Today, a federal court in the Eastern District of North Carolina permanently barred Sharon D. Rhodes and her businesses, R&S Freedom Tax Service and Changing Faces Annoited Tax Services, from preparing tax returns for others. Rhodes consented to the entry of the injunction without admitting she was guilty of the allegations against her.
According to the complaint, Rhodes prepared over 600 tax returns for the 2008 through 2010 tax years. The complaint alleges that Rhodes prepared returns claiming false charitable deductions and false credits such as the Earned Income Tax Credit and education credits. Rhodes also allegedly improperly understates her customers’ federal tax liabilities by creating phony businesses and then listing those fake businesses on returns and fabricating expenses and losses for them. The United States contended that the false items generated larger refunds for Rhodes’ customers than they were entitled to receive, and that the losses to the U.S. Treasury could amount to as much as $3 million.
Return preparer fraud is one of the IRS' Dirty Dozen Tax Scams for 2013, which can be viewed at www.irs.gov/uac/Newsroom/IRS-Releases-the-Dirty-Dozen-Tax-Scams-for-2013 . The IRS has tips for choosing a tax preparer: www.irs.gov/Tax-Professionals/Choosing-a-Tax-Professional . In the past decade, the Justice Department's Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers. Information about these cases is available on the Justice Department website at www.justice.gov/tax/taxpress2013.htm .