The United States filed a civil complaint yesterday asking a federal court in Honolulu to enjoin James A. Ericson from preparing federal tax returns for others, the Justice Department announced today. The complaint alleges that Ericson frequently prepares returns for individuals claiming refunds from the federal government that are not deserved. The complaint also alleges that Ericson prepares roughly over 1,000 tax returns per year for individuals on Maui, Hawaii.
According to the complaint, Ericson improperly understates his customers’ federal tax liabilities by creating phony businesses and then listing those fake businesses on returns and fabricating expenses and losses for them, claiming false or inflated credits and deducting personal expenses of his customers, such as costs associated with customers’ hobbies, which are not legally deductible. In total, the government’s complaint alleges that the loss to the U.S. Treasury from Ericson’s activities could be as much as $31 million for tax years 2007-2012. The government also asserts that many of Ericson’s customers may owe additional tax, interest, and penalties because of the improperly prepared returns.
In addition to asking the court to prohibit Ericson from preparing or filing federal tax returns for others, the complaint also seeks to enjoin anyone acting in concert with Ericson from preparing or filing federal tax returns, to prohibit Ericson from requesting or directing the preparation of federal tax returns for others, to require Ericson, within 30 days of entry of an injunction issued in this case, to contact all persons for whom he prepared a federal tax return since Jan. 1, 2008, in order to inform all such persons of the permanent injunction entered against him, to require Ericson to provide a list of all such persons to the United States, to allow the United States to monitor Ericson’s compliance with any such injunction, and to request that the Court retain jurisdiction over this case to enforce any injunction entered against Ericson.
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 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 .