Tax Relief News: FTC’s Shakedown of Tax Resolution Companies Contradicts Tax Law

The media is buzzing about the latest tax relief company to be under fire for deceptive business practices. And the  FTC’s orders to shut down American Tax Relief for cheating taxpayers out of $60 million comes just weeks before the Federal Trade Commission is slated to enact the “debt relief service” amendments to the Telemarketing Sales Rule (TSR) to reign in the practices of debt settlement, debt management, debt resolution and credit counseling agencies.

However, the FTC’s debt relief services amendment remains broad in its coverage of tax resolution companies. And the FTC is ambiguous with its ruling that all tax debts are “unsecured” unless “secured by a tax lien,” especially since this claim directly contradicts the Internal Revenue Code and Treasury regulations stating that there are simply no “unsecured” federal tax debts. In fact, tax debts are secured from the moment that the tax is assessed – a position in complete disagreement with that espoused by the FTC.

On October 27, 2010 provisions in the TSR will make it illegal for tax resolution companies to charge any fees until the customer has resolved the tax debt and made a payment for back taxes owed to the IRS. This hardly takes into consideration that the process of negotiating a tax relief settlement with the IRS can be extensive – involving tax filing reviews, examinations, removals of liens, establishing payment plans and many other services. And the FTC’s ambiguous positions on which tax debts are unsecured versus secured is causing confusion and uncertainty in the industry. Unfortunately, we cannot be uncertain about the application of the TSR to as violations of the rule bring civil penalties of up to $16,000 per violation.

While we are grateful that the FTC has been active in bringing enforcement actions to stamp out unethical debt relief practices, including debt settlement companies and debt negotiators with unfair and deceptive trade practices. However, the tax relief industry will need further clarification from the FTC regarding their treatment of tax debt as “unsecured,” a ruling that patently contradicts federal tax law.

For more IRS news and tax help tips, follow me on Twitter @taxresolution

More Tax Help, IRS News and Tax Relief Tips:

  1. Tax Help: Brian Compton Shares 7 Secret Weapons For Taxpayers to Fight the IRS on Big Biz Show
  2. Do You Owe Back Taxes? Are Under Audit? Don’t Hide from the IRS Anymore, Get Tax Relief Now!
  3. Need Tax Help? Glenn Beck Nationally Endorses Tax Resolution Services For Your IRS Problems
  4. IRS Help and Income Tax Relief for Individuals and Businesses Unable to Meet Tax Obligations
  5. Tax Relief News: FTC Orders American Tax Relief to Shut Down For Cheating Taxpayers Out of $60 Million

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One Response to “Tax Relief News: FTC’s Shakedown of Tax Resolution Companies Contradicts Tax Law”

  1. Top Tax Relief Blog Posts: Best of October IRS News and Tax Help Tips | Tax Attorney and Tax Resolution Services: IRS Help Blog Says:

    [...] Tax Relief News: FTC’s Shakedown of Tax Resolution Companies Contradicts Tax Law In October, the media was ringing about misleading tax relief success rates–which got the Federal Trade Commission to enact the “debt relief service” amendments to the Telemarketing Sales Rule (TSR) in order to reign in the practices of debt settlement, debt management, debt resolution and credit counseling agencies. Learn more here. [...]

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