At the end of 2013, we summarized several actions taken by the Justice Department against tax return preparers at the end of the year. Indeed, on Tuesday, the Justice Department issued a press release touting their enforcement efforts in this area, noting that it obtained over 60 permanent injunctions against tax return preparers in 2013 alone. Assistant Attorney General Kathryn Keneally for the Tax Division stated that “[d]uring the time when honest taxpayers are preparing their returns, the Tax Division will work tirelessly to challenge those who would abuse the tax laws and take advantage of their customers,” and therefore the DOJ and IRS “are working hard to shut down these abusive schemes and scams and punish the perpetrators where appropriate.” Since 2014 began, a number of significant actions against tax preparers have occurred, indicating that the trend established at the end of 2013 continues into 2014.
Two tax return preparers in Georgia and one in North Carolina have recently been permanently barred from preparing tax returns for others:
- Lakesia Michelle Mills, of Willis Tax Service, was alleged in a complaint to have prepared at least 455 tax returns that claimed $3.6 million in overstated refunds based primarily upon false documentation (settlement statements and proof of insurance) to support the First-Time Homebuyer Credit. In an injunction, Ms. Mills was permanently barred from the tax return preparation business, must provide the government a list of persons she prepared returns for as of January 1, 2009, notify her customers of the injunction, and publish the injunction in the local newspaper. [U.S. v. Lakesia Michelle Mills, No. 13-101, Southern District of Georgia].
- Joan Leger, of The 1804 Tax Group Inc. (formerly J & Company) now doing business as Liberty Tax Service, was alleged in a complaint to have fabricated income, deductions and credits in order to claim the earned income tax credit, among others, for her customers. Ms. Lever also created false losses and expenses for non-existent business or businesses not owned by the taxpayer. She also filed returns without her tax preparer identification number or with someone else’s number. The nearly 6,000 returns she prepared resulted in an alleged loss to the government of over $2 million. In an injunction, Ms. Leger was permanently barred from the tax return preparation business, must provide the government a list of persons she prepared returns for as of December 1, 2012, notify her customers of the injunction, and publish the injunction in the local newspaper. [U.S. v. Leger, et al., No. 13-3153, Northern District of Georgia].
- Sharon D. Rhodes, of R&S Freedom Tax Services and Changing Faces Anointed Tax Services, was alleged to have prepared returns that claimed false charitable deductions and other credits. She also listed fictitious businesses and fabricated expenses and losses for them. For the over 600 returns she prepared, the government alleged a nearly $3 million loss. In an injunction, Ms. Rhodes was permanently barred from the tax return preparation business and must provide the government a list of persons she prepared returns for from the 2008 tax year to present. [U.S. v. Rhodes, No. 13-759, Eastern District of North Carolina].
In addition, within the last month, the DOJ initiated four new civil suits against tax preparers, seeking permanent injunctions:
- A complaint against Keisha Stewart and her business, Professional Tax Services, Inc., alleged that returns she prepared contained inflated or fictitious income in order to receive the earned income tax credit. She also claimed improper and false deductions and credits, head of household status, false dependents. For the 2,222 tax returns she prepared for tax years 2010, 2011, and 2012, the government estimated a $1.6 million loss. [U.S. v. Stewart, et al., No. 14-60219, Southern District of Florida].
- A complaint against Barbara L. Garrett alleged that she prepared returns that contained fake business deductions and other improper deductions, including for charitable contributions, child care expenses, property taxes, medical expenses, and education expenses. In one example, Ms. Garrett included a fake claim for childcare expenses falsely identifying herself as the childcare provider. She also lists others as having prepared returns that she prepared, and she encouraged one taxpayer to lie during the government investigation. For nearly all of the tax returns she prepared that were audited, the IRS determined a tax loss of $400,000. [U.S. v. Garrett, No. 14-859, Northern District of Illinois].
- Carmen J. Martinez, of CJM Bookkeeping and Taxes, LLC, has been alleged in a complaint to have prepared more than 7,800 tax returns since 2010. Ms. Martinez allegedly prepared returns with false deductions and credits by improperly claiming children as dependents when they were not U.S. citizens or U.S. residents. This activity allegedly resulted in a loss to the government of as much as $25 million. [U.S. v. Martinez, No. 14-165, District of Delaware].
- Rulon Sandoval and Andrea R. Acosta Hernandez, husband and wife owners of Latinos Office LLC, have been alleged in a complaint to have prepared false returns with false credits and deductions, including improperly claimed business expenses and incorrect filing status, as well as having submitted returns using false or incorrect tax return preparer identification numbers. Following an audit of only 47 of the 6,514 returns filed, the government estimated that its loss could be at least $1.3 million. [U.S. v. Sandoval, No. 14-cv-85, District of Utah].
Finally, a 33-count indictment was unsealed that charged Russell Burroughs, of Computer Services, a tax return preparation business, with allegedly preparing and filing 33 false tax returns between tax years 2008 to 2011. Mr. Burroughs caused to have included false business income, energy credits, American Opportunity credits, education credits, as well as a number of others. [U.S. v. Burroughs, No. 13-cr-317, Middle District of Alabama; press release here].