Justice Department Asks Federal Court to Stop Maryland Tax Preparer from Promoting Tax Fraud Scheme

The United States filed a complaint seeking to permanently bar an Aberdeen, Maryland, woman and the tax preparation business she operates from preparing federal tax returns and promoting a frivolous tax avoidance scheme, the Justice Department announced today. 

The complaint against Charese Johnson, doing business as Prodigy Accounting Services, was filed in the U.S. District Court for the District of Maryland.  According to the complaint, Johnson prepares income tax returns for customers that fraudulently overstate the refunds due by claiming false withholdings or credits.

The complaint alleges that Johnson promotes a tax avoidance scheme based upon the bogus “redemption” theory, in which individuals assert that the federal government maintains secret accounts for U.S. citizens that can be accessed by issuing various forms to the Internal Revenue Service (IRS).  According to the complaint, Johnson prepares fraudulent IRS Forms 1099-A (Acquisition or Abandonment of Secured Property) and 8281 (Information Return for Publicly Offered Original Issue Discount Instruments) for her customers and files them with the IRS in order to claim enormous tax refunds on their behalf.  The IRS and the courts have repeatedly made clear that the theories Johnson uses in filing the refund claims are frivolous and pure fiction, according to the complaint.  The complaint further alleges that Johnson’s dozens of customers have sought millions of dollars in bogus refunds as a result of Johnson’s conduct.

Return preparer fraud, inflated refund claims and frivolous tax arguments are all among 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 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.