Business Blog
Deep in the Heart of Taxes
Owners of small businesses wrestling with tax obligations are sure to have seen the ads. American Tax Relief LLC promised to settle customers’ delinquent federal and state taxes for a fraction of what they owe, as well as put a stop to tax liens, bank levies, and property seizures. But according to a lawsuit filed by the FTC, the company charged up-front fees ranging from about $3,200 to $25,000 and offered little in return.
How did the outfit operate? The company’s ads included a toll-free number for consumers to call for a “free consultation.” After speaking briefly with supposed tax consultants who were paid on commission, virtually all callers were told they “qualified” for a tax relief program and that American Tax Relief – and its cadre of purportedly experienced attorneys, enrolled agents, and tax specialists who “know the secrets” – would help them significantly reduce their tax debts.
But even when customers paid the exorbitant fees, the FTC says many got next to nothing for their money – aside from high-pressure pitches to pony up more cash. Dissatisfied with the company’s broken promises, many customers asked for their money back. The FTC alleges that American Tax Relief rebuffed their requests, blaming customers for their failure to come through and citing a limit on customers’ right to cancel that had been buried in fine print.
The FTC says the company continued its deceptive practices even after federal agents executed a criminal search warrant on the operation’s Beverly Hills office earlier this year. 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. According to court papers filed by the FTC, one of the company’s owners was leasing a garageful of luxury cars, including a Rolls Royce, a Bentley, two Porsches, and two Mercedes-Benzes.
A federal judge in Chicago entered a temporary restraining order barring the company from making deceptive claims, freezing the defendants’ assets, and appointing a receiver to manage the company. Litigation is ongoing and the FTC is asking for restitution for customers.
One interesting sidelight. According to the FTC, the company’s California state business license was suspended last year – for not paying its own taxes.
Looking for more on how to evaluate ads promising tax help? Read Owe Back Taxes? Tax Relief Companies Can Result in More Pain than Gain.
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