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A Texas jury has sided with Attorney General Greg Abbot, ordering tax resolution firm TaxMasters to pay a grand total of $195 million in restitution and civil penalties. CEO Patrick Cox, known for appearing in the company's commercials, will be personally responsible for approximately $46 million of the TaxMasters verdict.
Abbot filed the lawsuit after receiving over 1,000 customer complaints. He accused the company of defrauding consumers and lying to them about TaxMasters' policies.
The majority of the TaxMasters verdict -- about $119 million -- will therefore be paid to consumers. TaxMasters advertised itself as having the ability to walk clients through IRS audits and disputes, as well as to help them recover seized property.
But evidence showed that the company did none of this. Instead of immediately contacting the IRS, Reuters reports TaxMasters refused to start work until the client had fully paid its fees. This practice caused clients to miss important IRS deadlines.
The company is also accused of misleading consumers about contract terms and not disclosing its no-refunds policy, explains CNN.
Though the TaxMasters verdict is a good start to rectifying the wrong done to the company's clients, a better start would have been avoiding TaxMasters altogether. Taxpayers are welcome to attempt their own negotiation with the IRS and do not need to use an intermediary. But if one is needed, it is best to go with an expert that is regulated and/or certified to practice before the IRS.