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We May No Longer Get Paid? HuH?

Sep 17th 2010
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Enrolled Agents are enrolled to practice before the Internal Revenue Service under 31 Code of Federal Regulations, Part 10 (Treausry Department Circular No. 230).

What is practice? It sure as heck isn't preparing tax returns.

It is representing taxpayers who are in dispute with the IRS.

Many savvy CPAs also make a living representing taxpayers who are in dispute with the IRS.

What is representation?

1) It's preventing assessments - as in representing clients at audits and appeals.

2) It is reducing or eliminating assessments by either getting the original assessment reconsidered in some fashion - or arranging for offers in compromise or payment deferral programs.

Most of the clients needing representation are desperate when they come to us. They will do anything we ask and pay our fees - while they miserable and afraid. Anyone with any experience knows that once the problem is resolved, one way or another, it is difficult to get paid.

After all, if they end up with a balance due and feel they owe too much, the client is angry and resentful and sees no reason to pay.

If they end up with a brilliantly successful resolution, even one beyond their wildest dreams, they are happy, euphoric, even. But no longer fearful or concerned - and there is no rush to pay us, since there is no longer any urgency.

Naturally, some people are either sufficiently grateful or ethical to pay us diligently, even if it takes them years. They are just good folks and honor their word, and their obligations. Period. They exist. And I'm proud to have known many such loyal and wonderful folks.

Why do I tell you all this, since you already know it?

Well, earlier this week, a friend sent me a copy of a letter from an enterprising fellow, Mark Guimond, at telling us that those of doing helping clients reduce tax debt are covered by the FINAL RULE of the FTC "Prohibiting Debt Relief Companies From Collecting Advance Fees". Basically, this rules prevents companies who are scamming consumers about helping them reduce their debt.

This fellow's letter said the FTC's FINAL RULE included the following wording:

"The definition of "debt relief service" covers all types of unsecured debt. If the debts you settle are unsecured - for example, medical debts or tax debts owed to the government - you're covered by the new Rule."

Well, there it is! He turns out to be correct. FTC issued a new brochure that we will all have to read very carefully. Although it is written for telemarketers, those of us engaged in any kind of advertising, including having a website, may fall under those rules.

three key principles of the new Rule:

None of us have problems with rule two or three. It's the first rule that's a huge concern.

  • It’s illegal to charge upfront fees . You can’t collect any fees from a customer before you have settled or otherwise resolved the consumer’s debts. If you renegotiate a customer’s debts one after the other, you can collect a fee for each debt you’ve renegotiated, but you can’t front-load payments. You can require customers to set aside money in a dedicated account for your fees and for payments to creditors and debt collectors, but the new Rule places restrictions on those accounts to make sure customers are protected.

    You have to disclose certain information before signing people up for your services. 

     Before people sign up, you must disclose fundamental aspects of your services, including how long it will take for them to get results, how much it will cost, the negative consequences that could result from using debt relief services, and key information about dedicated accounts, if you use them. You can't misrepresent your services. The new Rule prohibits you from making false or unsubstantiated claims about your services.

Must we remove all mention of such services from our websites? Would that suffice?  

Do we have to remove collections representation from our business cards and brochures?

Can we collect as we settle each year separately?

Are we now meant to drag out each client's case to settle only one year at a time so we can get paid before we help them for the second year?

I understand the government's concern about the many rip-off artists who spend millions of dollars each year on national television and radio advertisements. After spending all that money on advertising, they certainly do have to recoup a lot in billable fees.

But I'd hate to see taxpayers not get the help they need from solid, capable tax representatives.

What are you going to do about this?

What are NAEA, NATP, AICPA, AccountingWeb and other tax organizations going to do to protect our rights to help our clients?

Spread the word on this one, my friends!

Respectfully submitted,

Eva Rosenberg, EA


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