Washington (Oct. 15, 2003) -- The Internal Revenue Service, the Federal Trade Commission and state regulators have issued an alert for those seeking assistance from tax-exempt credit counseling organizations. An increasing number of complaints to federal and state agencies indicate that some organizations are engaging in questionable activities.

Federal and state regulators are concerned that some credit counseling organizations using questionable practices may seek tax-exempt status in order to circumvent state and federal consumer protection laws. State and federal statutes regulating credit counseling agencies often do not apply to Section 501(c)(3) tax-exempt organizations. To address some of the concerns, the IRS has stepped up its enforcement efforts to ensure that existing Section 501(c)(3) organizations are complying with the applicable rules and regulations.

“Many of these groups provide a valuable service to consumers, but some use the tax code to skirt consumer-protection laws,” said IRS commissioner Mark W. Everson. “The IRS will work to protect the integrity of the tax law to ensure that tax-exempt organizations understand and comply with the rules. We will work with other federal agencies and state regulators to combat abuse in this area. It is not fair to taxpayers struggling with financial problems to be taken advantage of by credit counseling groups exploiting gaps in the law.”

“Consumers who are struggling financially need to be careful not to lose even more money to someone offering a quick and easy way to fix credit problems,” said Timothy J. Muris, chairman of the FTC. “We want all consumers seeking help to take some common sense precautions.”

-- WebCPA staff

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