ST. PAUL, Minn. (Legal Newsline) - Minnesota Attorney General Lori Swanson on Thursday filed a lawsuit against TaxMasters, Inc., a so-called "tax relief" company based in Houston, for misrepresenting the tax help it provided to customers.
Swanson's lawsuit alleges the company got consumers to pay advance fees of $2,000 to $8,000 by misstating the help it would provide people with unpaid tax bills.
In some cases, the company claimed it could substantially reduce people's tax bills by up to 90 percent, but then delivered little or no help, Swanson says. In other cases, the company falsely promised that it could stop IRS collection efforts against consumers who hired it, she says.
"The company gets worried people to pay thousands of dollars by overstating the help it will provide with their tax bills," Swanson said in a statement.
Contrary to TaxMasters' promises, most citizens do not qualify for special IRS programs that reduce a person's tax debt, Swanson said.
The attorney general said while the IRS won't reduce most tax bills, it will work with individuals on repayment plans -- something people can do on their own without paying a tax relief company thousands of dollars.
This lawsuit is the latest in a series of nationwide enforcement efforts against such companies that allegedly charge consumers thousands of dollars in advance fees based on inflated promises.
In May, Texas Attorney General Greg Abbott filed his own lawsuit against TaxMasters, which is pending. In August, California Attorney General Jerry Brown filed a lawsuit against another large tax relief company, Roni Deutch. In October, the Federal Trade Commission filed a lawsuit against American Tax Relief, LLC.
Swanson said these so-called "tax relief" companies are just the latest type of firms to target citizens who are facing tough times in the bad economy.
The Minnesota lawsuit was filed in Hennepin County District Court and alleges that the company engaged in consumer fraud and deceptive trade practices. It seeks restitution for consumers, injunctive relief and civil penalties.
From Legal Newsline: Reach Jessica Karmasek by e-mail at jessica@legalnewsline.com.