There probably isn’t one radio listener or late night television viewer in the U.S. that has not seen or heard an ad for IRS tax debt relief. Roni Deutch and her claims of paying the IRS just pennies on the dollar, American Tax Relief and J.K. Harris are probably familiar to most. Unfortunately, most of these TV hucksters promoting tax relief are simply frauds.
What is so troubling is that these companies prey on people already in trouble. Most people unable to pay their taxes are already struggling financially. To then find out that the $10,000 or so up front fees paid to one of these tax relief companies was simply money wasted is devastating.
In October 2010, a federal judge finally shut down American Tax Relief. Earlier this summer, California Attorney General Jerry Brown sued attorney Roni Deutch for allegedly scamming clients out of $34 million in fees. And 18 states have pursued J.K. Harris for false and misleading ad claims. What does this mean for consumers who owe taxes?
The IRS does have programs to help delinquent taxpayers settle their tax debts. Although most accountants and lawyers are not familiar with the IRS’ offer and compromise program, there are many that are. The rules are a bit complex and the process can take 2 years but it is possible to make peace with the IRS and not lose everything.
Before signing up with a tax relief company, ask some questions and get the answers in writing. Be especially wary if the company wants all its fees to be paid up front. Nationally, the IRS acceptance rate of tax settlement offers is very low, primarily because of the many tax reduction scams out there. These scams often rely on extensive late night television advertising. Most of these companies have a very low acceptance rate and some never even submit a plan or follow up with the IRS.
A good accountant or lawyer who is familiar with the process often has a success rate well above 50%. That doesn’t mean every taxpayer can get away with paying just “pennies on the dollar.” A reputable professional can review your situation and tell you fairly accurately how much you will need to offer in order to have your offer accepted.
FTC Shuts Down American Tax Relief
The FTC’s action against American Tax Relief was the first action by the agency against a tax debt relief agency. The agency says the company bilked customers out of $100 million. Unfortunately, recovery efforts against the company netted nothing close to that amount.
Government lawyers said American Tax Relief advertised that it could settle consumers’ delinquent taxes for a fraction of the amount they owe. They also claimed to be able to remove tax liens and stop wage garnishments, bank and tax levies, property seizures, and “unbearable monthly payments.” For example, the company’s website states, “The IRS is currently accepting a fraction of back taxes owed to them (sic) for those who qualify.”
The American Tax Relief scam was particularly galling in that the FTC says the company continued taking money from consumers even after prosecutors had executed a criminal search warrant on the company.
In successfully seeking to shut down American Tax Relief, the Federal Trade Commission noted that the company had even failed to pay its own taxes.
Since this post was first written, many of the original tax relief agencies have been shut down. Fast forward to 2020 and a new batch of tax relief companies are eerily making the same pitch. Be very careful before paying anything to these companies. We recommend a good CPA familiar with the IRS’ offer-in-compromise program. The FTC also publishes a consumer protection pamphlet on tax relief agencies. According to them, “most taxpayers don’t qualify for the programs these fraudsters hawk, their companies don’t settle the tax debt, and in many cases don’t even send the necessary paperwork to the IRS requesting participation in the programs that were mentioned. Adding insult to injury, some of these companies don’t provide refunds, and leave people even further in debt.”
Seeking Tax Relief Agency Whistleblowers
Are all the current crop of tax relief companies scams? We have no idea and worry that consumers won’t know until it is too late. Under the IRS Whistleblower Program, whistleblowers can receive up to 30% of whatever the government recovers from tax cheats and that includes interest and penalties too. In most instances you can remain anonymous.
We are seeking present and former employees of these companies with information about fraudulent business practices. Depending on how the company operates, cash whistleblower rewards may be available. To learn more, visit our IRS tax fraud whistleblower page. Ready to see if you qualify for a reward? Contact attorney Brian Mahany online, by email at or by phone at 202-800-9791.
All inquiries are protected by the attorney – client privilege and kept strictly confidential.
Brian Mahany is a former tax prosecutor, revenue officer and served four years as Maine’s revenue commissioner. Our national boutique tax practice is limited to representing whistleblowers with inside information about tax frauds and cheats. That includes phony tax relief companies and tax preparers that assist others in committing tax fraud.
Although we do not handle routine tax matters, we probably can refer you to someone that can help.
And now for some fun! Here are original Roni Deutcsh and American Tax Relief TV commercials. Note how the pitch has barely changed!