FTC Telemarketing Sales Rule Advance-fee Ban Starts Today

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Today marks a new era for taxpayers struggling with IRS debt. According to independent Web site easyIRS.com the Federal Trade Commission (FTC) telemarketing sales rule took full effect this morning. Companies that promote IRS tax debt relief may no longer charge an advance fee before they settle or reduce a customer’s debt.

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If you pay them an upfront fee, which can be thousands of dollars, these companies claim they can reduce or even eliminate your tax debts

Today marks a new era for taxpayers struggling with IRS debt. According to independent Web site easyIRS.com the Federal Trade Commission (FTC) telemarketing sales rule took full effect this morning. Companies that promote IRS tax debt relief may no longer charge an advance fee before they settle or reduce a customer’s debt.

“If you pay them an upfront fee, which can be thousands of dollars, these companies claim they can reduce or even eliminate your tax debts,” the FTC said in a consumer alert. “The truth is that most taxpayers don’t qualify for the programs these fraudsters hawk, their companies don’t settle the tax debt, and in many cases don't even send the necessary paperwork to the IRS.”

The FTC will likely scrutinize early attempts to skirt the rules and may focus enforcement on companies that try to exploit loopholes, according to Michael Mallow and Michael Thurman in an article for Loeb & Loeb.

And the penalties for companies who circumvent the rules are steep.

“Anyone who violates the TSR is subject to civil penalties of up to $16,000 per violation. In addition, violators may be subject to nationwide injunctions that prohibit certain conduct, and may be required to pay redress to injured consumers,” according to an article appearing on Venable LLP’s Web site.

In spite of these warnings, not all tax debt relief firms will stop using deceptive sales practices. On his Forbes blog, The Tax Lawyer, Robert Wood recommended that taxpayers do their research and check references.

In its consumer alert, the FTC recommended using trusted, local tax professionals such as CPAs or enrolled agents, or dealing directly with the IRS.

“The IRS is just not that difficult to work with if you put it in their format. It saves you from multiple contacts and you get the outcome you expected,” said Alan Neely, CEO of tax software company, New River Innovation.

Neely is the co-founder of easyIRS.com, a new Web-based tax software service that helps people solve their own tax problems online – with expert support. “We’ve condensed the IRS procedure manual, with all the guidelines agents use, into a step-by-step software program. It removes all the uncertainty, anxiety and fear that come with solving IRS problems,” Neely said.

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Jayme White

Reed Humphrey