Roni Lynn Deutch

[Gary2]

However, let's monitor the real findings as this thing unfurls. A lien of $123,000 is only a small fraction of what she spends on nationwide advertising each year. That number must run into the millions. Allegations of bilking customers?

The lien was described as a federal tax lien, making it unrelated to any fines or other amounts that might be due to alleged illegal consumer practices.

We've read the accounts of taxpayers who paid a large deposit, never got their taxes resolved, and never got refunded. Sounds bad but if you are operating the representation company, know that 95% of these taxpayers never filed taxes for years, or never paid their taxes even when they had the money. If you're running the representation company, just how do you think you're going to get paid if you don't get money up front??

As for those who claim they never got any help? Shameful perhaps. But in order to help such a taxpayer, you need things like records, documentation, personal data, etc. Things that they never were willing to spend the time to get together in the first place. So they never follow through and then complain because the representation company won't give them their money back.

The issue is how are the fees presented in relationship to services provided. When I recently hired a lawyer (real estate issues, not taxes), I was asked for an upfront retainer, told how much I would be billed for the attorney's time and the paralegals' time, I'd get a detailed bill, and I'd get a refund of any unused amounts.

For the market Roni Deutch was trying to be in, it makes sense to say "We need a $5K retainer. It will cost approximately $1000 to analyze your situation. If, after the analysis, we don't think we can save you enough to justify the cost of continuing, we'll refund any part of the retainer that isn't used."

But what these places are allegedly doing is "We'll charge you $5K up front, which will cover all your costs through the OIC negotiation process (but not litigation). It's the same fee even if we discover after ten minutes worth of work that you don't have a case." But it's never presented this clearly, nor is it an acceptable business approach. It's like going to the auto shop to get the brake pads replaced, and having them charge you, up front, for replacing the discs or drums on the off chance you might actually need that - with no refund if you don't.

As for the late night weight loss stuff, first, what makes you think the FDA doesn't go after them? Second, there's a difference between saying the results aren't guaranteed and never delivering the product or service in the first place.

[erchess]

Gary2-how do you charge for representation?

I have a flat minimum fee per letter that is payable up front before I do any work. It covers up to five letter or telephone contacts with the taxing agency. In no case whatsoever will any of this fee be returned. Face to face contacts and preparation for them are extra as are contacts beyond the first five. Are you saying that you see a problem with this fee structure?

I do have a substantially reduced fee structure if I recognize at the outset that only one phone call at which I will point the agent to IRS information will be necessary to resolve this problem. I also pro rate my fees for very low income taxpayers who meet the guidelines to use a LITC.

[Snaggletooth]

Constructive Receipt

The lien was described as a federal tax lien, making it unrelated to any fines or other amounts that might be due to alleged illegal consumer practices.

Gary is exactly right on this one. The tax lien would have to be for the effects of unpaid taxes rather than amounts for civil or criminal penalties.

One way this could happen (particular in her situation) is the classification of client money as "Unearned Revenue" in the Liability section of the balance sheet. This normally is a situation where the company receives money from customers but has not yet delivered the services. Using this classification, an accrual basis taxpayer may avoid reporting revenue until such time as services are delivered, hence the money is then "earned."

The IRS targets Unearned Revenue for money from customers under the doctrine of "constructive receipt." They convert this to revenue in situations where:
(i) Refunds to customers are not forthcoming irrespective of whether services are delivered.
(ii) The likelihood of services ever being delivered is extremely remote.

The doctrine of "constructive receipt" could easily apply to Ms. Deutsch, according to complaints. This could very well be where the tax lien came from.

[taxea]

Nashville you are exactly right. However if we can rid the world of the companies that rip people off that would help those who do honest work for the client.

As for those clients, one must choose wisely and be sure that you get a sufficient retainer to at least cover what is necessary to start the work. You are so right that those who owe are usually not reliable and don't have the money to pay you, much less the IRS. I get a retainer that covers my fees and expenses up to filing the OIC. I put the client on an IA, complete and file any returns required, and once they are in the computer I get an updated accounting to use for the OIC.

If all goes well then I get the balance of what the fee would be to complete the job and negotiate an OIC with the IRS prior to filing the final OIC agreement. If client doesn't pay my final fee I don't file the OIC. At least they have all returns filed, are in compliance and up to date and have an IA in effect. If they want to pay less taxes it is their responsibility to continue the process with me.

[taxea]

Wonder what unsavory practices used by these firms actually provide ammunition for a prosecutor, should an Attorney General decide to go after them?? Seems like the previous post reduces this to a prosecution against "Ronco" products.

Stuff like a $6000. retainer and all they do is an IA for the client. The retainer is not refundable.
From what I understand this is not a situation where the client does not cooperate with any necessary docs.

Biggest problem is getting the people who were scammed to complain. Usually they are so embarrassed or ignorant of their rights that they do nothing.

[joanmcq]

You need to read the actual allegations against her, many by former employees who quit once they figured out how shady the operation was. The folks who answered the phones had no tax training, promised everyone they qualified for an OIC, and were trained to do nothing but hard sell to get the money.

Unreasonable timelines were set up to get documentation requested into the firm, and the cases were closed when not met.

Regardless of what was done or not done (often POAs were never even filed with the IRS), the clients were told all of the retainer was used up if they requested a refund.

I hope this is not how any of us do resolution work.