TaxMasters 'free consultation' may cost thousands, Texas officials say

TaxMasters 'free consultation' may cost thousandsTexas Attorney General Greg Abbott has charged Houston's TaxMasters Inc. with allegedly misleading customers and not revealing its no-refund policy, among other issues.

"In the midst of a national economic downturn, TaxMasters used a nationwide marketing campaign to offer services for distressed taxpayers who needed help dealing with the IRS," Abbott said in a statement.

With a national advertising campaign on the Internet -- including sponsoring segments of Dennis Miller and Charles Osgood shows -- and television ads on CNN, MSNBC and Fox News, TaxMasters promises to "get between" you and the U.S. Internal Revenue Service in a tax dispute. The Texas AG's office says the company sells a "free consultation" with a tax consultant, but callers are routed to salespeople who recommend a solution that could cost $1,500 to $9,000 or more.

Almost 1,000 complaints have flooded the Better Business Bureau of Houston and the attorney general's office, the state says.

As part of the case, the state wants restitution for consumers and a $20,000 fine for each violation of the Texas Deceptive Trade Practices Act. The actual number of charges will be determined through the case's discovery process, Jerry Strickland, communications director for the attorney general's office, told Consumer Ally. A hearing was to be held today in Travis County, Texas, to address issues with the case.

Also charged is TaxMasters' founder Patrick R. Cox and associated businesses, TMIRS Enterprises Ltd. and TM GP Services LLC. TaxMasters is registered in Nevada and based in Texas.

Company spokesman DeWayne Logan told Consumer Ally that TaxMasters is reviewing the state's allegations and plans to cooperate to resolve the issue. TaxMasters employs 323 and made $36.8 million last year.

The state also alleges callers were offered installment payment plans and when they asked for written terms, were told a credit card or bank account number was needed first. The state also alleges TaxMasters claimed to start client work immediately, but delayed work until the account was paid in full -- sometimes causing consumers to miss IRS deadlines.

When customers tried to get refunds, the state alleges TaxMasters refused and set debt collectors on customers who canceled their contracts.

The Better Business Bureau gives TaxMasters an F rating -- the lowest score.

In general, the BBB advises hiring a tax attorney, or a certified public accountant, or talking with the IRS before enlisting the help of a tax resolution firm.
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