IRS Revokes Tax-Exempt Status of 4 Credit-Counseling Agencies

By Caroline E. Mayer, Washington Post

The Internal Revenue Service has revoked the tax-exempt status of four credit-counseling agencies and is challenging the status of another “two handfuls,” an agency official said yesterday.

The revocations are part of a federal and state crackdown on nonprofit credit-counseling agencies after hundreds of consumers complained about deceptive and fraudulent marketing practices, including high fees, high-pressure tactics and inadequate educational services.

The IRS has said it is concerned that many nonprofit entities are misusing their tax-exempt status. Targeting 60 credit-counseling firms for audits, the IRS is looking at whether some have become profit-making entities by pressuring consumers to enroll in debt-management plans with fees that are siphoned off to for-profit companies controlled by the firms’ executives.

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