United States Files Suit to Stop Virginia Man from Promoting Tax Fraud Scheme
Promoter’s Customers Allegedly Filed More Than $67 Million in False Refund Claims
The United States has sued Charles Sewell of Bristol, Va., to bar him from promoting an alleged scheme involving fraudulent tax refund claims, the Justice Department announced today.
According to the government’s amended complaint, Sewell creates fraudulent types of Internal Revenue Service (IRS) Forms 1099 for other taxpayers and files them with the IRS. The fraudulent types of Forms 1099 are allegedly designed to help Sewell’s customers request large tax refunds to which they are not entitled, based on false claims of income earned and federal tax withheld. The complaint alleges that Sewell’s scheme is based on the “commercial redemption” theory, in which individuals make refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS. The lawsuit alleges that Sewell’s customers sought $67 million in bogus refunds as a result of Sewell’s conduct.
Claiming bogus tax refunds based on false Forms 1099-OID is one of 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 fraud promoters and unscrupulous tax preparers. Information about these cases is available on the Justice Department website.