They appear on late night television and on the internet promising to reduce your tax debt, remove tax liens, and settle your unpaid taxes, interest and penalties for pennies on the dollar. Do you really believe you can pay a fee to a tax relief company and reduce your $50,000 tax bill to $2,000?
Apparently a lot of people do believe that. The California Attorney General is suing TV’s Tax Lady, Roni Deutch, for $34 million.
Attorney General Jerry Brown announced the suit last Monday saying "Tax Lady Roni Deutch…promises to significantly reduce [clients’] IRS tax debts, but instead preys on their vulnerability, taking large up-front payments but providing little or no help in lowering their tax bills."
Brown alleges that Roni Deutch regularly violates state law by making false promises about her ability to resolve disputes with the IRS. He says that Deutch overstates her advertised television claims of winning 99% of her tax battles with the IRS while in reality she reduces the amount of money her clients owe in taxes in just 10% of the cases. Most of her clients quit or are terminated by her firm and are denied refunds after her staff bills them for work that wasn’t performed, the lawsuit said.
The attorney general’s office says hundreds of Deutch’s clients have filed complaints. In addition to not lowering their debts, consumers says she also refused to refund fees of as much as $4,700 that her firm charged.
The complaint filed against her alleges that she engaged in a scheme to swindle taxpayers, including senior citizens and disabled, who cannot afford to pay their tax debt by enticing them to engage her firm to negotiate a resolution of their tax debt with the IRS. She promises to lower the amount the clients owe the IRS, eliminate interest and penalties, establish a low monthly payment plan, or prevent the IRS from collecting on the tax debt altogether. According to the complaint, she also falsely represents that she is able to immediately stop IRS collection actions such as levies and wage garnishments.
Deutch has faced similar allegations before. In December 2006, she settled a lawsuit filed by New York City’s Department of Consumer Affairs that alleged she misled consumers with her advertising. She agreed to pay $300,000, including $100,000 in fines and $200,000 in restitution to consumers.
A recent MSNBC article cautioned taxpayers against falling for tax resolution promises that sound too good to be true. According to the article, "Instead of describing the long odds [of winning a tax settlement], many tax debt settlement companies sweet talk clients. Then they take large up-front payments — prices start at $3,000 and climb fast from there – but do little or nothing to help with the tax problem."
Most people are frightened when they are in trouble with the IRS. They may have a bill that is larger than anything they ever owed and they are scared stiff. Put yourself in their shoes. There you are, watching late night TV, unable to sleep because you are so worried about your tax problem, and an angry female attorney comes on and tells you she will fight the IRS for you and win! If you call the toll free number, you reach a salesperson whose job it is to get a large up front payment from you on your credit card.
Many tax relief companies make outlandish promises about reducing their tax bill to taxpayers, collect a large fee up front, and then never do anything. They may tell the taxpayer later that they don’t qualify for relief and suggest they call the IRS themselves for a payment plan.
If you are already in debt because of unpaid taxes, you don’t need to pay a big fee for nothing to one of these outfits.
Finding competent help can be challenging. You need to do your homework, and ask lots of questions. Find out about the firm – how long it’s been in business, what kind of complaints have been lodged against it? How many tax attorneys do they have on staff? Ask for references.
If the firm offers you a guarantee. Just say "no thanks" and run away. Nobody can guarantee anything. Does the firm want all its fee up front? If they do, run away. Some money upfront as a retainer is reasonable.
Do they give you a high pressure sales pitch? If they are pushing that hard, that’s a warning sign to stay away. In many cases when you get a sales pitch, you are talking with a salesperson, not a tax attorney or tax resolution specialist who can help you.
In general, when considering hiring any company or person to represent you, look for statements that seem too good to be true, claims of some kind of special advantage, or creating a fear that only they can solve. Be careful out there.