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Friday, November 27, 2009

Federal Court Shuts Down Kansas City Tax Preparer

Man Prepared “Result-Based” Tax Returns in Kansas City Area Restaurant

WASHINGTON – A federal court in Kansas City, Kan., has permanently barred Carlos Cruz, also known as Carlos Ruano-Cruz, from preparing tax returns for others, the Justice Department announced today. The court found that Cruz’s business, Carlos Income Tax Services, prepared federal income tax returns for customers that unlawfully understated tax liabilities by under reporting income and claiming improper deductions for employee business expenses and nondeductible personal expenses. The court said Cruz ignored customers’ documents and prepared "result-based" tax returns "where the goal is to maximize refunds rather than accurately report his customers’ actual income...." According to the court, Cruz prepared returns at a local restaurant.

The court also found that Cruz, who prepared more than 13,000 returns in the past five years, advised one customer to fabricate a business with phony income in order to increase the customer’s earned income tax credit. The customer had to pay back tax, interest and a penalty when the IRS detected the inaccuracies. The Internal Revenue Service (IRS) audited at least 81 returns prepared by Cruz and found that 95 percent of them needed corrections. The court said the tax losses from Cruz’s misconduct between 2003 and 2007 may exceed $25 million.

John A. DiCicco, Acting Assistant Attorney General for the Justice Department’s Tax Division, thanked Thomas Curteman, the Justice Department trial attorney who handled the case, and Roland Wallestad, the IRS revenue agent who conducted the investigation.

In the past decade, the Justice Department has obtained injunctions against more than 435 tax preparers and tax-fraud promoters. Information about these cases is available on the Justice Department Tax Division Web site .

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Updated September 15, 2014