The IRS has taken a stand and cracked down on supposed "non profit" credit counseling agencies. Beginning in 2004, the IRS has audited 63 different credit counseling agencies. This number represents more than 50 percent of the revenue generated in the industry. Forty-one of the audits have been completed with 100% ending with revocation, proposed revocation or other termination of the credit counseling agency's tax-exempt status.
“Over a period of years, tax-exempt credit counseling became a big business dominated by bad actors,” said IRS Commissioner Mark W. Everson. “Our examinations substantiated that these organizations have not been operating for the public good and don’t deserve tax-exempt status. They have poisoned an entire sector of the charitable community.”
The IRS audits found that the credit counseling agencies offered little or no credit counseling or education with the primary motivation being profit.
Since the "non-profit" status gives the impression to many seeking credit counseling (which is now mandatory under the new Bankruptcy Law) that the credit counseling service is being run for the benefit of those seeking help, the audit findings are disturbing. The IRS is sending inquiries to all the remaining non profit credit counseling agencies with more possible audits to follow.
Entire Press Release
IRS Cracks Down On Credit Counseling Agencies
