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Tax Master & JK Harris face legal challenges
posted by: Steve

This article was written by Diane C. Lade from the Sun Sentinel on March 18, 2011. Click here to read the orginal article on

Two tax resolution firms face inquiries

Tax resolution companies are ramping up their pitches in cyberspace and on late-night television, with the April 18 tax filing deadline a month away. They promise recession-battered taxpayers, struggling to pay their mortgages and bills, that they can settle their debt with the IRS for pennies on the dollar.

But some of these operations are the target of legal inquiries and lawsuits by regulators in multiple states, including two ongoing civil investigations by the Florida attorney general. Thousands of consumers nationwide have complained that tax resolution services took as much as $25,000 in advance, promising to get back due taxes and penalties reduced, but then did nothing.

So-called tax-settlement and tax-relief companies have flourished as the Internal Revenue Service has more aggressively pursued delinquent taxpayers. The agency filed nearly 1.1 million liens nationwide in federal fiscal year 2010, according to the IRS Data Book. That's a 60 percent increase over the number filed three years earlier.

Experts say that fact, coupled with the recession's lingering effects, has driven a boom in tax resolution outfits. They advise taxpayers needing help to choose credentialed tax professionals and be wary of those requiring high upfront fees.

"If you have to pay upfront, you may be left dangling with no results," said Gail Hillebrand, manager of Consumer Report's

Mike Dobzinski, spokesman for the IRS's Florida office, said three professionals are authorized to represent taxpayers before the IRS: attorneys, certified public accountants and enrolled agents, who must pass an IRS test and take refresher courses. But consumers can negotiate on their own behalf, he said.

The Florida Attorney General's Office is scrutinizing two large tax resolution companies that solicit clients nationwide: Tax Masters, based in Texas, and JK Harris and Co., of South Carolina. State regulators have received 26 complaints about Tax Masters from Floridians and 92 regarding JK Harris.

Tax Masters is being investigated for allegations of unfair competition and deceptive trade. The Texas and Minnesota attorneys general also filed deceptive and unfair trade civil charges against the company last year.

A company spokesman declined to comment.

JK Harris is being scrutinized for potentially violating a 2008 settlement with Florida and 17 other states over what investigators said were misleading sales tactics. Among the allegations: the company refused to give refunds when it did not help customers and falsely claimed its case processors were tax experts or ex-IRS agents. State officials said the company was cooperating with the investigation.

The company agreed to clearer disclosures and to return $1.5 million to consumers. But JK Harris spokeswoman Gina Anton said the credit crunch has made it difficult to find lenders willing to finance their clients' debts and has slowed the refunds.

Debra Avocato was living in Miami when she hired JK Harris in late 2009 after seeing its television ads. She said she discovered her caseworker had done nothing to promote her settlement offer to the IRS in 10 months when she contacted the agency. When she asked that her $1,800 be refunded, Avocato said JK Harris refused, saying it had fulfilled its contractual obligations.

"We got the impression that we couldn't do this on our own, that we needed representation. But you pay a lot of money and get nothing in return," said Avocato, an insurance adjuster who ended up negotiating a payment plan with the IRS on her own. She later filed a complaint with the attorney general.

Anton said JK Harris did submit an offer to the IRS but that Avocato canceled her contract before the company received a reply and that the lag time for her case was not unusual. It also isn't uncommon that customers think JK Harris has not contacted the IRS, Anton said, because the agency logs the name of the specific JK Harris-authorized professional as the client's representative, not the company itself.

JK Harris changed its business model in 2009, Anton said, and now charges in advance only for a report that analyzes what tax payment program the customer would qualify for. Anton said taxpayers then could either use the report to negotiate with the IRS on their own or pay extra for JK Harris to represent them.

Tax Masters officials said the company adopted a similar method last fall, charging less upfront. Clients then can decide if they want Tax Masters to pursue a resolution for them and will be charged only if the company is successful. The average Tax Masters client pays $4,500, officials said.

Consumer advocates caution against companies guaranteeing what the IRS calls an "offer in compromise" a settlement for a reduced tax payment, the solution most taxpayers seek. IRS statistics show that while the number of compromise applications is increasing, the agency continues to grant only about 25 percent of those requests.

Taxpayers seeking relief also should be aware that businesses or individuals claiming to be tax specialists may be just selling the services, Hillebrand said.

Tax resolution remains far less regulated than two industries it resembles: mortgage loan modification and debt settlement, which also have generated huge volumes of complaints regarding deceptive advertisements and advance payments.

New state and Federal Trade Commission rules have cracked down on loan modifications and debt settlement operations, forbidding upfront fees and mandating disclosures. But the FTC said last year that tax resolution companies could continue to ask for advance fees while the commission determined if it had authority over tax debt, after some tax resolution companies claimed the rule did not apply to them.

Last October, the FTC successfully petitioned to have the federal courts in Illinois shut down American Tax Relief, which allegedly falsely stated in TV, radio and Internet ads it could stop property seizures and cut tax debts. Regulators said the company owners fraudulently took more than $60 million from taxpayers, and bought themselves luxury cars and homes.

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If you have any questions regarding this post, or if you need tax resolution services in Coconut Creek or anywhere else in the country, please contact us at: 954-354-1660, one of our representatives will be happy to assist you.

Article date: May. 11 2011

Job type: Tax Resolution

Job Location: Coconut Creek - Broward County


  • Tax Resolution
  • Florida Attorney General
  • Tax Settlement
  • Tax Relief
  • Tax Masters
  • JK Harris
  • Debra Avocato
  • Miami
  • Legal Challenges

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