Credit Counseling Agencies' Tax Exempt Status Revoked by IRS

After hundreds of consumer complaints about misleading and deceitful practices of credit counseling agencies, the Internal Revenue Service has revoked the tax exemption status of four agencies and is challenging the status of others as well.

60 credit counseling agencies have been targeted for audits.    The IRS is looking into allegations that some have become profit-making organizations by pressuring clients to participate in debt-management plans with fees that are then passed on to for-profit companies controlled by the firms' executives.

Of the four firms whose status has been revoked, one voluntarily gave up its exemption.    Debra J. Kawecki, an IRS senior attorney, told the convention of the Association of Independent Consumer Credit Counseling Agencies that revocation is "a painful and drastic remedy" and one that is rarely invoked.

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