Another one of the late-night TV tax settlement outfits apparently is on the rocks. Janet Novack of Forbes reports that TaxMasters is facing a bankruptcy filing:
If you’ve got problems paying the Internal Revenue Service, don’t look for help from the ads on late night cable television. That’s one of the lessons from an SEC filing Friday by TaxMasters Inc., disclosing the publicly-traded company will file for voluntary bankruptcy.
TaxMasters is only the latest casualty in the “pennies on the dollar” tax settlement business. JK Harris and Roni Deutch, the Tax Lady, have shut down in the last year.
The late night TV tax settlement outfits promise to settle tax debts, but they have all been plagued with consumer protection complaints from state attorney general offices. The complaints typically say that the outfits charge their clients up-front and often fail to solve any tax problems.
In real life, “pennies on the dollar” deals through the offer-in-compromise process are the exception, not the norm. When the IRS does compromise, it is normally because the taxpayer is very truly broke, which is a hard way to go to get a tax break.
I believe their late night pitches encourage tax carelessness and recklessness. After all, why report all of my income or pay to have my taxes done when I can always get off for pennies? Unfortunately, I expect other tax settlement outfits to step right up and take their turn gulling the gullible.
UPDATE: Bankrupt TaxMasters Lists Less Than $50,000 In Assets, Up To 5,000 Creditors
The TaxProf has more.