A federal court has permanently barred a Michigan lawyer, Tammy Daniels of Farmington Hills, from promoting an alleged tax fraud scheme, the Justice Department announced today. The civil injunction order, to which Daniels consented without admitting the allegations against her, was signed by Judge Paul D. Borman of the U.S. District Court for the Eastern District of Michigan. In August the court enjoined Daniels’s co-defendants, Damian and Holly Jackson, from preparing federal tax returns for others and promoting the scheme.
The government complaint in the civil injunction lawsuit alleged that the Jacksons and their business, Diamond & Associates Enterprises LLC, 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 suit alleged that tax returns prepared for at least 182 customers under the auspices of Diamond Tax Services sought over $29 million in fraudulent refunds by falsely reporting large amounts of tax withheld on bogus Internal Revenue Service (IRS) 1099 Forms.
While most such frivolous refund claims are intercepted by the IRS before refunds are issued, the complaint alleged that the defendants’ scheme caused the IRS to issue at least $1.6 million in erroneous refunds to defendants’ customers. The suit further alleged that tax returns that Damian and Holly Jackson prepared requested the IRS to issue the refunds to their customers “C/O Attorney Tammy Daniels,” that Daniels negotiated the refund check if one was issued, and that the Jacksons and Daniels took a 10 percent cut of any refund issued by the IRS.
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 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 .