On the heels of the IRS’s plan to begin regulating tax preparers, the Justice Department announced that it has filed six lawsuits this week to stop preparers charged with generating fraudulent income tax returns.
The cases included five civil injunction lawsuits in Detroit, Cincinnati and Chicago filed against several individuals and their tax preparation services. However, the trend didn’t start this week. In December, the government filed a civil injunction suit against 12 individuals and entities in Providence, R.I.
The defendants allegedly engaged in a variety of schemes involving false deduction and credit claims, according to the Justice Department. For example, court filings in Rhode Island against Michael Brier, who operated through Refunds Now Inc. and Refunds Now Tax Service Inc., allege that he prepared, or directed the preparation of, over 24,000 customer tax returns containing fabricated charitable contributions and employee business expense deductions, inflated dependent exemptions, fraudulent Earned Income Tax Credit claims and false income and expense reporting relating to rental real estate.
Court papers filed in Chicago against Sidney Dove, of Sid’s Tax, allege that Dove tells customers that they are entitled to a charitable contribution deduction equal to 10 percent of their wages, regardless of whether they can substantiate their claim.
Court papers filed in Chicago against Natalie Bradford and Kristine Burkland-Valdez, of K & N Tax Pros Inc., allege that they prepared and directed the preparation of over 23,800 customer tax returns containing fabricated or falsified deductions such as employee business expenses, mileage, cash contributions, rental losses and medical expenses.
“The too-good-to-be-true results some return preparers tout are just that,” said Assistant Attorney General John A. DiCicco in a statement. “The IRS and Justice Department are working together closely to ensure that unscrupulous return preparers are shut down and their customers pay their correct federal tax liabilities. 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.”