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Friday, August 10, 2012
Federal Court Permanently Bars Detroit Husband and Wife from Promoting Alleged Tax-fraud Scheme and from Preparing Federal Tax Returns
Detroit-Area Group’s “Diamond Tax Services” Business Allegedly Claimed Over $29 Million in Fraudulent Income Tax Refunds

A federal court has permanently barred a Michigan couple, Damian and Holly Jackson, of Detroit, from preparing federal tax returns for others, preparing their own federal tax returns using false 1099 forms, and promoting an alleged tax-fraud scheme based on the frivolous “redemption” theory, the Justice Department announced today. The civil injunction order, to which the Jacksons consented without admitting the allegations against them, was signed by Judge Paul D. Borman of the U.S. District Court for the Eastern District of Michigan.

 

The government complaint in the civil case alleged that the Jacksons and their business, Diamond & Associates Enterprises, operated Diamond Tax Services and promoted a scheme involving the preparation of fraudulent federal income tax returns for customers seeking large tax refunds based on a frivolous tax-defier theory called “redemption” or “commercial redemption.”  

 

The complaint alleged that Damian Jackson, a minister at the Perfecting Church in Detroit, prepared tax returns that claimed huge fraudulent refunds based on fabricated income-tax withholding reported on false IRS 1099 forms. According to the complaint, Holly Jackson transmitted the false 1099 forms to the Internal Revenue Service (IRS). The suit alleged that federal tax returns prepared for at least 182 customers under the auspices of Diamond Tax Services sought over $29 million in fraudulent refunds, and that the Jacksons’ own federal income tax returns have requested more than $2.5 million in bogus refunds. While most of these frivolous refund claims are intercepted by the IRS before refunds are issued, the complaint alleges that the defendants’ scheme has caused the IRS to issue at least $1.6 million in erroneous refunds to the defendants’ customers.   According to the complaint, the Jacksons solicited up-front fees of $500 to $995 from customers, and received a 10 percent cut of any refund issued by the IRS.

           

The injunction suit remains pending against a third defendant.

           

Return-preparer fraud and false claims for refund using fake information returns, such as Form 1099, are among the IRS’s “Dirty Dozen” tax scams for 2012.

            

In the past ten years the Justice Department’s Tax Division has obtained injunctions against hundreds of tax-return preparers and tax-fraud promoters. Information about these cases is available on the Justice Department website .

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