HOUSTON—Despite a lawsuit from the Texas Attorney General, consumer complaints continue to pour in against TaxMasters, the popular Houston-based tax relief firm.
The ads are everywhere.
TaxMasters spends an estimated $14 million a year on advertising, making Uncle Sam sound scary and touting its expertise in tax relief.
“The IRS can and will garnish your wages … we’ll get between you and the IRS,” one commercial proclaims.
That’s exactly what Zain Naboulsi needed. After a business venture went bad, the computer programmer owed the government $50,000. But Naboulsi said TaxMasters assured him everything would be all right.
“No problem, we’ll do an offer of compromise, we’ll get to work on this, we’ll take care of you,” Naboulsi said of his initial phone conversation.
TaxMasters even allowed him pay its $4,000 fee over four payments. Months went by without a word, so he thought everything was OK.
That is, until a notice came in the mail.
“Wait a minute, what’s going on here?” he said.
It was a garnishment letter from the IRS. So he called TaxMasters right away, and got a surprise.
“’Oh, we don’t get to work on your case until you’re paid in full,” Naboulsi said he was told.
“What? This is the first I heard of this,” he said.
Soon after that, Uncle Sam stripped his paycheck down to 600 bucks a month.
I-Team: “How rough did things get?”
Naboulsi: “It was pretty rough.”
At this point in our interview, Naboulsi became emotional and stopped.
“You know, it was, uh, give me a minute,” he said, wiping his eyes.
After hundreds of stories like his, the state of Texas sued the company in May 2011. As part of that legal action, TaxMasters agreed to clearly disclose all terms, conditions and restrictions to consumers. The company also agreed to stop making specific tax relief promises in initial phone consultations.
But even after the heat from the state, the I-Team discovered consumers continued to file formal complaints about the very same things TaxMasters promised not to do.
”They offered pennies on the dollar to me—50,75 percent in the taxes that I owe,” said Shayne Highfield.
Considering he owed $22,000, Highfield signed right up.
“I was just like wow, you know, they’re really going to help me,” he said.
But he said after paying more than $3,000 in fees to TaxMasters, the company sent him a letter with three settlement options, none of which he qualified.
“It was all a fabrication, it was all just a big lie,” Highfield said.
But the pitch sure sounded good. That’s likely because TaxMasters uses salesmen, not accountants on the front lines. A job ad the I-Team obtained said the company looks for “talented closers” and promises the “leads come to you ... ready to bite.”
“They should have some kind of standards,” said Certified Public Accountant Ted Feher, who sits on the ethics committee for the Houston CPA Society.
”They do make it sound like it’s very easy and it’s a slam dunk,” said Feher.
But he said the reality is very few Offer in Compromise cases work out in the consumer’s favor.
“There’s not an awful lot that they can really get you,” he said.
That over-promising has landed others in trouble, such as JK Harris and Company.
Nineteen states sued the tax-relief firm and won $6.8 million in consumer refunds.
As for TaxMasters, the I-Team tracked down its founder and president Patrick Cox.
I-Team: “Why do so many consumer complaints continue to pour in against TaxMasters?”
Cox: “You know I told you we’d be glad to talk to you when we can, but I can’t right now.”
Cox claimed he can’t because of that state lawsuit against him. But what about all those complaints that poured in after TaxMasters agreed to change its ways?
I-Team: “Are you being fair to consumers?”
Cox: “Yes, we are.”
I-Team: “Then why have so many complaints come in?”
Cox: “You’d have to ask the consumer about that.”
Ultimately, TaxMasters denied that many consumer complaints were about issues or problems previously cited by the Attorney General.
We asked for comment about the claims of former customers Zain Naboulsi and Shayne Highfield. TaxMasters said it could do so but only if both men signed a release form. However, Naboulsi and Highfield refused to do so, saying that, given past experience, they no longer trusted the firm.
Finally, as of press time, TaxMasters website does disclose that it doesn’t have to work on a customer’s account until the firm has received its entire fee. It also states that that work may not necessarily be done by a “tax expert” or “professional.”
Thanks to Dan Parsons and the Houston Better Business Bureau for their help in researching this story.