The bearded one, Patrick Cox, has found himself joining other tax resolution promoters such as JK Harris, Roni Deutch and American Tax Relief in tough times. His company (which amazingly became public traded) has filed for bankruptcy. But what about their clients left in the lurch?  This article addresses what any clients of this and other so-called “tax relief” companies should do immediately.

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Another day, another tax resolution scam outfit popping up. This one, is so clever it won’t even tell you its name.

This is how it works. Read More…

Normally, I like any story that mentions notable facial hair.  But not in the case of this  unfortunate investigation by ABC News:

The television commercials feature TaxMasters’ red-bearded founder and CEO, Patrick Cox, who claims his company’s staff of former IRS agents and tax professionals “have helped many good people just like you.”

The TaxMasters ad blitz has been a driving force in the company’s soaring corporate revenues. The company, which went public last year, brought in $45.7 million in 2010, a three-fold increase in two years, according to filings with the Securities and Exchange Commission.

The company linked “an increase in advertising expense” to “increased sales volume” in its year-end filing.

The Minnesota attorney general says many of the company’s employees are skilled tele-marketers who have little knowledge of the complicated tax issues faced by people who have fallen behind in filing their returns or making tax payments.

“When you call, you think you’re talking to a tax professional,” said Swanson. “You’re really talking to just a salesperson who’s trying to get you to sign up.”

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Another heavily advertising “tax resolution” firm has been shut down.  American Tax Relief, is the latest target of governmental intervention for allegedly bilking consumers out of more than $60 million by falsely offering to reduce ta debt.

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According to Jerry Brown, California Attorney General, self-declared “Tax Lady” Roni Deutch,  has engaged in a “heartless scheme” to swindle hundreds of thousands of dollars from people with tax problems.

Brown has brought a civil complaint against Deutch claiming she wildly misleads consumers by promising to reduce their debts to the IRS. Instead, she takes large, up-front payments from them but provides little or no help in reducing their tax bills.

The lawsuit claims that Deutch spends $3 million a year on advertising, much of it on late-night television, in which she uses false testimonials from clients who claim her firm saved them thousands of dollars in tax debts. For example, Brown three clients who appear in one advertisement are actually in worse shape since they hired Deutch.

The lawsuit alleges that Deutch set up a “boiler room.” where callers seeking help are subjected to high-pressure sales tactics and misleading information, including claims that the firm has a 99% success rate in dealing with IRS, according to the complaint. Deutch’s firm actually reduces only 10% of its clients’ tax bills, Brown said. Deutch also escalates costs for clients by placing them in an endless loop of requests for duplicate documents that increases her fees, which  increases penalties and interest her clients owe to IRS. And then once the fees are increased, the lawsuit claims Deautch engages in harrassing collection calls. So Deutch’s clients end up with headaches from both the IRS and Roni Deutch.

Attorneys General from all over the country are  finally going after tax resolution scam artists. I heard that in Texas the AG has sued Taxmasters after it received 1000 complaints.

But you can’t rely on an AG to substitute your own due diligence. And plus, even if the AG’s are victorious, does that mean you will get money back? Hardly. Someone “clever” enough to scam is probably clever enough to make themselves judgment proof.

So this is what you need to know, if you find yourself in a jam.

• An actual tax resolution attorney can prove invaluable in tough IRS cases. Many cases they are crucial to fight the IRS — the most powerful collection agency in the world — to help people get back with their lives.
• But be sure they are actual attorneys.
• Ask about their success with local Revenue Officers.
• Be sure they are apporved by the Better Business Bureau
• If someone telemarkets you, they are not attorneys.
• If someone gives a testimonial, ask if they mind if you contact that person. If it is an actual testimonial, they’ll let you.
• It is easy to give guarantees. It’s harder to deliver results. And if you send money out of state, you will have a tough time recovering your money when things go bad.

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UPDATE: The “beam” reference explained.

I recommend to all my attorney friends — tax attorneys or not — to be a member of the BBB. It helps clients find you and gives an alternative method of dispute resolution if a client does not believe they have been treated fairly. But there is a danger — the BBB office right down the street from our main office has just sent out this press release:

Connecticut Better Business Bureau Warns Businesses about Fake BBB “Complaints”

E-mails Contain Suspicious Link to Malware Site

Wallingford, CT – July 27, 2010 – An e-mailed “complaint” supposedly originating from Better Business Bureau is being sent to BBB accredited and non-accredited companies in states across the country, including Connecticut. Businesses of all sizes have received the bogus e-mail complaint, ranging from banks and construction companies to major manufacturers and professionals. There is no indication how the e-mail addresses were collected.

The e-mail sender’s address is seatac@bbb.org with the subject line “BBB Complaint Case #” followed by a nine-digit number. Click on this link to see what the e-mail looks like: http://www.enewsbuilder.net/ctbbb/BBB_Fake_Complaint.pdf

The body of the e-mail claims that the recipient did not respond to a complaint filed by Jason Harlow (however, other names may be used) under the category “Contract Issues.” The goal of the e-mail is to get the recipient to click on a hyperlink with the following text: “Please click here to access the complaint.”

Connecticut BBB is receiving calls on a daily basis from companies that have been targeted.

A link in identical e-mails sent out earlier this year downloaded malware to the recipients’ computers. Malware consists of programs designed to damage or initiate unwanted actions without the knowledge of the user. This may include harvesting logins and passwords and forwarding them to the e-mail’s author.

BBB advises businesses that receive this e-mail to take the following precautions:

* Do not click on any links or reply to the message
* Run a full virus scan on your computer if you did click the link
* Forward the message to phishing@council.bbb.org
* Delete the message from your inbox and recycle bin

If you receive any e-mail from Better Business Bureau about a complaint filed against your company and need assistance in determining whether or not it is legitimate, contact the BBB directly at www.ct.bbb.org or at 203-269-2700.

So let’s say you have a brilliant idea. And here it is. You “find” the social security numbers of 250 dead people and file returns for them. And on these returns you say they had all with money withheld. So you send phony returns in, and wait for bogus refund checks to arrive.

Dumb idea, right? Wouldn’t that fact that no withholding actually took place and that no W-2 were ever filed with the IRS actually stop your brilliant scam from working?

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Sounds like someone found a pretty good gig. Don Shellef, a businessman from Great Neck, N.Y. bought heavily taxed CFC-113 for resale. But he got out of paying the heavy excise taxes. How? he claimed the purchases were for export and thus exempt…which they were not. So according to the Department of Justice’s press release…

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My good friend Yael Lazar, an tax law superstar out of New York, shared me this beauty a story her client regarding everyone’s favorite bearded clam, Mr. Taxmasters. This is too good not to share. And a little reference: “ACH” is that pre-authorized check withdrawal mechanism for reoccurring charges.

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Do you know what a “Bill of Exchange” is? If you don’t, then good. Keep it that way. But if someone ever comes up and tells  can use a “Bill of Exchange”  to pay your back taxes, don’t move any closer. Do not move any closer! Rather, scream: “I need an adult!” And run. Run far, far away.

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