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Tax Masters-TV Commerical Scammers

Minnesota Attorney General Lori Swanson sued TaxMasters Inc., last month claiming the Houston-based company engaged in consumer fraud and deceptive trade practices. Earlier in 2010 the Texas Attorney General sued them for the same sales scam shenanigans that I speak about throughout this blog. 

Here is a news clip from a station in Austin, Texas talking about Scam Masters:

According to the lawsuit filed by Minnesota, TaxMasters uses deceptive ads to lure in clients. (Similar to tax telemarketing companies that I reveal here). Once clients contact the company, high pressure telemarketers push and manipulate taxpayers into paying anywhere from $2000 to $10,000 + in up front fees. As with telemarketing companies who cold call people on federal and state tax liens, taxpayers are promised that former IRS professionals and attorneys (any attorney worth a damn will not be caught working for one of these companies) will work on their case. According to the lawsuit, virtually no one works on their case (same results taxpayers get when they hire companies who employ the deplorable cold calling telemarketing scams when a taxpayer has the misfortune of having a IRS or State Tax Lien filed against them ).

Although I am not a huge fan of the BBB at the moment, it is worth noting that they processed a total of 831 complaints against Tax Masters in the last 36 months, their standard reporting period.  I don't care how much business you do, 831 complaints, or 277 on average a year, is ridiculous.  I can see one or two here and there because of the nature of the industry, but 831 is giving the BBB their moneys worth! 

TaxMasters salespeople in some cases promised 80 to 90 percent reductions in IRS claims, and said they resolved customers’ tax issues 97 percent of the time.

“The company gets worried people to pay thousands of dollars by overstating the help it will provide with their tax bills,” Swanson said in a news release.

“This is the latest type of company we have seen target the misfortunes of people who are facing tough sledding in the bad economy.”

In a statement from TaxMasters, a lawyer for the company Chris Madel said TaxMasters "hopes to resolve this matter quickly."

"Orally and in writing, TaxMasters asked the Attorney General what they wanted the company to do. Unfortunately, that office ignored our requests and filed this lawsuit. This is another example of the Office's desire for headlines versus results," Madel said.

TaxMasters Inc. and its chief executive officer, Patrick Cox, have been charged with unlawful conduct and misleading customers by Texas Attorney General Greg Abbott.

The Houston-based tax firm and Cox were charged with multiple violations of the Texas Deceptive Trade Practices Act and Texas Debt Collection Act, according to the AG’s office, which cited hundreds of complaints of conduct and business practices.

“In the midst of a national economic downturn, TaxMasters used a nationwide marketing campaign to offer services for distressed taxpayers who needed help dealing with the IRS,” Abbott said in a statement. “A state investigation and nearly 1,000 customer complaints indicate that the defendants routinely misled customers about the nature of their tax resolution service agreements — and worse, attempted to enforce those improper agreements through unlawful debt collection tactics.”

The state’s enforcement action also accuses TaxMasters of failing to disclose its no-refunds policy and falsely claimed that the firm would begin working on a case immediately despite waiting until it had been paid in full, which caused some clients to miss IRS deadlines.

“The state’s enforcement action seeks to prohibit the defendants from continuing to violate the law and seeks restitution for the financially struggling taxpayers who were harmed by the defendants’ unlawful conduct,” Abbott said.

A self-proclaimed “tax resolution” firm, TaxMasters sought clients who had received notice from the IRS of an audit, garnishment, lien, levy or tax deficiency via a national advertising campaign and high-profile endorsements, claiming to have “one of the most effective tax relief teams in the tax representation business.”

Almost a thousand complainers to the Office of the Attorney General and the Better Business Bureau of Houston thought otherwise. Advertisements that offered free consultation with a tax consultant from a toll-free number instead lead to a salesperson who recommended a solution ranging from $1,500 to more than $9,000. Any requests for written terms and conditions required a credit card or bank account number.

Of course, the company also failed to provide any tax resolution either, and pursued debt collection efforts with clients who canceled their contracts.

The AG’s office is seeking restitution for each customer financially harmed, and civil penalties of up to $20,000 for each violation of the Texas Deceptive Trade Practices Act.

TaxMasters trades on the Over-the-Counter Bulletin Board Exchange under the symbol "TAXS-OB." Its stock closed Thursday at 8 cents. The company posted net income of $4.8 million on revenue of $36.8 million in 2009.

TaxMasters issued a statement earlier this week saying it had increased its customer base by 29 percent in the first quarter compared to last year.

Texas Attorney General Gregg Abbott has announced he has filed an enforcement action against Taxmasters, a Houston, Texas based firm that advertises heavily in national media that it can help consumers alleviate their existing obligations to the Internal Revenue Service.

On Thursday, May 13, Abbott charged the company with violations of Texas’ deceptive practices laws, including charges that, although the company promises to start working immediately for the consumer, it actually waits until the consumer makes full payment up-front (ranging from $1,500 to $9,000), with the resulting delays possibly resulting in even more IRS late penalties and fees.

“Although “tax relief” firms make big promises to help people relieve their tax obligations if they have fallen behind on their taxes, consumers should realize that they are taking a big risk if they rely on a third party to help cut their tax bills,” said Bill Moak, President of the Better Business Bureau (BBB) Serving Mississippi. “We urge consumers to be very careful when considering any offers to help ease your tax burdens.”

The BBB serving Greater Houston and South Texas reports that the company, which currently has an “F” rating, has been the subject of 684 complaints in the past 36 months. Seven of those have come from Mississippi consumers. 230 complaints have been unresolved.

In a news release on his website, Abbott accused the company of a number of deceptive practices. “…the defendants unlawfully misled customers about their service contract terms, failed to disclose its no-refunds policy, and falsely claimed that the firm’s employees would immediately begin work on a case – despite the fact that TaxMasters did not actually start to work on a case until its customers paid in full for services, even if that delayed response meant taxpayers missed significant IRS deadlines,” the statement read in part.

Furthermore, Abbott noted, the company appeared to be taking advantage of consumers during an economic downturn, and its no-refund policies and lack of a written contract resulted in customers who were uninformed about what services they were actually receiving.

When weighing claims from firms which promise to reduce your taxes, the BBB urges consumers to consider the following:

• Remember that you are ultimately responsible for your tax debt regardless of any agreements you may reach with any third parties.

• If you fall behind on your tax payments, contact the IRS immediately to see if a settlement or payment plan can be worked out. Ignoring the problem will only make it worse.

• If you do choose to hire an outside firm, insist on seeing a contract, and don’t pay anything up front. Reputable firms will only charge you after they have completed their work.

• Don’t give any credit card numbers, checking account numbers, or other information to anyone who contacts you.

• Check out the firm at before engaging them in any way, and file a complaint promptly if you suspect mishandling of your case or deceptive practices.

Abbott’s announcement about the case may be read in full at

The BBB’s report on Taxmasters may be read at

Earlier in 2010 a federal judge closed the doors on American Tax Relief after a lengthy investigation. Attorney Generals in other states have been aggressively pursuing other questionable tax relief companies too such as J.K. Harris and attorney Roni Deutch. 

Best bet-hire someone independent if you really seek help and want to get your tax problems resolved-not just delayed. 

Nicholas Hartney, E.A.
Direct Phone 720.340.4065


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