Ethics
Credit Counselor Audits And The IRS Focus
In the past few years a lot of folks have complained about so-called credit counselors who don?t get them out of debt and charge them a lot of money. They pay a fee to get counseling and receive nothing in return.
Well, it turns out one reason these companies increased exponentially is because they were given tax-exempt status for claiming to be credit counselors.
The IRS commissioner is focusing on dishonest credit or debt counselors, 41 debt counselors have lost their tax-exempt status of the 61 they recently audited. These organizations exist mainly to prey on debt heavy individuals by charging them excessive fees for little or no service.
Everson, the IRS commissioner, said that these 41 agencies collected 40% of a billion dollar industry, most offering little or no debt service. The 61 agencies audited by the IRS represent half of the revenue generated by the credit counseling industry. An additional 740 agencies will be notified shortly.
Groups who want to make a quick profit would cold call people in debt, read a script and convince them to pay high fees. A red flag when you are contacted is:
1. Does it sound like a script is being read from a book.
2. Are fees high? That is, are initial fees more than $50, and monthly fees more than $25.
3. Are they offering a quick debt management plan over the phone?
Getting into debt is easy, getting out of debt is difficult, but the best person to get a debt heavy person out of debt is that person.
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Lois Center-Shabazz is the founder of the personal finance website, Msfinancialsavvy.com and the author of the award-winning book, Let's Get Financial Savvy! http://www.msfinancialsavvy.com
Lois Center-Shabazz
Tags: credit counselors, irs commissioner, irs audits, tax exempt statusSimilar articles
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