American Tax Relief claims it can help tax delinquents settle with the Internal Revenue Service for "pennies on the dollar" but two New York City lawsuits say it's just not so.
New York City's Department of Consumer Affairs filed a lawsuit accusing the company, American Tax Relief, of sending junk mail with exaggerated promises -- and then collecting large fees but not clearing its clients' tax debts.
Separately, a Brooklyn woman filed a lawsuit claiming that she paid $5,000 to the firm to help resolve what was a $50,000 tax debt. The woman eventually learned she didn't qualify for the IRS settlement program the company was selling and had to settle with the IRS for about $80,000.
An attorney for American Tax Relief said the company has done nothing wrong, and that it doesn't promise it can help all of its clients.
The complaints are similar to those filed over the last several years with ConsumerAffairs.com
"I paid $3400 to them and they got nothing done for me," said Reno of Tampa, Fla. Carrie of Antioch, Calif., said she paid $12,000 but was still hit with a tax lien.
Tax settlement businesses have come under increasing scrutiny in recent years. The Internal Revenue Service warned in 2004 that unscrupulous companies were taking advantage of taxpayers who had no real chance of having debts reduced under the government's "offer-in-compromise" program.
Under that program, some taxpayers can have their debts reduced, but only if there is no likelihood they could ever pay the full amount. Of the 74,000 applications to the program in 2005, the IRS accepted 19,000, the Associated Press reported.
JK Harris & Co. also faces lawsuits in several states.
