You've probably seen the ads for American Tax Relief. They claim to provide help to beleaguered taxpayers by dramatically reducing tax debt, including penalties and interest. But chances are good you will not be seeing those ads again anytime soon.
Requested by the Federal Trade Commission, a federal judge has suspended operations at American Tax Relief, and seized some of the assets of the owners.
If the FTC is correct, American Tax Relief not only failed to help most customers find tax relief, it made their situations worse by charging them for what amounted to little or no assistance. The FTC says the company collected $60 million in fees, yet few taxpayers got actual relief.
The complaint alleges that the company's sales pitch was hollow and without substance. Generally, the process started with the offer of a free consultation to determine whether potential customers qualify. The consultants actually were commission-based sales people, who the FTC maintained, often did not collect enough information to make an accurate evaluation. Even so, most American Tax Relief customers were deemed eligible for tax relief.
Fees for these services usually ranged from $3,200 to $25,000. In the majority of cases, customers only qualified for arrangements they could have made themselves, such as tax payment plans - which result in full payment of the original tax due - or offers in compromise.
Some taxpayers were told they qualified to have penalties and interest wiped out. However, the Internal Revenue Service stated that only in limited circumstances can this happen for those with reasonable cause of late payments, such as death or natural disaster.
On September 24, a federal judge in Chicago acted on the FTC complaint, which named American Tax Relief, Alexander Seung Hah, and Joo Hyun Park. Also named are Park's parents, Young Soon Park and II Kon Park, who are accused of holding funds that were obtained from customers of American Tax Relief.
The judge ordered a temporary restraining order prohibiting deceptive claims, freezing the assets of the defendants, and appointing a receiver to manage the company.
This is not American Tax Relief's first brush with the law. Federal agents in April executed a criminal search warrant at the company's operation in Beverly Hills, California. Authorities seized a Ferrari and money from bank accounts, and filed liens on two residences, one of which was a home worth $3.4 million. FTC exhibits show that, at that time, one of the company owners was leasing a Rolls-Royce, a Bentley, two Porsches, and a Mercedes.
The FTC is actively seeking restitution for victims, urging them to call 877-FTC-HELP.