Seventy-one-year-old Wendell Sexton got a letter last October at his southwest Houston home from a Dallas-based accountant with a tantalizing hook.
"It appears you have overlooked, and are about to lose $933.50 from one or more public agencies with the state of Texas," wrote CPA Karyn A. Ward. "I help individuals, such as you, apply for and receive monies that are about to be lost.I work on a contingency basis -- one-half the total amount recovered."
If that wasn't enough of a lure, Ward then pointed out that unless Sexton responded immediately, a fast-approaching deadline meant that some or all of his money would be lost forever. Because Sexton and his wife were still paying for their house, the Sextons' mortgage company handled his property tax payments. He was unaware that he could have been filing for an over-65 tax exemption for the last six years that should have yielded them a $476.50 annual refund. The former employment counselor did not take the bait.
Alerted by Ward's letter and several follow-ups, Sexton refused to sign a release to allow her to collect the money. Instead, he went hunting for the source of the cash. He eventually figured out the problem and filed on his own for the previous and current year's exemptions. Since the state does not allow claims past one year, he had lost five years of refunds worth $2,282, a significant amount of cash for retirees on a fixed income.
Sexton figures there are two parties at fault for his and other elderly taxpayers' loss of funds that were rightfully theirs. The first is unscrupulous lawyers and accountants, called factors, who are profiteering off uninformed homeowners. The second is public taxing entities that fail to inform the homeowners of their rights with the same aggressiveness that the factors have shown in going after their money.
Factoring is a common bane of tax appraisal districts, and the solicitors usually target homeowners who have failed to file for a homestead exemption. Ward's use of age data to solicit elderly homeowners is a more refined tactic, and it strikes Harris County Tax Assessor-Collector Paul Bettencourt as particularly noxious.
"I don't consider making a buck off of somebody's plight, that they've been overpaying taxes for six years, to be the best way to make a living," says Bettencourt. "But it's legal, and it's a free country."
"It's so bad I refer to it as a scam," concurs HCAD chief appraiser Jim Robinson. "It's not illegal, but it takes advantage of people's lack of knowledge."
Ward has been in business in Harris County only since last year, but Bettencourt says she's making a name for herself in local tax circles because of several innovative strategies. Her firm correlates age data from driver's licenses and voting records with appraisal district rolls to pinpoint over-65 homeowners who have not filed for their exemption. Ward then runs a computer calculation that estimates the total amount of a refund if somebody would apply for it, and sends out a first round of letters with an estimated two years of refunds. Of course, she does not disclose where the refunds can be found.
If the fish doesn't bite on the first worm, Ward fattens the bait with a second letter calculating three years of refunds. "What she doesn't tell you," says Bettencourt, "is the total includes the next year's tax refund, not even the ones she could get refunds for this year. Then she gives you a deadline that if you don't call within a week you're going to blow it." Homeowners who sign the letters are legally liable to Ward for half the refunds, even the one for the next year.
Ward does something else that bothers the tax assessor: She gets people to change the address where their tax bills are sent, so that the bills go to her Dallas office instead of their homes. "And that's going to cause massive complications in the future."
Ward rejects the idea that she's up to anything other than running a respectable business operation. She says her service is mutually beneficial to her clients and herself. While she declines to discuss how she locates elderly people who have not applied for age exemptions, she says they constitute only a small percentage of her clientele.
"The people that I help that are over 65 are a very small minority, somewhere between 10 and 15 percent," says the accountant. "It's clearly not a target audience."
While Wendell Sexton may not be one of her fans, Ward claims that many of the people she helps to get refunds are more than happy to fork over half.
"From the people I do help I have a lot of thank-you letters, people that say, 'You know what? I never would have known about this.' And half of this amount is better than zero."
In fact, Ward says she's providing information that helps many other people, like Sexton, solve the tax riddle on their own. "There's some that say, 'I could do that for free.' I can't tell you how many people take the letter and go figure it out. And that's fine."
Once she files the exemption for them, says Ward, the future savings are the homeowners' for the rest of their lives. "Keep in mind that they will get a reduced tax amount for every year going forward. So what appears to be 50 percent, well, when you factor that over five years, it's a much smaller amount."
Ward figures that if her business didn't exist, her clients "would continue to pay, year after year," she says. "And if they are not alerted by the taxing jurisdictions or some other method, they'll just continue to pay."
That's a challenge that tax assessor Bettencourt and chief appraiser Robinson are willing to take her up on. Both would like to beat the factors to the punch by developing a method of informing homeowners when they turn 65 of the refunds that are theirs for the asking.
Harris County voter registration data contains birth dates, so Bettencourt says, "What we're going to start doing here is comparing our own databases, because obviously what Miss Ward has is an age file." By cross-checking the county's own databases, he wants to see if they can help people such as the elderly in low-income, minority communities. Bettencourt says the problem is "epidemic" there.
Robinson says he's also open to new approaches.
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"I'd be willing to look at this, and talk to Paul about it. I would not be at all averse to doing it. [The factors] need to be shut down, 'cause it's just not fair. It's really taking advantage of people's lack of knowledge."
Wendell Sexton figures it's about time tax authorities made an extra effort to reach people in his predicament and inform them of their rights.
"They need to do something, because there are a lot of people being taken," says the man who beat the factor but still lost five years of tax rebates. "Some people are too old, and not everybody's intelligent enough to go searching when they get these letters."
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