Monday, September 5, 2011

Some tax-resolution companies are scams

Monday, September 5, 2011

Investors are often warned that if something sounds too good to be true, it probably is. Or in other words, if that guy on TV really made millions investing in real estate with no money down, why can't he afford a better toupee?

  • When hiring any type of tax professional consumers should investigate how reputable the company or individual is.

    By Tina Fineberg, AP

    When hiring any type of tax professional consumers should investigate how reputable the company or individual is.

By Tina Fineberg, AP

When hiring any type of tax professional consumers should investigate how reputable the company or individual is.

You should apply the same skepticism to ads from companies that claim they can make your tax debts disappear. The ads, which also flourish on the radio and the Internet, typically claim that good folks who run these companies will defend you against those big bad bullies at the IRS.

While there's no question that the IRS can make your life miserable, some tax-settlement companies could compound your tax woes, according to lawsuits filed by state and federal regulators. Some recent examples:

•In September, the Federal Trade Commission charged American Tax Relief of Beverly Hills with misrepresenting its ability to provide tax relief for thousands of customers. The FTC said most customers never got the promised tax relief, even though they paid "exorbitant fees." The FTC alleged that the company cheated consumers out of more than $60 million, which enabled the company's owners to amass an impressive collection of luxury cars.

Officials with American Tax Relief couldn't be reached for comment.

•Attorneys general in Texas and Minnesota have filed lawsuits against TaxMasters and its chief executive officer, Patrick Cox, for allegedly misleading customers about its ability to reduce their tax bills. In a lawsuit filed in December, Minnesota Attorney General Lori Swanson charged that most of the "tax consultants" who answer calls to TaxMasters' toll-free number are sales representatives who often make unrealistic promises "in order to dupe consumers into paying thousands of dollars in advance fees."

TaxMasters declined to comment on the lawsuits.

•Earlier this month, a California superior court froze the assets of Roni Deutch, a tax attorney who promotes herself as the "Tax Lady" in late-night television commercials. The action came after California's then-attorney general, now governor, Jerry Brown charged Deutch with violating an earlier court order that directed her to repay dissatisfied customers. Last year, the attorney general's office charged that Deutch misled customers when she claimed she could help 99% of her clients resolve tax disputes with the IRS.

In a statement on her website, Deutch called the complaint "election year politics" and said she was cooperating with the attorney general's office. Last week, she said she planned to file for bankruptcy and closed her office.

Red flags to watch for

There are reputable tax professionals who can help you resolve problems with the IRS, and in some instances, reduce your tax bill. How to identify those that aren't looking out for your best interests:

•Large upfront fees and high-pressure sales tactics. Consumers who hired American Tax Relief services were charged fees ranging from $3,200 to $25,000, according to the FTC. Fees for TaxMasters range from $1,500 to $9,000, according to the Texas attorney general, while Deutch's customers were charged $1,600 to $4,700.

American Tax Relief customers were required to make their payments over the phone, either with their credit card or with debits from their bank accounts, the FTC says.

Consumers who call TaxMasters for a "free consultation" get few details about the service unless they agree to pay a fee, according to the complaint filed by the Texas attorney general's office. According to the lawsuit, customers who request a written description of services are told that it's not possible to generate the documents until they make a payment.

•No face-to-face consultation. If a tax settlement company insists on conducting all business by phone, the company is probably more interested in signing up lots of customers than providing good service, regulators say. Deutch's firm, for example, conducted all business by phone, even for customers who lived near the firm's office in Sacramento County, according to the California attorney general's office.

•Guaranteed results. Beware of any tax-settlement company that promises it will reduce your tax debts. While there are legitimate IRS programs for taxpayers who can't pay, only the IRS can determine whether you're qualified.

Similarly, you should avoid any company that claims it can stop IRS collection efforts. Consumers who contacted Deutch's firm were told that once they gave it power of attorney over their tax debt, the IRS would no longer be allowed to collect on those debts, according to the California attorney general's complaint. Those customers were subsequently hit with wage garnishments, bank levies and federal tax liens, the complaint says.

No easy solutions

Tax-settlement companies often promote their inside knowledge of IRS tax-relief programs. What they often don't tell you is that the bar to qualify for some of these programs is extremely high. The most common tax-relief programs:

•Offer in compromise. Under the program, the IRS agrees to accept less than you owe. But to obtain a permanent reduction in your tax debt, it's not enough to show the IRS that you can't pay your tax bill. You must also prove you've exhausted all of your financial resources and have little hope of raising money in the future.

"People see these TV ads and get the impression you can dicker with the IRS," says Steven Baker, director of the FTC's Midwest region. "The reality is they're going to take almost every asset you've got."

•Penalty abatement. If you're behind on your taxes, you probably owe the IRS late-payment penalties, in addition to interest. In some cases, the IRS will reduce or eliminate those penalties, says Danny Snow, a certified public accountant in Memphis.

However, the IRS won't grant penalty abatement without reasonable cause, Snow says. For example, a widow who filed her tax return late because her husband died shortly before April 15 might qualify for penalty abatement, he says.

You don't need to hire a tax-settlement company to seek penalty abatement, Snow says. If you believe you can show extenuating circumstances, you can apply on your own or ask your tax preparer to file a request on your behalf, he says.

•Installment agreements. Under an installment plan, you make monthly payments on your tax debt for up to five years. But this is something you can do on your own. The fee to set up an installment plan is $105, or $52 if you agree to have payments automatically debited from your bank account. Approval is automatic for taxpayers who owe $10,000 or less and are in good standing with the IRS.

If you cant pay

Tax-settlement companies have flourished during the economic downturn because a lot of desperate people have tax bills they can't pay. Sadly, though, victims of unscrupulous tax relief firms have ended up even deeper in debt.

If you owe the IRS money, you have options:

•Talk to a CPA or enrolled agent who has experience dealing with IRS collection issues. If you already have a tax preparer, he or she may be able to help you or refer you to someone who can.

•If you can't afford to hire a tax professional, you may qualify for a Low-Income Tax Clinic. To find one near you, go to the website for the IRS Taxpayer Advocate,

•If you have tried unsuccessfully to resolve your problems with the IRS, you may be able to get help from the Taxpayer Advocate's office. For more information, go to, or call 877-777-4778.

Sandra Block covers personal finance for USA TODAY. Her Your Money column appears Tuesdays. E-mail her at: Follow on Twitter:

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Worried about retirement? Online calculators can help


Q: Can you recommend any online retirement calculators?


A: Mountaineers plan to scale Mount Everest. Runners train for a marathon. But for investors, retirement is the big long term goal.

Few financial goals are more important than making sure you have enough money when you are elderly. Do the math wrong and you might wind up eating dog food when you're 90 years old. But not only is calculating how much you need to retire very important, it's extraordinarily complex. There are many variables that go into measuring how much you need to retire.

Making things even more complicated is the fact your retirement will likely span several decades. Not only do you have to make sure you have enough when you retire at age 65 you also don't want the money to run out, even if you're retired for 30 or more years. You must plan for tremendous economic disruptions, given that your portfolio may be invested for more than 30 years.

Don't, though, let the enormity of the task of retirement planning scare you into inaction. There are a number of useful online retirement that can help you start to think through all the variables that go into retirement planning.

Let's be clear. None of the online retirement planning calculators are perfect. It's a bad idea to take the results of just one online calculator and consider that to be the magic number. It's a good idea to run your numbers through several of these calculators and compare and contrast the results. By evaluating the results of several calculators, you will get a good idea of what your plan should be. If you still feel uncertain, you might want to meet with a professional financial planner who might be able to work through your individual situation in more detail.

With all that said, a few of the online retirement calculators worth checking out include:

T. Rowe Price's Retirement Income Calculator. T. Rowe's retirement calculator takes you through all the key areas when it comes to retirement. You indicate the basics like your age and how much you've saved so far. You can then enter how much you're saving each year and indicate how much your employer is helping you save. Next, you input into the calculator how you're invested right now, by telling the calculator how much of your portfolio is in bonds and how much in stocks. You can also indicate if you expect to receive any Social Security benefits, or not.

After entering all the information, the site steps you through a presentation of how you're looking for retirement and if you have enough. If your plan works, good for you. If not, you can then tweak the assumptions until it does.

Fidelity retirement tools. Fidelity provides a series of four retirement centers on its site, depending on whether you're looking to plan for retirement, getting back on track for planning for retirement, gearing up for your retirement or trying to make your money last through retirement. All these tools are available at Fidelity's Retirement Planning, Guidance, and Tools site.

Fidelity's myPlan Snapshot tool asks just five questions to help you see how retirement is going. You tell the tool how old you are, how much you earn a year, how much you've saved so far and your monthly savings and investment style. The tool then gives you a basic estimate of how much you need to save. Fidelity also offers a tool that helps you design a financial plan that will help you reach multiple financial goals, including retirement. is best known for helping people track how much they're spending and monitor their financial accounts. But the site also offers a useful retirement planning tool in its "Goals" section. The "Save for Retirement" tool asks you your age, retirement age goal, annual income wanted in retirement and investment style. The tool then gives you a ballpark figure on how much you need to retire. You can then use the site to help you budget money so you can reach your goal. is free to use, but you must register first.

Choose to Save Ballpark Estimate. This tool from the Employee Benefit Research Institute attempts to incorporate several variables you might overlook, including your inflation expectations and any income you might get from pensions. personal financial calculators. provides a variety of financial tools, including some to help you plan for retirement. All the tools are available at

One of the tools in the Retirement pulldown is a Retirement Planner calculator. It requires you to enter your age and other financial basics about yourself. But this tool is useful because you can estimate what you think your investment returns will be ahead of retirement and also in retirement.

But again, as good as some of these tools are, don't rely on just one for something as important as retirement. Use them all and then size up the results next to each other. Doing this should give you a good idea of what you'll need.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies and Fundamental Analysis for Dummies. He answers a different reader question every weekday in his Ask Matt column at To submit a question, e-mail Matt at Follow Matt on Twitter at:

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Explorers' century-old whisky found in Antarctic


Five crates of Scotch whisky and two of brandy have been recovered by a team restoring an Antarctic hut used more than 100 years ago by famed polar explorer Ernest Shackleton.

Ice cracked some of the bottles that had been left there in 1909, but the restorers said Friday they are confident the five crates contain intact bottles "given liquid can be heard when the crates are moved."

New Zealand Antarctic Heritage Trust team leader Al Fastier said the team thought there were two crates and were amazed to find five.

Current distillery owner, drinks group Whyte & Mackay, launched the bid to recover the Scotch whisky for samples to test and decide whether to relaunch the defunct spirit made by distiller McKinlay and Co.

Fastier said restoration workers found the crates under the hut's floorboards in 2006, but they were too deeply embedded in ice to be dislodged.

The New Zealanders agreed to drill the ice to try to retrieve some bottles, although the rest must stay under conservation guidelines agreed to by 12 Antarctic Treaty nations.

"The unexpected find of the brandy crates, one labeled Chas. Mackinlay & Co and the other labeled The Hunter Valley Distillery Limited Allandale (Australia) are a real bonus," said Fastier.

Ice has cracked some of the crates and formed inside them. Fastier said in a statement that would make extracting the contents delicate, but the trust would decide how to do so in coming weeks.

Richard Paterson, master blender at Whyte and Mackay, whose company supplied the Mackinlay's whisky for Shackleton, described the find as "a gift from the heavens for whisky lovers."

"If the contents can be confirmed, safely extracted and analyzed, the original blend may be able to be replicated. Given the original recipe no longer exists, this may open a door into history," he said in a statement.

Shackleton's expedition ran short of supplies on its long ski trek to the South Pole from the northern Antarctic coast in 1907-1909 and turned back about 100 miles (160 kilometers) short of its goal.

The expedition sailed away in 1909 as winter ice formed, leaving behind supplies, including the whisky and brandy.

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Dawn closes in on Vesta


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Q&A sites take search to the next level


Kerryann Bouret spends her week answering a lot of questions.

  • ChaCha's web site.


    ChaCha's web site.


ChaCha's web site.

As one of 65,000 "guides" for the ChaCha question-and-answer website, she'll answer about 500 questions a day.

Some are easy: "What time is sunrise today in Sacramento?" Others are doozies: "Compare and contrast Atticus Finch from To Kill a Mockingbird with characters in 1984."

She doesn't make much — 10 to 20 cents an answer — but loves it "because it kills the time I'd be spending on Facebook, and I enjoy helping people find answers."

Bouret has lots of company. Answering online questions is a popular Internet pastime for guides on ChaCha and for "friends" and the "community" on sites such as, Aardvark or Locql. They are among dozens of question-and-answer websites that have popped up in recent months or were revamped to welcome user responses.

The traditional model for such sites used computers to generate answers from a variety of sources, as with and The new model adds humans to the equation.

The uptick in question-and-answer sites shows "this nut hasn't been cracked yet, and there's a ton of opportunity," says Valerie Combs, a vice president at Ask originally started in 2000 as Ask Jeeves, a pure question-and-answer site, but eventually became a pure search engine.

This year it switched back to only questions and answers. Ask, a unit of Barry Diller's IAC, is beta-testing a feature that lets the online community answer questions. Its official debut is expected by year's end, Combs says.

The business model for such sites remains murky, however. Ad-supported ChaCha, which is not yet profitable, has raised more than $52 million from a variety of sources, including Amazon CEO Jeff Bezos and Vanguard Ventures co-founder Rod Canion.

Aardvark and Locql have yet to put ads on their sites. But Locql reportedly has raised $1 million from a variety of sources, including Google, according to TechCrunch, and Google snapped up Aardvark for $50 million.

Greg Sterling, an analyst at Sterling Market Intelligence, says Q&A is a variation of search, a different way of phrasing a search query. "Add the community and, in some cases, you get more trusted answers or recommendations."

The explosive growth of mobile has added more heat to the Q&A sites.

Ask says its iPhone app has been downloaded some 700,000 times. ChaCha puts its downloads at nearly 225,000. "You can ask us a question via text, online or via our apps and get an answer in real time," says Scott Jones, founder.

A look at differences in the sites

How do the human-based sites differ? Here is a look at four of them.

What it's about: The veteran has returned to its roots with pure questions and answers.

Front page includes: Question of the Day (What's Bono's real name?) popular questions ("Is Katie Couric replacing Oprah?") and another question tease — "How do you cure hiccups?"

Participation: Join the Ask community to answer questions and help raise money for breast cancer research. The questions aren't all easy, for example: "How do you get a Sharpie off a hamster?"

Sample question: What was the Beatles' best-selling album? Ask links to an answer from Wikipedia that suggests The Beatles— also known as The White Album— and invites users to go to the community for a second opinion. (The Beatles is the best-seller in the United States; Sgt. Pepper's Lonely Hearts Club Band is the best-seller worldwide, which Ask doesn't tell us.)

Stats: 92 million visitors in May; 700,000 downloads of iPhone app.


What it's about: Questions answered by real people, with a heavy entertainment focus.

Front page includes: Listings of new, popular and trending questions, popular questions and the ability to sign in with logins from many social-media sites, including Facebook, Twitter and LinkedIn.

Participation: Questions are answered by Indianapolis-based "guides," who get paid anywhere from 2 to 20 cents per answer, according to ChaCha. The company says it has answered more than 1 billion questions.

Sample question. The Beatles' best-selling album? The Beatles, with 19 million sold, along with links to other related questions such as whether the Beatles sold more records than Michael Jackson, and what is the best-selling album ever. When rephrased, the Beatles question comes back with Revolver and Sgt. Pepper.

Stats: 10 million visitors in May.

Aardvark (

What it's about: Pose a question to your group of friends and get an answer from this Google-owned site.

Front page includes: Three steps — pose the question, get it out to the community and await a response. Sign in with Facebook or Google.

Participation: Answers come from your friends and the Vark community of folks who are connected to friends and people who share your interests.

Sample question: The Beatles query comes back with multiple instant messages and e-mails from Vark users — some correct, some not.

Stats: Google acquired the site in 2010. The company could not be reached for comment.


What it's about: Pose questions to your friends about a local neighborhood. Questions go out to your Facebook friends as well, as do the answers.

Front page includes: An invitation to answer generic questions about your community ("What's the best Chinese restaurant, shopping mall, children's playground?") and send them to your Facebook friends.

Participation: Answers come from your friends, period, because, as Locql says in its FAQ: "Local people know the best about local areas. Your friends know the best about you."

Sample question: The Beatles question doesn't work for local, and since the site is based in the Seattle area, the best responses come from the Northwest. Best places to visit in Seattle? A Locql user responds, "Pike Place Market, the Duck Boat and Underground tours."

Stats: Just launched June 1 with a public beta. The site was formed by two Microsoft engineers as a sideline, Haitao Li and Robert Mao.

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