Federal Court Holds Tennessee Tax Return Preparer in Contempt

Court Finds That “The Tax Firm” is Successor to Previously
Enjoined Operation, “The Tax Factory,” Flouted Court’s Earlier Order

Finding that she “is not competent, or if competent, she is not willing to prepare returns that comply with the law,” a federal court yesterday held Stephanie Edmond in contempt of court for violating the court’s previous injunction orders.  The U.S. District Court for the District of Tennessee also barred Edmond’s businesses, the Tax Factory and the Tax Firm, and her husband, Kevin Williams, from preparing tax returns and it ordered them to disgorge to the United States all fees they have earned since January 15.

On April 17, 2015, the court enjoined Edmond and the Tax Factory from preparing improper federal income tax returns.  The court also ordered Edmond and her businesses to pay for an independent monitor who would be required to report to the United States on a monthly basis as to whether Edmond complied with the internal revenue laws.  However, the court found that after the independent monitor sent Edmond and the Tax Factory a letter regarding their failure to provide bank statements and otherwise comply with the April 2015 injunction, Williams arranged, in exchange for a fee, to use the Electronic Filing Identification Number of another entity, the Tax Firm, to file returns.  The court found that the Tax Firm was the successor of the Tax Factory and concluded that “[t]here is no evidence that the Tax Firm was created for any reason except to escape the review of the monitor and the injunctions issued by this Court. There is no evidence to show a legitimate separate entity.  Instead, the evidence demonstrates that Tax Firm was created for the improper purpose of flouting the Court’s orders.”  The court ordered a copy of the contempt order to be posted at the locations of the Tax Factory and the Tax Firm in Memphis.

Return preparer fraud is one of the Internal Revenue Service’s (IRS) Dirty Dozen Tax Scams for 2016.  The IRS has some tips on their website for choosing a tax preparer and has launched a free directory of federal tax preparers.  In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers.  Information about these cases is available on the Justice Department website.  An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page.  If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.