Department of Justice Seal Department of Justice
FOR IMMEDIATE RELEASE
WEDNESDAY, JULY 13, 2011
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FEDERAL COURT BARS IDAHO WOMAN FROM PROMOTING "FORM 1099-OID" TAX SCHEME

Tax Preparer Sought More Than $168 Million in Fraudulent Tax Refunds

WASHINGTON - A federal court has permanently barred Penny Jones from preparing federal tax returns for others and from promoting the use of false tax forms, the Justice Department announced today. The civil injunction order, entered by Judge Edward J. Lodge in U.S. District Court for the District of Idaho, found that Jones operated a tax preparation business using a post office box in Shelley, Idaho, and prepared more than 400 federal tax returns claiming fraudulent tax refunds exceeding $168 million.

The court also found that Jones prepared various false Internal Revenue Service (IRS) forms, including Form 1099-OID, for use in requesting refunds based on phony claims of large income tax withholding. The court order says the scheme is rooted in the long-discredited "redemption" theory which, according to its proponents, allows taxpayers to use IRS forms to access secret Treasury accounts to satisfy their tax liabilities. The court found that this theory has been "routinely rejected" by other courts, that the forms attached to tax returns prepared by Jones were "phony," and that Jones knew her actions were fraudulent.

The court order requires Jones to provide the government with a list identifying all persons for whom she prepared federal tax returns for tax years 2005 through 2009.

Return preparer fraud and bogus refund claims based on false Forms 1099-OID are two of the IRS’s "Dirty Dozen" tax scams for 2011. In the past decade, the Justice Department’s Tax Division has obtained injunctions against hundreds of dishonest return preparers and tax fraud promoters. Information about these cases is available on the Justice Department website.

Related Documents:

  United States v. Penny Lea Jones, etc.
Memorandum Order

(PDF document)


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