with tax debt? Here’s what to know — FTC Consumer Advice, 2026-08-13
- Removal of public records has little effect on consumers’ credit scores — Consumer Financial Protection Bureau, 2018-02-22
- A new retrospective on the removal of public records — Consumer Financial Protection Bureau
- Offer in compromise — Internal Revenue Service
- Understanding a federal tax lien — Internal Revenue Service
- IRS Provides Year in Review in 2025 Data Book — CPA Practice Advisor, 2026-06-11
- IRS offers in compromise have plummeted. What it means for taxpayers — CNBC, 2026-09-18
- 26 U.S. Code § 7122, Compromises — Legal Information Institute, Cornell Law School
