Chapter 11 bankruptcy has been filed by a prominent financial advice firm.
Tax Masters filed Chapter 11 bankruptcy papers after suffering loses up to $10 million. The documents filed at the federal court house show the company has less than $50,000 in assets, but still owes money to as many as 5,000 people.
The bankruptcy isn’t the only legal mess that Tax Masters have found themselves involved in. The company is due to appear in a Texas court on charges of deceptive practices. Tax Masters notified the Securities Exchange Commission last Friday of its intent to file for bankruptcy. The filing stated that Tax Masters owes between $1 million and $10million to between 1,000 and 5,000 people.
The trouble doesn’t stop there.
ABC News reports a landlord alleges that Tax Masters has not paid their January rent for their office in Houston, where they are headquartered. A construction company doing work on the office is also suing saying that have not received payment either.
This is a sharp contrast to the $45.7 million in revenue that Tax Masters reported in 2010.
Tax Masters lured clients in by saying they could help solve their tax issues. Some customers paid as much as $3,000 for financial advice by Tax Masters, only to hear nothing back from the company. Others paid fees in installments only to realize that Tax Masters did not start working on a given case until payment was paid in full. This caused many to miss key IRS deadlines.
The firm is also under fire after claiming a free consultation. This consultation was not with a qualified professional, but rather with a salesman.
Tax Master has already settled a Minnesota case in which the Minnesota Attorney General claimed Tax Masters was “taking advantage” of consumers. The case was settled when the company agreed to pay $500,000 into a fund to compensate customers who claimed they had been cheated. The company never admitted wrongdoing, however.
Tax Masters gained national attention through the use of their commercials. As recent as last week, Tax Masters commercials were being broadcast nationwide. Saturday Night Live even parodied the commercial which features Jason Sudeikes playing founder Patrick Cox. Cox appeared in the commercials for Tax Masters.