Court Orders Florida Tax Return Preparation Company and Owner to Stop Assisting in Knowing Understatements of Tax Liability; Requires Monitoring at Company's Expense
A federal district judge in Miami has ordered a tax return preparation business based in Miami and its owner to stop assisting in the preparation of federal income tax returns that knowingly understate federal income tax liability, the Justice Department announced today.
The injunction also requires Miami-based Ebenezer Tax Services Inc. and its owner, Ernice Joseph, to exercise due diligence in preparing returns that claim the Earned Income Tax Credit and bars them from preparing any return that claims the Fuel Excise Tax Credit. In addition, the judge ordered Ebenezer and Joseph to gather documentation to substantiate the deductions and credits claimed on the returns they prepare and to retain the documentation for a period of five years. The defendants are also required to send a copy of the injunction to customers and others. Finally, the injunction requires that a neutral monitor be engaged at Ebenezer’s and Joseph’s expense to review and monitor their compliance with the injunction and provide a report of its findings to the United States.
If the court later finds that Ebenezer or Joseph have violated any of the terms of the injunction, they will be permanently barred from preparing federal tax returns for others. The court previously barred Primo Tax Services Inc., another company partly owned by Joseph, from preparing returns for others.
According to the complaint, Joseph and Ebenezer Tax Services have prepared federal income tax returns that unlawfully understate income tax liabilities and overstate refunds through a variety of schemes. The complaint alleged that Ebenezer Tax Services prepared returns that unlawfully claimed the Earned Income Tax Credit by reporting fictitious Schedule C businesses or business income. The complaint also alleged that Ebenezer and Joseph prepared returns that claimed credits to which the taxpayers were not entitled in order to overstate their clients’ refunds. According to the complaint, the Internal Revenue Service (IRS) estimates that the activities of Ebenezer Tax Services and Joseph may have led to millions of dollars in revenue losses.
In consenting to the injunction, Ebenezer and Joseph admitted that they had engaged in conduct subject to penalty under Section 6701 of the Internal Revenue Code. Section 6701 penalizes the knowing preparation of documents whose use would result in an understatement of tax liability.
Return preparer fraud is one of the IRS’ Dirty Dozen Tax Scams for 2015. The IRS has some tips on its website for choosing a tax return preparer, and has launched a free directory of federal tax return preparers. In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers and tax scheme promoters. Information about these cases is available on the Justice Department’s 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.