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DoJ Shuts Down US Tax Preparation Firms

by Mike Godfrey,, Washington

23 October 2013

The US Department of Justice (DoJ) has shut down a number of tax return preparation firms, taking the number of injunctions it has obtained to stop tax fraud promoters and return preparers to more than 500 in the past decade.

In the past week, a federal court in Ohio has permanently barred two companies from preparing federal tax returns, promoting the availability of theft loss deductions, or engaging in any other tax-related activities in the future. The businesses were condemned for preying on elderly investors, misleading them that they could deduct their financial losses on their federal income tax returns in an advantaged way, and receive large refunds.

In Mississippi, the DoJ has requested that a federal district court apply similar penalties to an individual working under a company name. It alleges that she prepared returns that overstated income, including by reporting fictitious household income, in order to increase the amount of her customers' claim to the Earned Income Tax Credit. It is further claimed that she falsely claimed a refundable education credit on behalf of her clients. The loss to the Government over the period between 2009 and 2012 could be as much as USD7m.

Finally, a tax preparation business with 12 offices throughout the US is now facing additional charges after a federal grand jury in California returned a second superseding indictment. The co-conspirators are said to have prepared false individual income tax returns which did not disclose their clients' foreign financial accounts or report the income earned. They are also accused of incorporating offshore companies in Belize and elsewhere, and of helping clients to open secret bank accounts at the Luxembourg locations of two Israeli banks. If convicted, the defendants face a maximum of five years in prison and a fine of USD250,000 for each count brought against them.

TAGS: court | compliance | tax | business | tax compliance | tax avoidance | Belize | Israel | Luxembourg | offshore | education | tax planning | United States | revenue statistics | penalties | individual income tax | Tax

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