After an ABC investigation of the tax resolution firm TaxMasters aired on Nightline and World News with Diane Sawyer, viewers shared their own stories about the company, which claims in TV commercials that it will "stand between" desperate taxpayers and the IRS, but has been sued by two states for alleged deceptive business practices.
In emails to the Brian Ross Investigative Unit's tip line, and in comments posted on a web story about the investigation, a half dozen viewers who said they were former clients of TaxMasters claimed that they had paid the Houston-based company thousands of dollars but instead of receiving the promised assistance with their back taxes often wound up owing more money to the government as interest and penalties piled up.
Tax Masters, which saw its revenues soar to $43 million in 2010, has been sued by the attorneys general of Texas and Minnesota. The Texas suit alleges that TaxMasters "engaged in false, misleading, and deceptive acts and practices," while Minnesota's attorney general accuses the company of fraud and deception.
Viewer "eibd" posted a comment on a web story about TaxMasters that said "TaxMasters got $3,750 out of me and did absolutely nothing for my tax situation. ... I finally called the IRS and set up payments on my own." Eibd claimed that TaxMasters had "convinced me that the IRS preys on people's fear of the IRS and told me not to deal with them directly."
A viewer named Carolyn said she regretted ever reaching out to the company. "When I was in a tax crisis, I unfortunately contacted TaxMasters for help. TaxMasters was eager to help as well as take my money, $5,275.00 up front," claimed Carolyn. "I quickly realized TaxMasters wasn't going to solve my tax problems, or give me back my $5,000." Carolyn said she solved her problem by contacting the Taxpayer Advocate Service of the IRS, and hiring a tax attorney.
In an email to the Blotter's tip line, a tipster claimed that after her husband returned from Iraq with Post-traumatic Stress Disorder, she and her husband sought help with their taxes from TaxMasters only to become "victim[s]." "We have lost our $4,000," she wrote, "but maybe someone else can be saved from this."
"Jtrimarchi88" claimed in a comment on a Blotter web story about TaxMasters to have seen the company from the other side. "It's terrible to admit that I worked for this company," wrote Jtrmarchi88. "I had just moved to Houston and I was in need of a job. I didn't research the company but I have learned my lesson. The sales people lie to the prospect[s] by telling them fantasy outcomes."
Viewers also claimed in comments and emails to the Blotter tip line to have had problems with other tax resolution firms, including JK Harris and Company and Roni Deutch.
In 2008, South Carolina-based JK Harris settled with the attorneys general of 18 states without admitting wrongdoing, agreeing to pay $1.5 million into a restitution fund and change its business practices. JK Harris settled a suit filed by Texas for $1.2 million in 2009, after the company agreed to set aside $800,000 to refund customers, and was ordered to disclose to clients, in writing, that very few taxpayers end up qualifying for the IRS's Offer in Compromise program, the main vehicle that allows some taxpayers to settle their debts for less than they owe.
The Roni Deutch firm paid the City of New York $300,000 to settle claims of deceptive advertising in 2006, and is currently being sued by the state of California. According to then-Attorney General Jerry Brown, who filed suit in 2010, firm founder Roni Deutch and her company "falsely represent both their success rate in negotiating tax debt resolution for clients and the type of tax debt resolution they can secure." Deutch has disputed the claims in a press release. "My law firm has been representing taxpayers before the IRS for almost 20 years," she wrote. "We have saved thousands of people tens of millions of dollars.
Tapes of actual TaxMasters sales calls show the allegedly deceptive practices cited in the Texas and Minnesota lawsuits, including one in which a salesman promises the IRS stops collection efforts once a customer hires TaxMasters.
"That's what the IRS, consultation does," says the salesman. "It pulls your name, it pulls your number out of the collection process."
Listen To The TaxMasters Sales Call
Minnesota Attorney General Lori Swanson, whose office obtained the taped calls from TaxMasters, told ABC News that TaxMasters can't automatically stop collections from happening. "In fact, when you hire this company, sometimes the situation even gets worse. They may garnish you, they may put down liens."
In another call, the TaxMasters sales representative claims the company can easily get back taxes reduced to pennies on a dollar.
"You're owing $19,000," says the salesman. "I mean, we can get you down to basically, next to nothing, and our job, and our goal is to get you to zero. We're 97 percent successful.
Listen To The TaxMasters Sales Call
Attorney General Swanson calls that "another falsehood" and that the person making the claim is "a salesperson, who is trying to get you to pay thousands of dollars to the company, not somebody with tax expertise." The IRS will only forgive a tax debt if the taxpayer has no assets and no hope of earning money to repay a tax bill.
TaxMasters CEO Patrick Cox declined to be interviewed by ABC News, and in a written statement he did not address the specific allegations in the Texas and Minnesota lawsuits. TaxMasters has denied the allegations in the lawsuits and Cox said the company "prides itself on honest customer service, a transparent process with our customer, and seeking fair treatment from the IRS."
Of the allegations made by dissatisfied customers in the Nightline and World News with Diane Sawyer reports, Cox said, "It is not surprising that ABC News dug through the tens of thousands of taxpayers we have spoken with over the years and found a few individuals willing to complain on camera."
Cox said he could not comment on specific cases cited to him by ABC News, but said they "are not a fair representation of TaxMasters' client base or business practice."
Read Patrick Cox's Full Statement to ABC News.
Despite the pending lawsuits, TaxMasters has continued to flood CNN, Fox News and other cable channels with commercials that promise to help Americans facing problems with the IRS. The ads feature TaxMasters' red-bearded founder and CEO Cox, who claims his company's staff of former IRS agents and tax professionals "have helped many good people just like you."
In a statement, CNN said the network was "aware of pending legal activity" and had been told by TaxMasters that it was working to address the claims with the state authorities. "We continue to monitor any activity for developments or resolution, and will further evaluate our relationship as it becomes necessary," the network said in the statement.
Fox News acknowledged receiving viewer complaints. "Anytime we have received a complaint about TaxMasters we forward it to them and tell them they have five working days to resolve the complaint," said a Fox News spokeswoman. While the spokeswoman did not disclose the number or nature of the complaints, she said they have all been resolved.
The TaxMasters ad blitz has been a driving force in the company's soaring corporate revenues. The company linked "an increase in advertising expense" to "increased sales volume" in its year-end filing.