Feds Take Closer Look At Tax Resolution Companies As Complaints Parallel Those Leveled Against Loan Modification Firms

WebCPA reports:

• The Internal Revenue Service has suspended an enrolled agent from practicing before the agency after his clients complained that he did little to help them settle their tax disputes. The IRS’s Office of Professional Responsibility suspended Richard Hargus, who worked in California for two separate, now defunct companies that specialized in tax resolution services, including the submission of offers in compromises ["OIC"] to the IRS.(1)

• Multiple taxpayers paid the companies for Hargus to resolve their income tax liabilities through the OIC program. An OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. In many instances, however, Hargus’s clients either did not receive the services for which they paid him or received very little assistance with resolving their tax issues, the IRS said. [...] After an IRS investigation, Hargus admitted a lack of due diligence in these taxpayers’ situations. The IRS suspended Hargus on Monday from practice for at least 18 months.(2)

• The IRS said that it is taking a closer look at tax resolution companies, and is also litigating known OIC abuses to ensure that tax professionals fulfill their legal and ethical obligations to their clients in dealing with IRS tax matters. The IRS’s parent agency, the Treasury Department, also announced on Monday an initiative to crack down on companies that claim to help people with foreclosure prevention services, but instead charge them up front while performing few services on their behalf.

For the story, see Practitioner Suspended for Bilking Taxpayers.

For a related post on dealing with unpaid federal tax problems, see IRS To Ease Up On Squeezing Financially Stressed Taxpayers Owing Back Taxes.

(1) According to the story, Tax practitioners are subject to the regulations issued under Treasury Department Circular 230, the IRS pointed out. Circular 230 provides that a practitioner must exercise due diligence in preparing or assisting in the preparation, approval and filing of tax returns, documents, affidavits and other papers relating to IRS matters.

(2) For an IRS advisory warning taxpayers to beware of promoters’ claims that tax debts can be settled for “pennies on the dollar,” see IR-2004-17: Check Carefully Before Applying for Offers in Compromise.