Tax Resolution Under Scrutiny-Find Out Who Should Worry

I contributed to a recent article written by Tax Analysts Document Service regarding the unscrupulous practices of some tax negotiation-resolution firms (the article was called Tax Debt Representation Industry Continues to Operate in the Shadows). I talked about the reality that some tax resolution firms have negatively affected not only vulnerable taxpayers but also damaged the reputation of the viable tax debt representation industry and set the Federal Trade Commission (FTC) scrambling to regulate it. I thought it would be important to share some of those points publicly here on our blog.

It was important for me to point out that while bad firms exist, many scrupulous industry professionals (including myself and my tax resolution firm) are doing something about the fall out. We founded a coalition of ethical tax resolution firms called the Tax Problem Resolution Services Coalition (TPRSC) to protect both consumers and legitimate businesses by setting higher standards for the industry. Outlining such professional standards has allowed us to practice and maintain the services we provide and distinguish ourselves from those who have managed to tarnish the reputation of the entire industry.

In response to complaints from the Better Business Bureau (BBB) and consumers at large, the FTC recently proposed legislation that attempts to curb bad practices and weed out the abusers. The FTC sites three main issues of objection practiced by abusive tax debt representation providers:

Deceptive business practices including taking upfront payment from clients.
“F” Better Business Bureau ratings (BBB).
False advertising.

In October, the FTC began enforcing a rule that prohibited tax debt specialists from charging an upfront fee for their services. Since the average tax debt case lasts between seven to 12 months, many firms do not have enough cash flow to work a case for that long without collecting fees.

As the tax debt representation industry has been essentially unregulated since its inception in 1998, it was only a matter of time before there was government intervention as the abuses from questionable firms are sizable. The Tax Debt Representation Industry Continues to Operate in the Shadows article provides an example of a case in California where the attorney general filed a suit last year against a firm seeking some $34 million in restitution for clients it says were misled. Another suit was for $60 million. The numbers are staggering

A conservative estimate of the annual tax debt representation market would be $500 million to $1 billion – a robust industry to be sure. However, enforcing the FTC legislation as it stands would end up being disastrous for honest tax resolution specialists and put many out of business. The TPRSC, in favor of regulations for the industry but defending the practice of charging upfront fees for services, has proposed appropriate legislation to both federal and state lawmakers for some regulation and to allow tax specialists to continue assisting customers to permanently resolve their tax problems and provide this much needed service.

My focus has been to provide the resources and information to consumers to prevent possible abuses. Consumers are strongly encouraged to do their research before hiring a tax resolution specialist. There are great online resources to gather information and finding the right tax experts for your individual case.

Below are two important tips to consider when beginning your research:

1. Consult the Better Business Bureau first. Check out a potential tax resolution specialist-firm or tax attorney on the Better Business Bureau’s website: bbb.org. Consumers start the complaint process against fraudulent companies with the BBB, so it’s a great place to begin your research. Here’s Tax Resolution Services‘ rating: http://www.trustlink.org/Reviews/Tax-Resolution-Services-Company-205910848

Be sure to assess the following points:

The grade rating (example: B, also see how many reviews there are, more is better)
How long the business is accredited (adheres to BBB accreditation standards).
Are there any complaints? How has the company resolved them?

Read all the analysis and Trust Link reviews to get helpful feedback from previous client experiences and don’t be fooled by advertisements from companies that guarantee success. Would you hire a company with a C grade and many unresolved complaints because of their slick ads? Or a new company with an A rating with only 5 reviews? Look for a professional and critically evaluate those reviews.

2. Google it! – Check credentials and determine credibility. Google the company name with the words “complaint,” “rip-off” and “scam.” Then Google the founder’s name and check his/her credentials. If the firm has a tax attorney (or several), check with your state’s bar to see if there are complaints rendered against them. Consider the following:

How many years is the firm in practice?
Does he or she have references?
Is he or she licensed?
What trade affiliations is the firm associated with such as TPRSC or Certified Tax Resolution Specialist (CTRS). Check up to date status.
Check to see if they meet educational, experience and examination requirements prescribed by the American Society of Tax Problem Solvers (ASTPS).
Social media efforts such as Facebook and LinkedIn can be helpful. Not all reputable firms participate but it’s worth looking into. Check for recent content and information posts. The benefit: you will be able to see all comments both good and bad.

Companies recently sued by the FTC had terrible BBB ratings, some as low as an (F). By just doing step #1 and searching the web, a savvy taxpayer could easily sort the good firms from the bad and avert a nightmare. Finding the right tax resolution specialist to help can be as easy as doing a little homework – worth the peace of mind it will bring.

Sources:

http://www.taxanalysts.com/ article

bbb.org

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