This is a question all CPA’s get from clients who are in trouble with the IRS or State Taxing Authorities. The correct question is, What’s the difference between the results when a National advertising Tax Relief Company or a local CPA deal with the Taxing Authority. I’ve been telling my clients for years the answer is, “Nothing”. This answer at times has been received with some skepticism. But, recently some verification came from the Minnesota Attorney General Lori Swanson.
The Attorney General of Minnesota recently filed a lawsuit against National Advertising Tax Relief company Tax Masters.The lawsuit alleges that Tax Masters salespeople told consumers things like:
“… based upon our success rate and our experience, on average, our clients see a savings of anywhere between 80 and 90% of what the IRS claims they owe.” “We’re highly successful; we are the
most successful tax resolution company. We’re 97% successful.” “We’ll save you anywhere from 65 to 90% is our goal on … savings off the total tax debt. 97% of the time we reach that goal, the other
3% are the people who just flat out lie to us.” Among other things, Tax Masters: Overstated its ability to reduce or settle peoples’ tax obligations. Charged consumers thousands of dollars in
advance fees for help in reducing tax bills that the company knew or should have known would not be negotiated by the IRS. Failed to deliver on its promises and sometimes even failed to meaningfully
contact the IRS. Failed to make refunds to consumers who complained that the company did not take the promised action.
This lawsuit is the latest in a series of nationwide enforcement efforts in recent months against tax relief companies that charge consumers thousands of dollars in advance fees based on inflated promises. In May, 2010 the Texas Attorney General filed a lawsuit against Tax Masters, which is pending. In October, 2010 the Federal Trade Commission filed a lawsuit against another tax relief company, American Tax Relief, LLC. In August, 2010 the California Attorney General filed
a lawsuit against another large tax relief company, Roni Deutch.
Last April, the Minnesota Attorney General’s Office distributed a Consumer Alert entitled “Beware of Tax Relief Scams.” Attorney General Swanson offers this advice to consumers: If you have tax
problems and need outside help, consider hiring a local certified public accountant, tax specialist, or tax attorney.
Remember, the IRS generally only reduces a tax debt for a limited number of individuals who face current and continuous dire circumstances and whose tax debt significantly exceeds their assets and their future earning potential. There are no tricks or secret strategies that tax relief companies possess that change the IRS eligibility requirements. As a general matter, if you have enough
money to pay a tax relief company, the IRS probably will not reduce your tax debt. Some tax relief companies charge thousands of dollars in advance fees based on inflated promises of their ability
to help. By hiring these companies, you may be squandering money that could be used to pay down your tax debt.