The Department of Justice filed a civil lawsuit in a federal court in Memphis today to stop Stephanie Edmond and her businesses, the Tax Factory and Tax Factory Enterprise Inc., from preparing federal income tax returns. According to the complaint, Edmond and her businesses have prepared more than 9,000 tax returns since 2011.
The complaint filed with the U.S. District Court for the Western District of Tennessee alleges that Edmond understates her customers’ federal tax liabilities by creating fake businesses, then listing those phony businesses on returns and fabricating expenses for them. Edmond also improperly claims the earned income tax credit on the income tax returns that she prepares for her customers. In one case, according to the complaint, two returns prepared for a customer by The Tax Factory claimed bogus business losses of approximately $30,000 for each of the two years, and as a result, the customer improperly received tax refunds of approximately $7,000 both years. In total, the complaint alleges that Edmond’s activities over the last three years have cost the Treasury $9.7 million or more in lost income tax revenue.
Return preparer fraud is one of the Internal Revenue Service’s 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 Internal Revenue Service has some tips for choosing a tax preparer: http://www.irs.gov/Tax-Professionals/Choosing-a-Tax-Professional. In the past decade, the 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.g ov/tax/taxpress2013.htm.