By Stephen J. Dunn
In the throes of our country’s worst economic time since the Great Depression, “tax resolution” firms advertised heavily on television, promising relief which they could not deliver. Desperate taxpayers facing tax collection action responded to the ads. These firms use high-pressure sales techniques to exact substantial retainers—typically $5,000-$10,000. The retainer paid, the “resolution” firm disappears. The taxpayer is out his or her money, without relief. The government’s taxes go unpaid.
These unconscionable firms are unregulated. Many of them are accountants by trade. Certified public accountants, or CPAs as they are called, are trained to audit companies’ financial and report on them for the benefit of shareholders. I know. I was a CPA earlier in my career. CPAs who specialize in taxation tend to be adept at preparation of income tax returns. But CPAs are not trained in law or advocacy. If a case does not resolve administratively, a non-lawyer CPA is unable to take it to the next level—litigation. Petitioning the U.S. Tax Court, or the knowledge by IRS counsel that the taxpayer’s representative is capable of litigating the case, is important in resolving a tax case. Pursuant to IRS practice, once a case is docketed in U.S. Tax Court, it is sent back to IRS Appeals for another attempt at administrative resolution. IRS Counsel have ultimate settlement authority over a docketed case—they tend to be the most reasonable of all IRS representatives.
I have posted on tax resolution scams twice previously, on September 19, 2010 and on November 29, 2010. Thankfully, the largest of these schemes have now been shut down. “Tax Lady” Roni Lynn Deutch was shut down by then-Attorney General (now Governor) of California Jerry Brown. Deutch has since surrendered her law license and declared bankruptcy.
A $195 million judgment was entered against Patrick Cox and his firm, Tax Masters. The firm ceased operations, and declared bankruptcy. The largest creditors included $2.6 million owed to CNN for advertising and $2.3 million owing to a Philadelphia law firm. What a shame.
JK Harris, which at its peak had several hundred offices throughout the country, has now ceased operations under crushing civil and administrative litigation.
But tax resolution schemes persist, albeit on a smaller, local or regional scale. I have long known that these operators hire “bird dogs” to search local register of deeds’ officers for Notices of Federal Tax Lien (“NFTL”), and then bombard the subjects of the notices with come-ons for tax relief. I have recently experienced the onslaught first-hand. A client owing a substantial balance to the IRS retired to a foreign country. As the client does not have a U.S. address, the IRS sends mail to him at my office address. When the IRS recorded an NFTL against the client, the barrage of mail from tax relief operators began. The ads were quite startling. Some made a deliberate effort to appear that they were coming from the Internal Revenue Service. Some came from people falsely claiming to be lawyers. All of them made outlandish, unfounded claims/promises of tax relief.
The IRS could end such “bird-dogging” by discontinuing the practice of disclosing taxpayers’ addresses on NFTLs. Congress could also legislate against such misuse of recorded NFTLs—NFTLs are recorded to put prospective creditors on notice of the IRS’ priority in a taxpayer’s assets.
“Buyer beware” prevails in the marketplace. Tax resolution schemes are a waste of money. If you have a tax problem, you are best represented by a competent tax attorney, who is accountable to the organized bar, and to you.
After I posted this piece, the IRS apparently posted an updated NFTL against my client described in the piece. This triggered another onslaught of solicitations from tax resolution schemes. I have attached several of them for your perusal.