WASHINGTON – The United States has filed six lawsuits in five states to stop tax return preparers from fraudulently claiming the first-time homebuyer tax credit and the earned-income tax credit, the Justice Department announced today. The filings of those civil injunction complaints coincided with the indictment of a Philadelphia man on criminal charges of fraudulently claiming the first-time homebuyer credit. All of these actions are part of the Justice Department’s continuing efforts to halt tax scams involving false claims for tax credits and to prosecute those who fraudulently file tax returns containing those claims.
"We are working hard to ensure that those who try to cheat our country by filing phony claims for tax credits do not get away with it," said John A. DiCicco, Acting Assistant Attorney General of the Justice Department’s Tax Division. "Honest taxpayers will be pleased to see the Internal Revenue Service and the Justice Department continuing to investigate, prevent, and prosecute these types of schemes during the 2011 tax filing season. False claim cases are certainly a nationwide priority for the Tax Division. This kind of tax fraud is an insult to hard-working Americans who legitimately qualify for these tax credits."
First-Time Homebuyer Tax Credit Cases
According to the indictment, Jonathan Brownlee of Philadelphia was charged with 16 counts of filing false federal income tax returns that contained fraudulent claims for the first-time-homebuyer credit. He allegedly obtained personal information about several individuals through false pretenses and used that information to make false claims for the credit to the Internal Revenue Service (IRS), along with requests that refunds be deposited into bank accounts that he controlled or could access. Brownlee allegedly knew the individuals whose names he used were not entitled to the credit because they had neither purchased a home nor signed a contract to do so. If convicted, he faces a maximum prison sentence of 80 years and a maximum fine of $4 million.
The indictment was announced by Zane David Memeger, U.S. Attorney for the Eastern District of Pennsylvania; Acting Assistant Attorney General John A. DiCicco of the Justice Department’s Tax Division; and Special Agent-in-Charge Eric Hylton with the IRS Criminal Investigation Division Field Office in Philadelphia.
In addition, three of the announced injunction complaints involved the first-time homebuyer credit:
The first-time homebuyer tax credit was created by the Housing and Economic Recovery Act of 2008, which included a refundable tax credit for first-time homebuyers equal to 10 percent of the purchase price, up to $7,500, for home purchases completed in 2008. The taxpayer was to repay the credit interest free over 15 years. Congress extended the credit in the American Recovery and Reinvestment Act of 2009, increased the maximum allowable amount to $8,000, and eliminated repayment of the credit if the taxpayer retained the residence for more than 36 months. The credit expired in 2010, so eligible taxpayers may still claim it on their 2010 federal income tax returns.
To protect the U.S. Treasury from fraudulent claims for this credit, the Tax Division, the U.S. Attorney’s offices and the IRS have vigorously prosecuted those who have abused the credit. Examples of these criminal prosecutions in 2010 include:
In addition, over the past year, the Justice Department has obtained civil injunctions against tax-return preparers on the basis of false claims for first-time homebuyer credits, including: Dianelys Armengol Guevara of Pembroke Pines, Fla.; Alberto Camejo of Hialeah, Fla.; and David Santiago , Paula Olivette Patrice, and Henry Ernesto Medina Jr. of Miami.
Earned-Income Tax Credit Cases
Earned-Income Tax Credit Cases
In addition to the lawsuit against Delois Warren discussed above, the Justice Department filed three other civil complaints seeking to stop tax-return preparers from filing false claims for the earned-income tax credit:
The government asked a Texas federal court to bar two Houston-area tax preparers, Christopher Helton and Marcia Johnson, from preparing any more federal tax returns. The pair, who do business as M.C. Tax Service, M.C. Tax Interprise and M.J. Tax Service, allegedly claim false earned-income and fuel tax credits on their customers’ tax returns. The complaint alleges that the defendants routinely prepare tax returns that either claimed the earned-income credit for taxpayers who do not qualify for it or overstate the amount of the credit for eligible taxpayers. Helton and Johnson allegedly prepared tax returns claiming more than $1.5 million in earned-income tax credits during tax years 2007 through 2009, and the complaint describes fraudulent tax refunds based on false earned-income credits as a "rampant problem" at M.C. Tax Service.
Originally enacted by Congress in 1975, the earned-income tax credit benefits low-income working individuals and families. The amount of the credit depends on several facts, including the individual’s filing status, annual wages and number of dependents. It is a "refundable" credit because, if the amount of the credit exceeds the amount of tax owed, the difference may be claimed as a tax refund by eligible persons.
Over the past decade, the Justice Department’s Tax Division has obtained hundreds of injunctions against tax-scheme promoters and preparers of fraudulent tax returns, including those with false claims for earned-income tax credits. For example, over the past year, the Justice Department announced injunctions or injunction complaints against the following individuals in cases involving the earned-income credit: Sony Ducasse of Greenacres, Fla.; Maritza Villanueva of Irving, Texas; Michael Brier of R.I.; Saloum Njie of Atlanta; Shirley Clark of Jacksonville, Fla.; James King of Dublin, Ga.; George Thomas Gaines of Aurora, Colo.; Aurelia Sanderson Johnson of Montgomery; Jody Ball of Bryson City, N.C.; Christopher Musyoki and Samuel Nganga of Cobb County, Ga.; and John Lewis, Artels James and Perry Wright of Birmingham, Ala.
More information about the Tax Division’s continuing efforts to shut down and prosecute fraudulent tax-return preparers can be found on the division’s website.