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Tax debt relief services may be too good to be true

South Carolina residents who owe money to the federal government can be overwhelmed, so when tax debt relief firms offer easy ways to lower tax bills, it seems almost like a dream come true. The fact is, it may well be too good to be true. In civil lawsuits filed against these firms, authorities claim that consumers paid thousands of dollars to these companies with the promise of debt relief, but no relief was actually forthcoming. Many customers were disgruntled after services promised were never rendered.

While tax debt relief firms are known to make big promises and advertise on late-night television and billboards, three of the most well-known firms have been shut down. In one state, a jury ordered the founder and chief executive of TaxMasters to pay over $113 million in restitution to customers. They were found to have made more than 110,000 violations under the state's Deceptive Trade Practices Act. Evidence against the company documented that they misled and defrauded customers and did not provide promised services in return.

Another major tax debt relief company closed its doors after being sued by the California attorney general for over $34 million, again for unfulfilled promises to consumers. While it can be a relief for South Carolina residents to believe organizations exist to help consumers with debt relief, caution is always encouraged. A reduction in tax debt is a big promise, and unfortunately these companies were apparently unable to deliver on those promises. Instead, numerous consumers complained they were bilked out of money with no help provided in return.

When that occurs, the result may be financial problems more significant than originally encountered. While the tax problems of each South Carolina resident are different, the simple fact is that some find themselves is a hopeless struggle to right their financial ship. In some instances, debt relief may be obtained by filing for bankruptcy protection to either reorganize existing obligations under the supervision of the court or to seek a straight liquidation. Of course, when it comes to taxes, not all debt can be discharged in bankruptcy, and those affected will need to investigate how the laws and regulations apply to them.

Source: MarketWatch, "Tax-debt relief firms pay the price," Andrea Coombes, April 3, 2012

1 Comment

If you have a tax problem, tell your spouse. Don't let the news come from the IRS. One spouse is notresponsible for the tax debt the other spouse brings into the marriage (or even a tax debt that comes from a non-joint return filed when married), but a tax debts certainly affects the non-debtor spouse. For instance, if the IRS garnishes your wages because of your tax debt, the loss in income certainly affects your spouse. Jointly held assets, such as a shared bank account are also at risk if only one spouse has a tax debt. Heaven help the spouse who has kept a tax problem secret and then the joint bank account is cleaned out by an IRS levy. Is this reliable???

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