Smart SpendingSmart Spending

Tax relief firm misled customers, FTC says

American Tax Relief's ads on TV, radio and the Internet said it could settle customers' tax debt for a fraction of what they owed.

By Karen Datko Oct 7, 2010 5:20PM

This post comes from James Limbach at partner site


A federal judge has halted a national operation accused of bilking consumers out of more than $60 million by falsely claiming it can reduce tax debts.

The California state business license of American Tax Relief was suspended last year for nonpayment of its own taxes, according to the Federal Trade Commission, which is seeking to make the defendants pay restitution to victims.


"We've made it a top priority to go after scammers who try to exploit the financial hardship of others," said David C. Vladeck, director of the FTC's Bureau of Consumer Protection. "For people having a tough time paying their taxes, the last thing they need is to lose more money to a fraud."


Large fees

According to the FTC, American Tax Relief falsely claimed in TV, radio and Internet ads that it can settle consumers' delinquent federal and state taxes for a fraction of the amount they owe. The company also falsely claimed that it can remove tax liens and stop wage garnishments, bank and tax levies, property seizures, and "unbearable monthly payments."


For example, the company's website stated, "The IRS is currently accepting a fraction of back taxes owed to them for those who qualify. The IRS is allowing the people with delinquent tax liabilities a ONE-TIME opportunity to settle the debt ONCE AND FOR ALL. But at the same time, the IRS does not advertise, promote or even voluntarily suggest this program."


The FTC says the company continued its deceptive practices even after federal agents executed a criminal search warrant on the operation's Beverly Hills business premises in April. At that time, authorities seized money from bank accounts and a Ferrari from the company's owner, and placed liens on two residences, including a $3.4 million house. At the time, one of the company's owners was leasing six other vehicles, including a Rolls Royce, a Bentley, two Porsches, and two Mercedes-Benzes, according to exhibits the FTC filed in court.


American Tax Relief charged upfront fees ranging from about $3,200 to $25,000 for the purported tax relief services. The company's ads included a toll-free number for consumers to call for a "free consultation." After speaking briefly with commission-based salespeople who were supposedly "tax consultants," virtually all consumers were told that they "qualify" for a tax relief program, and that American Tax Relief could help them significantly reduce their tax debts, the FTC complaint alleges.


Judge issues order

In reality, very few of the company's customers qualified for the promised tax relief programs, which are available only in very limited circumstances. Most people who hired the company would qualify at most for installment payment plans, which still require payment of the full amount owed, and which many taxpayers can easily arrange by themselves.


The FTC says many consumers were told they qualified for an "offer in compromise," the only IRS program that allows people to avoid paying the full amount of back taxes. It's available only in limited circumstances -- taxpayers are eligible only after other payment options have been exhausted and the person's ability to pay has been reviewed.


Other consumers were told that they qualified for a "penalty abatement," which the company claimed would eliminate both accumulated penalties and interest stemming from late payments, the FTC said. However, a penalty abatement is considered by the IRS only in very limited circumstances for people who have "reasonable cause" for the late payments, such as death, serious injury, natural disaster or the like.


Daniel of Cicero, N.Y., told that he called American Tax Relief after seeing their ad and "they immediately told me they could reduce my tax debt, which was $38,000, to $3,000 or $4,000." He said he sent them $4,900 to start the process. "Had to keep sending them papers they requested over and over, IRS then contacted them -- IRS claims they never returned their phone calls and my claim was denied." When he tried again to contact American Tax Relief, Daniel says, "they never returned my calls.


The FTC contends the company did not gather sufficient information from consumers to know whether they would be likely to qualify for either an offer in compromise or a penalty abatement.


The agency's complaint names Alexander Seung Hahn, Joo Hyun Park, and American Tax Relief LLC.  


On Sept. 24, a federal judge in Chicago entered a temporary restraining order prohibiting deceptive claims, freezing the defendants' assets, and appointing a receiver to manage the company.


According to The New York Times:

Charles L. Kreindler, a Los Angeles lawyer who represents the company, said in a statement that it intended to fight the FTC action, which "focused on a small handful of complaints and ignored the thousands of consumers who have been helped."

More from and MSN Money:



Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.