Federal Court Permanently Bars a Michigan and Illinois-Based Liberty Tax Service Franchisee from Preparing Federal Income Tax Returns
The U.S. District Court for the Eastern District of Michigan has permanently barred a Liberty Tax Service franchise owner and his companies from preparing federal tax returns for others, the Justice Department announced today.
The civil injunction order prohibits Syed N. Ahmed and his companies from acting as federal tax return preparers and from owning, operating, or profiting from tax-return preparation businesses. Ahmed and his companies agreed to the entry of the injunction but did not admit the allegations in the civil complaint against them.
According to the complaint, Ahmed and his businesses operated at least 10 Liberty Tax Service franchise locations in the Detroit, Michigan, and Chicago, Illinois, areas. The complaint alleged that the defendants’ employees prepared federal income tax returns containing false information in order to illegally generate higher tax refunds or higher refundable credits for their customers. The government alleged that defendants improperly obtained inflated tax refunds and refundable credits for customers by preparing tax returns that included, among other things, false or inflated Schedule C (Profit or Loss From Business) income and expenses, bogus dependents, false filing statuses, improper education credits and false itemized deductions.
The lawsuit further alleged that the defendants’ Liberty Tax franchises prepared 17,759 federal income tax returns between 2010 and 2013. According to the complaint, defendants’ conduct cost the U.S. Treasury $2.8 million, based on audit adjustments the Internal Revenue Service (IRS) made to tax returns for 2010 to 2013 prepared and filed by Ahmed’s Liberty Tax Service franchises. The total harm to the government could be much higher, the complaint states.
Return preparer fraud is one of the IRS’s Dirty Dozen Tax Scams for 2015. The IRS has some tips on its website for choosing a tax preparer and has launched a free directory of federal tax preparers. In the past decade, the Justice Department’s 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.