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The Minnesota Attorney General, Lori Swanson , has joined other state’s Attorney Generals who have sued Tax Masters for misrepresenting the tax help it provided to customers.

They advertise that they will "solve your tax problems". The lawsuit says otherwise.

"The company gets worried people to pay thousands of dollars by overstating the help it will provide with their tax bills," said Attorney General Swanson. "This is the latest type of company we have seen target the misfortunes of people who are facing tough sledding in the bad economy."

The lawsuit alleges that the company got consumers to pay advance fees of $2,000 to $8,000 by misstating the help it would provide people with unpaid tax bills. In some cases, the company claimed it could substantially reduce people’s tax bills by up to 90 percent, but then delivered little or no help. In other cases, the company falsely promised that it could stop IRS collection efforts against consumers who hired it.

The complaint includes:

  • "… based upon our success rate and our experience, on average, our clients see a savings of anywhere between 80 and 90% of what the IRS claims they owe."
  • "We’re highly successful; we are the most successful tax resolution company. We’re 97% successful."
  • "We’ll save you anywhere from 65 to 90% is our goal on … savings off the total tax debt. 97% of the time we reach that goal, the other 3% are the people who just flat out lie to us."

Among other things, TaxMasters:

  • Overstated its ability to reduce or settle peoples’ tax obligations.
  • Charged consumers thousands of dollars in advance fees for help in reducing tax bills that the company knew or should have known would not be negotiated by the IRS.
  • Failed to deliver on its promises and sometimes even failed to meaningfully contact the IRS.
  • Failed to make refunds to consumers who complained that the company did not take the promised action.

Unfortunately, there are too many people falling for offered "help" because of tough economic times and fear. It will be interesting to see where the litigation goes. So far, it doesn’t look like anyone from TaxMasters has responded.

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