Tax attorney Venar Ayar is leading a charge to protect consumers, heighten awareness, and hold tax resolution companies (aka fake tax lawyers) accountable for unauthorized practice of law.
Tax resolution scams have become a serious problem for consumers. Many tax resolution companies advertise that they have tax lawyers who will resolve tax debts for consumers, but instead these companies are collecting high fees and leaving consumers deeper in debt, with no tax resolution whatsoever.
"Most people who fall behind on their taxes feel like they aren't qualified to talk to the IRS on their own, and they don't know what their options are, and that makes them easy targets for unethical tax resolution companies," said Ayar, principal and founding tax attorney for Ayar Law in Southfield,. "These companies tell consumers they are tax lawyers, or have tax lawyers on staff, but they're basically salespeople, or 'fake tax lawyers,' who aren't regulated, authorized to practice tax law, or held to the same regulatory standards as actual tax attorneys and certified public accountants."
While it might be true that these companies employ some people who have a license to practice law, the firm cannot offer legal services to the public.
"In the context of their employment with tax relief firms, none of the staff members are attorneys, even if they actually hold a license to practice law," said Ayar. "They are no different from an attorney serving coffee at Starbucks. Sure, he might be a lawyer, but he isn't practicing law."
Ayar has seen an increasing number of consumers who've come to his firm after being ripped off by fake lawyers at local and national tax resolution firms. One of his most recent clients was featured in a recent consumer protection television story on Detroit's Local 4 News. This man paid over $5,000 and followed the advice of a person he was told was a tax lawyer. Now he's being sued by the IRS, and the "tax lawyer" at the company he hired to resolve his tax debt told him they couldn't actually represent him in a court of law.
Ayar said many of these tax resolution companies advertise themselves as tax attorneys, and lead consumers to believe they are entitled to practice law or provide legal advice, but in doing so, they are committing unauthorized practice of law (MCL 450.681); a misdemeanor crime punishable by six months in jail and a fine. The statute applies to every employee that takes part in making such representations, even if that person happens to be a licensed attorney.
"The problem," said Ayar, "is that these companies rely on the fact that they are not law firms, so that they can sidestep State Bar ethics rules that would apply to law firms, while at the same time advertising in a way that leads people to believe that they actually have an attorney representing them."
A big part of the problem is that these firms rely heavily on commissioned, non-attorney salespeople. In the legal world, that model would be highly unethical because lawyers are not allowed to split legal fees with non-lawyers, but because tax relief firms are not law firms, they can do whatever they want with their fees.
Several big tax resolution companies over the years have been shut down for false and deceptive advertising practices, but not before taking millions of dollars from consumers. The Federal Trade Commission reported that American Tax Relief of Beverly Hills cheated their customers out of $60 million worth of unfulfilled tax relief services in 2011, and attorney generals have shut down numerous national companies like Tax Masters, JK Harris, and Roni Deutch, the "Tax Lady," as well as countless smaller firms in recent years.
Unfortunately, many of these companies make so much money while they're in operation, every time one gets shut down, two more seem to take its place.
Ayar thinks the model needs to change. The only way to protect consumers from these predatory practices is to enforce the existing Unauthorized Practice of Law statutes. If these companies are not allowed to advertise as if they were attorneys, then people who are looking for tax lawyers will not hire them.
Ayar has one important piece of advice for consumers: if a company promises you a tax lawyer, ask if they are a law firm. If they are not a law firm, they are not authorized to make those claims, and the lawyer they promised you is a Fake Tax Lawyer.
"This has got to stop somewhere," said Ayar. "Too many people's lives are being ruined, and these companies will continue mislead consumers as long as they can get away with it."
Published: Tue, Jun 13, 2017
