Not surprisingly, the seemingly simple task of doing state and federal taxes has left many people confused over the years and sometimes results in the emergence of certain tax issues (i.e., audits, seizures, etc.) When confronted with such problems, people sometimes turn to so-called professionals for tax assistance, including those who advertise on T.V. However, one Texas company that offers such tax assistance recently filed for bankruptcy, leaving many people out in the cold during the most busy tax time of the year.
According to news reports, TaxMasters -- the Houston-based company behind the ubiquitous television advertisements featuring CEO Patrick Cox -- filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court this past Sunday.
For those unfamiliar with Chapter 11 bankruptcy protection, it typically entails a debtor proposing a plan of reorganization outlining how it will keep its business alive and pay off creditors over the course of time. It should be noted, however, that Chapter 11 may also be used as a mechanism for liquidation.
In its bankruptcy petition, TaxMasters listed its assets as less than $50,000 and its total liabilities as anywhere from $1 million and $10 million. It also indicated that four units were being placed into bankruptcy, and that two of them were to be liquidated via Chapter 7 bankruptcy.
Interestingly, TaxMasters announced in February that it was scheduled to receive a large influx of equity financing -- $25 million -- courtesy of a micro-cap financier. However, a recent SEC filing indicates that this funding was "unexpectedly delayed" and a closing date remained indefinite.
Interestingly, TaxMasters -- which purports to offer assistance with audits, tax disputes and property seizures -- became somewhat infamous back in 2010 after Attorney General Greg Abbott filed a lawsuit alleging it had violated the Texas Deceptive Trade Practices Act.
Specifically, Abbott accused TaxMasters of the following:
- Informing clients that it would begin working on their cases immediately, when in reality it would wait until all fees had been paid (often meaning vital IRS deadlines were missed)
- Hiding policy terms
- Using unqualified salespeople to handle client calls
Stay tuned for future developments from our San Antonio bankruptcy blog ...
Regardless of your financial situation, contact an experienced legal professional to learn more about your rights and your options under Chapter 7 bankruptcy or Chapter 13 bankruptcy.
This post is for informational purposes only and is not to be construed as legal advice.
The Chicago Tribune, "TaxMasters files for bankruptcy" March 19, 2012
CBS News, "TaxMasters bankruptcy leaves clients in the lurch" March 20, 2012
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