Garcia never dreamed she would land in so much trouble
with the IRS. But a few years ago, she found herself
owing about $32,000 in back taxes — a situation she
says was partly caused by a family member fraudulently
using her name and Social Security number for work.
for help, Garcia turned to TaxMasters, one of the many
"tax relief" companies advertising heavily on
TV, radio and the Internet.
run into tax problems, and their advertising was
enticing," said the Roseville, Calif., resident and
mother of four adult children. "Needless to say, it
was a fiasco. They prey on your fears of the IRS coming
and taking what little you have: my car, my wages."
paying about $4,000 in upfront fees — and giving the
company power of attorney to represent her before the
Internal Revenue Service — Garcia thought her problems
were over. Instead, they just got worse.
went by without any resolution. Meanwhile, the IRS tax
penalties and interest kept climbing. After a year or
so, Garcia owed more than $42,000.
time I emailed (TaxMasters), they said: ‘We’re
working on it.’ "
March 2012, the company, Texas-based TaxMasters Inc.,
filed for bankruptcy, leaving thousands of hapless
taxpayers, including Garcia, in worse shape than when
year, as the tax season closes, many Americans are
unable to pay their full IRS bill or resolve their
past-due obligations. These folks are often the target
of "tax relief" companies.
the economy perks up, many of these companies actually
drum up more business, said Gary Almond, president of
the Northeast California Better Business Bureau.
"As the economy improves, some (consumers) want to
resolve their past debts. They now may have equity in
their home to resolve debt. Or they want to refinance
their mortgage and need to settle their tax liens. Or
they’ve become employed again and find that their
wages are being garnished."
plenty of legitimate companies offer tax help to
struggling consumers, a number of unethical companies,
especially those charging high upfront fees, prey on
its website, the Federal Trade Commission warns against
companies charging upfront fees while claiming they can
"reduce or even eliminate" tax debts.
truth is that most taxpayers don’t qualify for the
programs these fraudsters hawk, their companies don’t
settle the tax debt, and in many cases don’t even send
the necessary paperwork to the IRS," notes the FTC’s
all cases, consumers should be wary of
of these ‘effectiveness’ claims should be taken with
a grain of salt. Everyone’s case is different; there
are no blanket guarantees," said the BBB’s
the more notorious tax-resolution empires was run by
former Sacramento, Calif., attorney Roni Deutch, who
famously branded herself "The Tax Lady" in
late-night cable TV ads. Starting from a solo law
practice in the late 1990s, Deutch eventually presided
over a $25 million-a-year company with franchises and
offices in 23 states.
2010, then-state Attorney General Jerry Brown filed a
lawsuit accusing Deutch of swindling thousands of
customers facing IRS tax woes. The state’s lawsuit
said she charged individual clients up to $4,700 for tax
help but delivered little or no results. As part of the
lawsuit, she was ordered to pay $435 million in refunds
to unsatisfied clients.
maintaining her innocence, Deutch eventually closed her
offices and surrendered her law license in May 2011,
saying she was broke and unable to keep her company
companies like Deutch’s and TaxMaster have been
magnets for complaints, other tax-relief firms operate
virtually complaint free.
are so many bad ones, but the credible companies are
making a difference in people’s lives," said
Kathy Hill, founder and CEO of Tax Tiger in Sacramento,
a tax resolution company with franchises in three other
year, she and others formed the National Association of
Tax Resolution Companies, a Washington, D.C.-based group
whose mission is to preserve the industry’s reputation
and protect consumers from "unfair and
deceptive" tax-resolution advertising tactics.
an association of the ‘good guys,’ " said Hill,
whose firm has an A-plus rating from the BBB.
first-time clients, Hill’s company typically does a
free financial consultation, looking at income, assets
and monthly expenses to see what kind of repayment plan
they have little to no assets — no equity in a home,
no 401(k), no investments, cars or real estate, they
probably qualify for an ‘offer in compromise,"
she said. A so-called OIC is where the IRS or state tax
agency agrees to settle a tax debt for less than what is
IRS hates the program because they have to settle for
less than what’s owed," said Hill. "But it’s
a blessing for those who can’t pay the $50,000 or
$60,000 they owe."
it’s not a quick-fix solution. Hill said it can take
up to a year to get all the documentation and paperwork
— everything from rental receipts to wages to car
payments — submitted and approved by the IRS.
typically charges a flat fee, anywhere from $1,000 to
negotiate an IRS or FTB installment plan to $4,800 for
more time-consuming offer-in-compromise settlements.
Rather than an upfront fee, clients make an initial down
payment, then pay the rest within 10 to 12 months.
Tax Tiger customer, Roseville resident Jennifer Dunn,
discovered a year or so ago that she was on the hook for
nearly $70,000 owed to the IRS by her estranged husband’s
concrete business. Amid her divorce, "I tried
resolving it on my own with the IRS but wasn’t getting
anywhere," said Dunn, who said the IRS payment plan
was more than she could afford on her schoolteacher
turned to Hill, who arranged an IRS compromise
settlement of $871. As part of the 2012 agreement, Dunn
must file her taxes on time for the next six years, or
the deal is off.
said the relief of resolving her situation is huge.
"She (Hill) was a savior, I tell you."
avoid getting defrauded by an unsavory company, do your
homework, say state and local officials. Check with the
Better Business Bureau or appropriate state agency for a
anybody who requires an upfront fee for a service they
can’t guarantee, run," said Mark Leyes, spokesman
for the state Department of Corporations.
the IRS and its Taxpayer Advocate Service are working to
resolve tax debts of former TaxMasters clients such as
who works full time at a warehouse store, says she now
wishes she had gone directly to the IRS for help. Her
recent 2012 tax refund — $300 — went straight to the
IRS for repayment.
back, "I made mistakes," Garcia said. "I
thought I could fix it on my own. And I couldn’t."
TAX RELIEF? HERE’S HOW TO GET IT
Revenue Service: Under its "Fresh Start"
program, delinquent taxpayers can request installment
payments or an "offer-in-compromise" plan to
wipe out existing tax debts. The IRS expanded its
program in 2010, making it easier for more people to
payments are generally available for individuals with up
to $50,000 to repay. If approved, you repay in regular
monthly payments, starting as low as $25.
OICs, taxpayers must show they have no way of repaying
their debt in a reasonable amount of time, based on
their income and assets. In most cases, the tax debt
must be $50,000 or less. Taxpayers offer a settlement
amount, which is reviewed by the IRS.
IRS has also raised the debt amount — to $10,000 —
that triggers a lien for unpaid back taxes being placed
on a person’s home or property.
details on resolving IRS debts, go to: http:///