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DOJ Files Suit Against Fraudulent Tax Return Preparation Services

By Admin on January 12, 2010 | Last updated on March 21, 2019

The Department of Justice recently announced five new civil cases it is pursuing against tax preparers in Detroit, Cincinnati and Chicago. These suits join the twelve filed against individuals and businesses in Rhode Island, in December. The suits seek to stop the named defendants from preparing or in any way advising on tax returns due to allegations of fraudulent claims used to lower the tax liabilities of their customers.

Most of these fraudulent providers of tax preparation services have been quite prolific, providing tax returns for as many as 24,000 customers a piece. Perhaps they can turn out so many returns because they are not overly careful about the deductions they list for their customers. For example, court filings in Rhode Island against tax prep services Refunds Now Inc. and Refunds Now Tax Service Inc.,show the filed returns containing made up charitable contributions, inflated employee business expense deductions, and inflated dependent exemptions, among other tricks. Filings against preparers doing business as K & N Tax Pros Inc., in Chicago allege that defendants prepared or oversaw preparation of over 23,000 customer tax returns containing fabricated or falsified deductions for employee business expenses, mileage, cash contributions, rental losses and medical expenses.

One good rule of thumb when discussing tax returns with a preparation service is, as usual, "...too-good-to-be-true results ... are just that," said John A. DiCicco, Acting Assistant Attorney General for the Justice Department’s Tax Division. Some issues most of the fraudulent tax prep services had in common were: fabricated or inflated charitable deductions, inflated business expense deductions, inflated or false real estate deductions.

There is one very good reason to steer clear if you think your tax preparer might be stretching the truth a bit. If your preparer gets caught for fraudulent claims, you will not only have lost the money spent to prepare the tax returns, but after the fraud is detected, customers are still responsible for paying all taxes, interest and penalties. To be clear, John DiCicco says, "Taxpayers using these types of preparers, at best, are stuck with paying additional taxes and interest, and at worst, depending on culpability, may be subject to penalties and possibly even criminal prosecution."

Information on Dept. of Justice cases against more than 435 tax-scheme promoters and tax preparers is available on the Justice Department Web site, at http://www.justice.gov/tax/taxpress2010.htm.

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