WASHINGTON – The Justice Department announced today that the preliminary injunction ordered this week by a federal judge in Michigan is the 200th injunction the Department has obtained since it launched its initiative to stop the promotion of tax fraud schemes and the preparation of false or fraudulent tax returns. Under the leadership of Assistant Attorney General Eileen J. O’Connor, the Justice Department’s Tax Division began targeting these activities for coordinated civil and criminal enforcement in 2001.
An injunction is a civil court order prohibiting a party from a specific course of action. It is often the fastest way to stop the promotion of tax fraud, including the preparation of false returns. Criminal prosecution authorized by the Tax Division puts tax-fraud scheme promoters and preparers of false returns in jail and secures monetary restitution. The Tax Division often pursues both civil and criminal remedies in a case, sometimes simultaneously. Since 2001, it has been the policy of the Justice Department to use all available civil and criminal tools to enforce the tax laws.
The case that resulted in the 200th injunction bars Joyce M. Stone, her son Charles J. Freed and their company, Stone and Associates, all of Hillsdale, Mich., from preparing any income tax returns for another person or entity. It is a preliminary injunction. According to the government’s complaint in the case, Stone and Freed prepare customers’ income tax returns claiming improper deductions. According to government filings and an IRS audit of returns prepared by Stone, Freed and another defendant, and cited by the court in its opinion, the defendants understated their customers’ tax liability by an average of nearly $6,300 per return. The court noted that Stone, Freed and a third defendant have prepared more than 3,000 returns for customers since the start of 2005, including 1,786 in 2006. More information about this case and the recently obtained preliminary injunction is available at http://www.usdoj.gov/tax/txdv06525.htm
“With each passing day, tax fraud promotions - including fraudulent return preparation - can ensnare more customers and cost the federal Treasury and honest taxpayers more and more in unpaid taxes and fraudulently obtained refunds,” said Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division. “It makes sense to shut down these activities as quickly as possible. In appropriate cases, the Tax Division will also authorize prosecution of the offenders.”
“Injunctions are an important component of our overall program to reduce tax fraud. They put the unscrupulous tax preparers on notice that the government is on to them and will take further action as appropriate,” said IRS Commissioner Mark W. Everson.
During the past five years, the Tax Division has obtained injunctions barring the promotion and use of tax fraud schemes that include falsely reporting “zero income” on tax returns; failing to withhold, report and pay payroll and income taxes; and using trusts to conceal ownership or control of assets. Additionally, injunctions were obtained for falsely claiming that Native American casino gaming proceeds are tax exempt; falsely claiming that only income from foreign sources is taxable; using a “corporation sole” to avoid tax; and purporting to pay employees in commodities such as milk.
The Justice Department also has obtained injunctions against numerous return preparers who prepare false or fraudulent returns.
More information about the Tax Division’s injunction cases from 2001 to 2006 is available on the Justice Department website at http://www.usdoj.gov/tax/taxpress2006.htm.
Information about the Justice Department’s Tax Division can be found at http://www.usdoj.gov/tax.