It’s no surprise to learn that many Americans have skyrocketing debt, and in particular big tax debt too. With huge tax debt and hard to pay tax liability many folks received IRS tax liens, wage garnishments, and asset seizures – all things that cause normal taxpayers to get pretty nervous and hire the first company who promises help. Sadly, many of those companies are tax resolution services scams. Here’s the biggest scammers: TaxMasters, JK Harris, and Ronnie Deutsch were just a few of the big name services that came under legal persecution and eventually went into bankruptcy.
You don’t want to end up like this
This is Patrick Cox, founder of the company TaxMasters – one of the biggest tax scams in history. This company was sued by the Texas Attorney General and found guilty with a verdict of $195 Million dollars. They misled and defrauded taxpayers, promising results and then abandoning the case after collecting the money. The court found that they were a scam, with over 100,000 violations of deceptive trade practice.
This is Roni Deutch, founder of the aptly named tax resolution company Roni Deutch (commonly known as the “The Tax Lady”). Using high pressure sales and deceptive practices, Deutch swindled millions from troubled taxpayers, and as a result was sued by the California Attorney General for $34 Million dollars. In court, Deutch was held in contempt for deliberately shredding documents and siphoning money out of the company against orders.
This is John K. Harris, founder of JK Harris & Co. This tax resolution service scam used misleading advertising and sales tactics to get taxpayers to sign up and then they would let their tax debt pile up, along with the penalties and interest. The company was sued and eventually forced to pay a $6 Million dollar settlement. Later, Harris declared bankruptcy. Harris was recently forced to pay an additional $4.8 Million dollars to resolve the assets he extracted from the company.
Recognize this commercial? It’s from American Tax Relief, a tax resolution services scam that was sued by the FTC for over $100 Million dollars. American Tax Relief (ATR) not only duped it’s customers into hiring them for tax resolution, they also sold their personal info. Apparently the owners, Hahn and his wife had their assets seized – including a ferrari, a Beverly Hills home, an LA condo, and expensive jewelry. Gotta love the irony of that.
What You Need to Know to Avoid a Tax Resolution Services Scam
While these types of companies are getting the crack down, you should remember these essential tips:
1. Remember that ONLY an INDIVIDUAL can be ‘enrolled’ as a Federally Authorized Tax Representative; a company CANNOT be enrolled. Therefore it is critical for you to determine up front WHO exactly will be negotiating with the IRS for you.
2. Remember that YOU and the other clients are the ones who pay, as part of a tax company’s fees, for their advertising budget. Monies diverted from your fees pay for T V ads and high paid executives – it is NOT money being paid to a Licensed / Enrolled person to represent you with the IRS.
3. ALWAYS take a few moments FIRST to check the Better Business Bureau or state consumer protection offices where the company is located to find out if there have been complaints and the nature and number of those complaints. Lack of history is not a good sign!
4. Beware of BIG PROMISES to guarantee a particular result; there are NO ‘ magic wands’ when it comes to dealing with the IRS because every case is different
5. Remember that it is natural for you to WANT TO HEAR that some company is going to instantly and completely solve your tax problem for you with little or no further work on your part; if a deal sounds too good to be true, it likely is too good to be true.