Tuesday, April 5, 2011

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Texas Attorney General's Office Resolves Legal Action Against South Carolina-Based Tax Consulting Firm

HOUSTON – Texas Attorney General Greg Abbott has resolved the State’s enforcement action against South Carolina-based income tax consulting firm JK Harris & Company. The judgment also applies to two related companies, JKH Financial Recovery Systems, LLC and Professional Fee Financing Associates. In April 2009, the State charged the defendants with materially misrepresenting their ability to help Texans resolve their unpaid federal income tax obligations.

Under the agreed final judgment and permanent injunction, the defendants must pay $800,000 in refunds to their Texas customers. The court-approved agreement also imposed significant injunctive relief and ordered the defendants to reimburse the State for investigative and court costs and attorneys’ fees.

Media links

View Video of News Conference
Final judgment and permanent injunction against JK Harris & Company
Attorney General's lawsuit against JK Harris & Company

“Under the court order, JK Harris and its related companies must reform the way it does business – and provide restitution to Texas taxpayers who were harmed by the defendants’ unlawful conduct,” Attorney General Abbott said. “Taxpayers from across the state complained to the Attorney General’s Office about the defendants’ misconduct. The agreement seeks to resolve past problems, reimburse Texans who paid for services that were not actually rendered, and prevent additional misconduct in the future.”

In addition to the agreement’s financial penalties, the court ordered the defendants to reform several of their business practices and to improve disclosures to their clients. For example, the defendants must clearly disclose, in writing, the fact that very few taxpayers qualify for the Internal Revenue Service’s Offer in Compromise (OIC) program. The defendants must also acknowledge that a taxpayer’s future earning potential and equity holdings factor into taxpayers’ eligibility for the OIC program – and thus decrease the likelihood that certain taxpayers will qualify for OIC treatment. JK Harris must also provide its clients written notice that the IRS is likely to continue collection efforts – including liens, levies and garnishment procedures – unless and until an OIC is approved.

The judgment stems from the State’s April 2009 legal action against the defendants for misrepresenting their ability to help delinquent taxpayers resolve their unpaid obligations to the IRS. According to the state’s enforcement action, JK Harris failed to provide promised services, overstated its ability to reduce taxpayers’ debts to the Internal Revenue Service, and accepted large, prepaid fees from customers whose tax liabilities the firm knew – or should have known – it could not actually reduce.

Former clients of JK Harris & Company, JKH Financial Recovery Systems, LLC, or Professional Fee Financing Associates who believe they were misled by the defendants’ conduct should contact the Attorney General’s Office at (800) 252-8011.