WASHINGTON - A federal judge in Kalamazoo, Mich., issued an order permanently barring Donald A. Gray from preparing federal income taxes for others, the Justice Department announced today. The court found that Gray has been preparing tax returns for his customers based on the frivolous theory that wages are not income for federal tax purposes. Judge Paul L. Maloney noted that federal courts have “emphatically and repeatedly rejected” this argument.
The court also recalled Gray’s acknowledgment at a March 2007 hearing that the Internal Revenue Service (IRS) has rejected the position that wages are not income, and noted that Gray knew his customers had received letters from the IRS rejecting their tax returns as frivolous.
Besides barring Gray from preparing federal income tax returns for others, the court also ordered that he be barred from counseling others about the preparation of their returns, from holding himself out as a Certified Public Accountant, and from otherwise interfering with the administration and enforcement of the internal revenue laws. The government complaint stated that the IRS estimated that Gray’s harm to the U.S. Treasury was $1.5 million.
“As the court noted, the continuous and repetitive nature of Gray’s conduct is evident from the thousands of tax returns prepared,” said Nathan J. Hochman, Assistant Attorney General of the Justice Department’s Tax Division. “Such extensive fraud will not be tolerated, and such fraudsters will be shut down.”
Since 2001, the Justice Department’s Tax Division has obtained injunctions against more than 305 tax-return preparers and tax-fraud promoters. Information about these cases is available on the Justice Department website, as is information about the Justice Department’s Tax Division.