What’s that old adage?- “If it seems too good to be true, it probably is.”
Yesterday, it was announced that TaxMasters Inc., a Texas-based, publically traded tax advisory firm and frequent advertiser on cable television, was ordered to pay more than $195 million in penalties for defrauding its clients. The firm’s founder and chief executive officer has to pay $46 million of the judgment handed down last week by a Texas jury. TaxMasters was found to have committed more than 110,000 violations of Texas’ Deceptive Trade Practices Act, according to a statement released by the Texas Attorney General. More than $113 million of the total restitution ordered is earmarked to repay defrauded consumers. The question is, will they ever see it!
In its television ads, TaxMasters claimed it could help taxpayers who have found themselves in trouble with the Internal Revenue Service. The trial showed the claims were in fact hollow promises and that TaxMasters didn’t even bother to show up when it came time to fulfill those promises, but instead misled and defrauded their customers. TaxMasters filed for Chapter 11 bankruptcy one day before the trial began last month.
Prosecutors in the case alleged that the so-called “tax resolution” firm misled their clients by aggressively advertising its services to taxpayers who had been audited by the IRS or were facing liens, garnishments or were simply behind in their taxes. TaxMasters was accused of lying to their customers by telling them a TaxMaster representative would start work on their case immediately. Instead, TaxMasters employees only started work when a client had paid their agreed upon fee in-full. Thus many of their clients missed important deadlines set by the IRS. In addition, prosecutors claimed that TaxMasters often failed to contact the IRS on behalf of its clients and failed to show up for IRS hearings.
Today, there are many “tax resolution” firms that are aggressively advertising their services to taxpayers who have fallen behind on their tax payments or have been examined and didn’t know how to properly defend themselves, or simply didn’t have the money to pay the assessments. Often, these “tax resolution” firms claim that they can settle these matters for pennies on the dollar.
We know from experience that these IRS matters are not that simple or that easily settled. Every time I hear one of those commercials the old adage rings true- “If it seems too good to be true, it probably is.” It’s not surprising to hear about the TaxMasters settlement. If you have a tax resolution matter, seek competent advice from a reputable tax professional you know and can trust.
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