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Court Shuts Down Southern California Return Preparation Firm

Firm Is Alleged to Claim Phony Home Mortgage Deductions

WASHINGTON, D.C. – The U.S. District Court for the Central District of California in Riverside has issued a temporary restraining order barring N.C.K. Services, Inc., a tax preparation firm based in Rialto, and all three of its return preparers—Karen and Carla Berry of Rialto, and Ivan Johnson of San Bernardino—from preparing federal income tax returns for others, the Justice Department announced today. The district court further ordered defendants to show cause why a preliminary injunction should not be issued pending a trial on the merits of the United States’ complaint for permanent injunctive relief.

The complaint alleges that the defendants prepared thousands of income tax returns containing false and fraudulent deductions since at least 2001, particularly home mortgage interest deductions. For example, the United States alleges that defendants systematically claimed fictitious home mortgage interest deductions for their customers, even in cases where the customers did not own homes. In addition, the government’s application for a temporary restraining order states that each defendant has continually failed to sign customer returns as required by federal law. According to an IRS audit results described in the application, the aggregate tax loss to the government as a result of the defendants’ understatements of tax on customers’ returns is estimated to exceed $25 million. In ruling upon the United States’ request for a temporary restraining order, Judge Virginia A. Phillips found that “immediate and irreparable injury will result to the United States if Defendants are allowed to continue preparing income tax returns” pending trial.

“Tax preparation fraud costs the federal treasury hundreds of millions of dollars every year,” said Eileen J. O’Connor, the Assistant Attorney General for the Justice Department’s Tax Division. “If you have someone else prepare your return, you should review it carefully and make sure it is truthful and that it contains your preparer's signature and identification number.”

This case is part of the Justice Department=s initiative to stop the promotion of tax-fraud schemes. Since 2001, the Justice Department has sought and obtained injunctions against more than 160 tax-scam promoters and preparers of false or fraudulent returns. Information about these cases is available at Information about the Justice Department's Tax Division can be found at