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Mocked and broke: Houston-based TaxMasters files for bankruptcy

Irony’s foot has firmly planted itself in TaxMasters’ assets: The widely satirized Houston company, which the Texas Attorney General says hoodwinked customers struggling with IRS debts, filed for bankruptcy this week.

The company, which promised, “we solve your tax problems” listed assets of up to $50,000 and estimated liabilities between $1,000,001 and $10 million, according to a bankruptcy filing.

Saturday Night Live and a number of YouTube videos have parodied the company’s oddly stiff commercials:


In May 2010, Texas Attorney General Greg Abbott sued the company and its CEO, Patrick Cox, for violations of the Texas Deceptive Trade Practices Act and the Texas Debt Collection Act. Minnesota’s AG also sued. 

The Texas enforcement action accused TaxMasters of routinely misleading customers about their 1040 service contract terms, failing to disclose its no-refunds policy and falsely claiming the firm would immediately begin work on a case. 

Instead, TaxMasters did not actually start work on a case until customers paid in full for services, even if that meant taxpayers missed IRS deadlines, according to the attorney general. In fact, customers complained that TaxMaster’s crack team of “former IRS agents” failed to:

Contact and consult the IRS on the client’s behalf; 

Appear with clients at IRS audits or hearings;

Postpone or stop wage or bank garnishments;

Stop levies or liens against a client’s property. 

TaxMasters’ advertisements also promised a  “free consultation” with a “tax consultant.” Court documents filed by the state said callers were not connected to an employee qualified to give tax advice, but rather with a TaxMasters salesperson who recommended a “solution” for up to $9,000 or more.
The company listed owing between 1,000 and 5,000 creditors. Watchdog is taking bets on whether one of them is the IRS.

-- Darren Barbee


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