California is suing Roni Deutch for $34 million and the U. S Government has shut down American Tax Relief.
These “pennies on the dollar” tax debt settlement companies are among the latest feeling the heat from a consumer and governmental backlash.
The Federal Trade Commission (FTC) Telemarketing Sales Rule goes into effect on Oct. 27, and the debt relief companies have responded by looking for loopholes in the rules that could destroy their main source of income.
The new rules will ban these firms from collecting advance fees. Generally, the clients are required to make substantial upfront payments when signing up with the firm. These fees are paid even though no service has been provided and no reduction or adjustment of the tax debt has been negotiated with the taxing agency.
The tax debt resolution companies are seriously concerned about future earnings. If they provide online or telephone business, as opposed to in office, face-to-face meetings and evaluations of the client, they cannot charge upfront fees.
The industry is concerned that potential clients will abandon them, to seek tax debt relief assistance from the IRS, or local Enrolled Agents, CPAs and tax attorneys – the traditional providers.
Tax Wisdom – Imagine a banquet attended by 100 random Americans. If the bill for the meal is distributed like the income tax, the richest person in the room is required to pay one-third of the tab – or more than all 50 attendees with a below average income. The three richest people are charged as much as the other 97. And the 30 or so lowest-income people in the room …pay nothing and eat for free.
– The Wall Street Journal