I don’t quite know where the tax relief industry was during the whole process to regulate the debt settlement industry. A process that took a couple of years by the way.
But all of a sudden, with new regulations that will apply to the tax relief industry going into effect on October 27, 2010, the tax relief industry is waking up and crying foul.
A recent press release from New River Innovation, which promotes their automated approach to resolving tax issues, makes the case why tax relief providers are not happy that they are now regulated by the FTC telemarketing sales rules. The release says:
“Tax industry insiders have been buzzing for the past week about recent FTC telemarketing laws that limit the ability of tax debt settlement firms to sell their services. One tax expert believes that the legislation could level the tax resolution industry—and overhaul options for consumers who need help.
The implications of the FTC ruling for “pennies on the dollar” tax debt resolution firms are downright catastrophic, said tax expert Jim Buttonow, a 19-year IRS veteran and co-founder of tax software firm easyIRS.com.
“Congress and the FTC have given a big win for those consumers. The consumer is now in control and is protected from deceptive advertising,” Buttonow said.
The new FTC rule prohibits debt relief firms from charging advance fees or making false promises about debt reduction, and requires them to adhere to strict disclosure standards. The FTC ruling in case number 3:2010cv02063 of the California Southern District Court reinforced its hard-line position Wednesday by shutting down American Tax Relief, alleging deceptive practices and false claims. In a separate matter, Roni Deutch, a California-based tax debt firm, is facing a $34 million lawsuit (Case Number 2010-00085933) filed by state Attorney General Jerry Brown in Sacramento County Superior Court. The state is claiming that Deutch advertises a success rate for IRS settlements of up to 99%, yet successfully reduces the amount of money her clients owe in taxes in just 10% of cases.
Buttonow, who worked extensively in debt relief as an IRS official, said the problem is in the business model.
The upfront cost of acquiring a customer with tax debt is extremely high. For example, TaxMasters, Inc., a tax debt relief firm that advertises heavily on radio, TV and the Web, disclosed in its recent Securities and Exchange Commission, or SEC, filings that it spends roughly 40% of its revenue in advertising and promotion to acquire customers. These costs necessitate collecting large upfront payments from clients. To convince cash-strapped prospects to commit to the large fees, tax debt firms often must exaggerate the money savings that a customer might receive from an IRS settlement, Buttonow said.
“These companies prey on the small percentage of Americans who are desperate to solve their situation,” Buttonow said. “The IRS is not scary to deal with as these organizations purport.”
Because of the legislation, he said customers will more likely work directly with the IRS, without professional representation, or work with local tax practitioners.
“Most problems just require that you understand your facts, the applicable law, and know how to navigate the IRS,” Buttonow said. “The best way to solve any IRS problem is to do it yourself or ask a trusted tax professional if your problem is serious. The FTC reiterated this position in their consumer alert issued this week.”
For Americans working directly with the IRS who want help understanding IRS processes, Buttonow’s venture-capital backed technology firm is ready to help. New River Innovation has developed patent-pending technology that solves a wide range of IRS problems for a fraction of the traditional cost. This software is available online at easyIRS.com.” – SourceIt's Official, Tax Relief Providers Not Happy Campers. It's Their Turn, Turn, Turn. by Steve Rhode