Dawn from Hilton Head Island

If you have been in trouble with the IRS before, or maybe if you just watch TV or read the newspaper, you’ve see ads from J.K. Harris & Company, who say they are the largest tax defense company, etc. They apparently have also made other claims, according to the State of Texas Attorney General, who in a recent lawsuit, has accused the company of “materially misrepresenting their ability to help Texans resolve their unpaid tax obligations.”

According to the state’s enforcement action, JK Harris failed to provide promised services, misrepresented its employees’ professional skills and experience, overstated its ability to reduce debts that customers owe to the Internal Revenue Service, and accepted large, prepaid fees from customers whose tax liabilities the firm knew – or should have known – it could not reduce.

“The defendants are charged with unlawfully misrepresenting – and overstating – their ability to reduce unpaid debts that taxpayers owe to the IRS,” said Attorney General Greg Abbott. “Struggling Texans who paid large, upfront fees were told that their unpaid taxes could be resolved for pennies on the dollar. Today’s enforcement action seeks restitution for the defendants’ Texas customers and a court order enjoining the defendants’ unlawful conduct.”

JK Harris and related companies, LLC, JKH Financial Recovery Systems LLC, and Professional Fee Financing Associates, along with the firms’ owners, John K. Harris and Charles R. Harris, Jr., are all named defendants in the state’s enforcement action. Citing Texas Deceptive Trade Practices Act violations, the state is seeking an injunction, penalties, fees and restitution for the Texas-based JK Harris customers.

The defendants’ advertising and marketing materials claimed that JK Harris could settle customers’ unpaid tax obligations for pennies on the dollar. JK Harris typically charged $2,000 to $5,000 – paid in advance – for its tax resolution services, which largely relied upon the IRS’ Offer-in-Compromise (OIC) program.

According to court documents filed by the state, the defendants charged customers without actually reviewing individual tax files to see whether individual taxpayers were eligible for relief through the OIC program – which is limited to very specific situations.

The state’s investigation revealed that few of JK Harris’ customers qualified for OIC relief. Further, the defendants’ often failed to file their customers’ OIC application forms and frequently took no steps to reduce customers’ tax debts. When customers realized that JK Harris had undertaken little or no action, they frequently demanded refunds – and the defendants often failed to return the customers’ money.

My law office handles the defense of I.R.S. matters. But I’m careful to show prospective clients all the 5 available ways of dealing with IRS tax problems. I’m also realistic about explaining to clients that most people do not qualify for the Offer in Compromise program. Many of my prospective clients then either have me help them negotiate an Installment Agreement, or we file some kind of bankruptcy case for them, either to discharge the taxes in Chapter 7, or pay some or all of the taxes in Chapter 13.

But if you hire some big national outfit to help you with such a personal financial problem, it’s no wonder there can be problems. The big company is tempted to just treat you like a number, like a money producer. If you hire an attorney, the attorney is your fiduciary, the attorney has a high degree of legal duty to you, to do the best job possible, and treat your case as he would his own. And the crazy thing is, hiring your own local attorney, C.P.A. or enrolled agent to help you with your I.R.S. tax collection defense matter, can actually be less expensive than going with the big national company like J.K. Harris. But by all means, investigate and make your own decision on who to hire to help you with your IRS problems.

To read the full press release from the Texas Attorney General’s office, go to http://www.oag.state.tx.us/oagNews/release.php?id=2924 . Texans who need additional information, believe they have been harmed by a tax-assistance firm’s unlawful conduct or wish to file a complaint may contact the OAG at (800) 252-8011 or do so online at www.texasattorneygeneral.gov.