IRS to Crack Down on Some Credit Counselors

WASHINGTON – Internal Revenue Service Commissioner Mark Everson told the House Ways and Means Committee’s Subcommittee on Oversight that the agency is poised to start cracking down on credit counseling firms run by individuals who “seem motivated by profit more than charity.” “We have designed a comprehensive multi-faceted strategy to address alleged abuses, and commissioned a team to oversee the strategic management of our compliance efforts,” Everson wrote in prepared testimony. “Members of this coordinating team include individuals from all functions within the exempt organizations office at the Service, as well as lawyers from the Office of the Chief Counsel.” Everson told legislators that the IRS has 850 non-profit credit counseling agencies on its rolls and that the number has been growing in recent years, often without any real check on their authenticity. “Among the more recent applicants, we are finding credit counseling organizations that vary from the model approved in the earlier rulings and court cases,” Everson wrote. “We are seeing organizations whose principal activity is selling and administering debt management plans. Often the board of directors is not representative of the community and may be related by family or business ties to the for-profit entities that service and market the debt management plans,” he added. Everson also noted that increasing numbers of organizations are supported by fees from customers and from credit card companies and the fees are much higher than those in the rulings or court cases. “It does not appear that significant counseling or education is being provided,” he added.