Justice Department Continues Efforts to Stop Fraudulent Tax Preparers
Taxpayers Should Be Alert to Dishonest Return Preparers
The Department of Justice urges taxpayers to choose their return preparers wisely as the April 18th federal tax filing deadline approaches. Return preparer fraud is one of the IRS’ Dirty Dozen Tax Scams. Unscrupulous preparers who include errors or false information on a tax return could leave a taxpayer open to liability for unpaid taxes, penalties and interest.
“Taxpayers are responsible for what is on their return, even when it is prepared by someone else,” said Deputy Assistant Attorney General David A. Hubbert of the Justice Department’s Tax Division. “If your preparer asks you to sign a blank return, will not let you review your return before filing it, or is depositing your refund in a way that is not clear to you, consult the IRS’s website to make sure you are not exposing yourself to trouble.”
“Tax preparers contemplating filing false returns for their clients should know that our criminal prosecutors are prepared for the filing season too,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division. “As the division’s work this past year reflects, we have the expertise and resources to identify and hold preparers fully accountable for their criminal conduct.”
Over the last year, the Tax Division has worked with U.S. Attorneys’ Offices around the country to bring civil and criminal actions against dishonest tax preparers, seeking civil injunctions to stop ongoing fraud, civil penalties or disgorgement of ill-gotten proceeds, and criminal penalties. The department’s message has been clear: those who prepare fraudulent returns will face serious and lasting consequences.
Examples of civil injunctions obtained by the Tax Division over the last year include:
- On Feb. 15, 2022, a federal district court in the Northern District of Illinois permanently barred Melissa Gasca individually and doing business as Su Familia Income Tax, as well as FinancialPlus Services Inc., from preparing returns for others and from owning or operating a tax return preparation business in the future. The court also ordered defendants to disgorge approximately $30,000.
- On Oct. 5, 2021, a federal district court in the Western District of Michigan, permanently barred Stanley Meyer (dba I-Tax Services) and Rosa Linda Meyer (dba Su Casa Income Tax Service), husband and wife, from preparing returns for others and from owning, operating or franchising any tax return preparation business in the future.
- On May 13, 2021, a federal district court in the Northern District of Mississippi permanently barred Kathy Moton and K & M Tax Essentials LLC from preparing returns for others and from owning, operating or franchising any tax return preparation business in the future. The court order also required defendants to send notice of the injunction to each person for whom they prepared federal tax returns, other tax forms or claims for refund after Jan. 1, 2018, and to publicize the injunction for one year on all social media that defendants earlier used to advertise their services.
The Tax Division has also sought to strip fraudulent preparers of ill-gotten gains and to hold in contempt those who attempt to flout court-ordered restraints on further fraudulent activity. Over the last year, the division has brought these cases to court, including:
- On Feb. 3, 2022, a federal court in the Southern District of Florida permanently barred Wendell Devallon, Berald Dominique and their business, Tax Time Group Inc., from preparing federal income tax returns in the future. The court also ordered defendants to disgorge $353,000 to the United States. The disgorgement amount was based on defendants’ misconduct before the government sued as well as their violations of a preliminary injunction entered in January 2021 while the suit was ongoing.
- On Nov. 10, 2021, a federal court in the Southern District of Texas required Levett Camarena to disgorge $40,000 earned in violation of the October 2017 order that permanently barred her from preparing returns for others, advising in the preparation of those returns and representing customers before the IRS.
- On Sept. 29, 2021, a federal court in the Southern District of Florida required Milagros Espinal to pay $400,000 as a contempt sanction for violating the court’s February 2011 order that permanently barred Espinal from acting as a return preparer. In ordering the sanctions, the court found that Espinal continued to prepare returns despite being barred from doing so and, furthermore, that the returns she prepared contained fraudulent claims. The sanctions were calculated to compensate the U.S. Treasury for the harm Espinal caused, to strip Espinal of ill-gotten fees obtained in violation of the court’s earlier ban, and to reimburse the costs the United States incurred to investigate and prosecute her contempt.
Criminal convictions against fraudulent preparers obtained by the Tax Division over the last year include:
- On March 22, 2022, Fred Pickett Jr., of Belle Glade, Florida, was sentenced to 97 months in prison after being convicted at trial of 22 counts of preparing false tax returns for his clients. According to evidence presented at trial, Pickett prepared tax returns for some of his clients claiming they owned fictitious businesses that lost tens of thousands of dollars each year. Pickett included these nonexistent companies, as well as other false deductions and tax credits, on his clients’ returns to generate refunds they were not entitled to receive. Pickett had already been permanently barred in October 2017 from further work as a tax return preparer.
- On Feb. 8, 2022, Adrienne Williams, of Rocky Mount, North Carolina, was sentenced to 50 months in prison for conspiring to defraud the United States. According to court documents and statements made in court, between 2009 and 2017, Williams and at least two employees at Ultimate Tax Service, a tax return preparation service she owned and operated, prepared false tax returns for clients. The returns claimed fraudulent refunds by including, among other falsities, bogus federal income tax withholdings. In all, Williams and her co-conspirators sought to defraud the IRS of more than $3.5 million.
- On May 7, 2021, Karen Marie Jones, of Durham, North Carolina, was sentenced to 22 months in prison for conspiring to defraud the United States. According to court documents and statements made in court, from 2012 through 2017, Jones and two other return preparers who worked at the tax return preparation business she owned conspired to prepare false returns for clients. The returns fraudulently lowered the clients’ tax liabilities or inflated their refunds by claiming false education credits or dependents or by manipulating the clients’ income to qualify for larger earned income tax credits. Under the scheme, some clients were charged up to $3,000 for preparing returns. Based on an analysis of the falsely claimed education credits, the tax loss is approximately $1.2 million.
The Tax Division reminds taxpayers that the IRS has information and tips on its site, see here and here, for choosing a tax preparer, has launched a free directory of credentialed federal tax preparers, and offers information on how to avoid “ghost” tax preparers, whose refusal to sign a return should be a red flag to taxpayers. The IRS also has a checklist of things to remember when filing income tax returns for tax year 2021.
In addition, IRS Free File, a public-private partnership, offers free online tax preparation and filing options on IRS partner websites for individuals whose adjusted gross income is under $73,000. For individuals whose income is over that threshold, IRS Free File offers electronical federal tax forms that can be filled out and filed online for free. The IRS has tips on how seniors and individuals with low to moderate income can get other help or guidance on tax return preparation, too.
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’s website. An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found 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.