Justice Department Seeks to Shut Down Detroit-Area Tax Return Preparers

The Justice Department announced today that it has asked a federal court in Detroit to permanently bar Calvin Carter and brothers Raheen Stroud and Laron Stroud, who do business as E-File Tax Pros LLC and Tax King, from preparing federal tax returns. The civil injunction suit alleges that Carter and the Stroud brothers falsify customers’ income on their tax returns, frequently by fabricating business income and expenses, in order to claim the maximum earned income tax credit (EITC) for them.

The EITC is a refundable credit available to certain low-income people. The maximum credit in 2010 was $5,666. Due to the method used to calculate the EITC, people with higher annual incomes may be entitled to a larger credit. Some tax preparers refer to the range of earned income generating a maximum EITC as the “sweet spot.” According to the complaint, Carter and the Stroud brothers fabricated businesses and reported fake business income and expenses on their customers’ tax returns to achieve reported income in the EITC sweet spot. The complaint alleges that the defendants filed tax returns in 2009, 2010, and 2011 that had an extremely high refund-request rate of 97 percent.

The complaint also alleges that the defendants prepare returns for customers that falsely claim the first-time-homebuyer credit even though the customers had not bought new homes and were ineligible for the credit.

In the past decade 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 .

Related Materials:

United States v. Calvin Carter, et al.
Complaint for Permanent Injunction and Other Relief (PDF)