Florida and North Carolina Tax Return Preparers Subject of Department of Justice Complaint
The Earned Income Tax Credit is another hot button issue triggering a number of audits by the IRS. According to three separate suits filed by the Department of Justice, the owners and operators of the tax return preparation businesses Q A Tax Service Inc., Unik Tax Refund, D&M Tax Solutions, LED Tax Services, and UJM Tax Services prepare false tax returns. The government seeks court orders prohibiting the owners and operators of these businesses from preparing tax returns for others and from owning and operating a tax return preparation business. The suits also seek an order requiring the owners and operators to disgorge the gross receipts received for the preparation of federal tax returns. The complaints allege that each of the businesses use a model previously used by the tax return preparation business formerly known as LBS Tax Services. Since 2014, the U.S. has successfully obtained court orders requiring almost a dozen former LBS franchisees and managers to disgorge millions of dollars in fees and prohibiting these individuals from owning and operating a tax return preparation business and from preparing tax returns for others. Specifically, the government alleges that the defendants fraudulently increased their customers’ refunds and profit through exorbitant and often undisclosed fees at the expense of their customers and the U.S. Treasury by: falsely claiming the Earned Income Tax Credit, fabricating businesses and related business income and expenses, fabricating deductions, particularly for unreimbursed employee business expenses, and charging deceptive and/or unconscionable fees. Return preparer fraud was one of the IRS’s Dirty Dozen Tax Scams for 2016, and taxpayers seeking a return preparer should remain vigilant against fraud. The IRS website includes a number of tips for choosing a tax preparer, as well as a free directory of federal tax preparers.