Justice Department Continues Enforcement Actions Across the Country to Stop and Punish Dishonest Tax Return Preparers
With the tax season in full swing, the Justice Department warns taxpayers to avoid unscrupulous tax return preparers who seek to harm taxpayers, and also reminds taxpayers that they could still be responsible for any unpaid taxes, penalties, and interest, resulting from errors made on their returns.
In the last year, the Justice Department’s Tax Division, in collaboration with U.S. Attorney’s Offices, filed dozens of civil and criminal actions throughout the United States seeking court orders to shut down tax return preparers who allegedly prepared false tax returns and to punish dishonest tax return preparers for their fraudulent activities.
“The Tax Division will continue to protect the American public by holding fraudulent tax return preparers accountable,” said Principal Deputy Assistant Attorney General Richard E. Zuckerman. “The Justice Department is committed to working with the IRS to stamp out this fraud.”
In the past decade, the Tax Division has obtained convictions and injunctions against hundreds of unscrupulous return preparers. Information about these cases is available on the Justice Department’s website. An alphabetical listing of persons enjoined from preparing returns can be found on this page. If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details(link sends e-mail).
Examples of some of the criminal convictions obtained by the Tax Division in the last year include:
- In January 2018, a Kansas City, Kansas tax return preparer was sentenced to 96 months in prison for preparing income tax returns for clients that reported false business income and losses, medical and dental expense deductions, job-related expenses, charitable donations, and other fraudulent items.
- In August 2017, a Gulfport, Mississippi tax return preparer was sentenced to 48 months in prison for obstructing the internal revenue laws and aiding in the preparation of a false tax return. She ran a home-based tax return preparation business where she instructed several of her clients, who owed income taxes to the IRS, to write payment checks directly to her rather than to the IRS. She kept these funds for herself and used the money to gamble at local casinos. Typically, she provided copies of accurate returns to her clients, but then did not file any return with the IRS.
- In April 2017, a San Diego, California tax return preparer was sentenced to 37 months in prison for preparing fraudulent tax returns. She prepared fraudulent returns for her clients that reported fake business losses, charitable contributions, and medical, dental, education and unreimbursed employee expenses. In total, her conduct caused a tax loss of more than $1.2 million.
Examples of some of the civil injunctions obtained by the Tax Division in the last year include:
- In October 2017, a federal court in Houston, Texas permanently enjoined a woman and a corporation from preparing federal tax returns for others. According to the government’s complaint, the woman, through her business, routinely prepared federal tax returns for customers that reported false expense deductions, as well as false claims for education tax credits and improper dependents.
- In September 2017, a federal court in Detroit, Michigan permanently barred a tax return preparation company and its owner from operating a tax return preparation business and preparing federal tax returns for others. The owner prepared tax returns with false income and expenses, bogus dependents, improper filing statuses, and false itemized deductions, all with the purpose of fraudulently maximizing customer refunds and refundable credits, according to the government’s complaint.
- In July 2017, a federal court in New York permanently enjoined the owners and their multiple businesses from preparing federal tax returns for others. The owners prepared federal tax returns for customers that contained false or erroneous claims for education tax credits, fuel tax credits, and the Earned Income Tax Credit, according to the government’s complaint.
When return preparers violate these civil injunction orders, the Tax Division is committed to holding them responsible:
- In December 2017, a Louisiana woman, who continued to file returns even after a federal judge permanently enjoined her from preparing returns, was sentenced to seven years in prison for filing fraudulent income tax returns. She filed returns that included fake business losses, deductions, and tax credits in order to fraudulently increase her clients’ refunds.
- In November 2017, a federal court in Florida found a woman in contempt of the court’s injunction barring her from preparing tax returns for others. The court ordered her to pay the government $11,572.57 as a sanction for costs incurred investigating her contempt.
- In May 2017, a federal court in Maryland found that a man had violated the court’s previous permanent injunction barring him from preparing tax returns for others and from operating a tax preparation business. The court ordered that he comply with the previously entered injunction and that he pay the United States $29,914.38 for its costs incurred investigating whether he had complied with the injunction.
Tax return preparer fraud is one of the IRS’s Dirty Dozen Tax Scams for 2018 and taxpayers seeking a return preparer should remain vigilant. The IRS has some information on its website about selecting a return preparer and has launched a free directory of federal tax preparers. Also, the IRS has a list of steps on its website that you can take now in anticipation of filing your 2017 federal income tax return and ten tips for choosing a tax preparer.