Justice Department Files Lawsuit to Enjoin Las Vegas Man from Preparing Returns Containing the Foreign Earned Income Exclusion
The United States has asked a federal court in Las Vegas to bar a Las Vegas man from preparing federal tax returns that contain or involve foreign earned income, and from promoting to others the exclusion of foreign earned income.
The complaint, which was filed with the U.S. District Court for the District of Nevada, alleges that Harvey L. Cage, who does business as CSN Tax Services, inappropriately attempts to exclude foreign earned income from the calculation of his customers’ federal tax liabilities. According to the complaint, from 2009 through 2012, Cage personally prepared more than 3,200 tax returns, of which approximately 25 percent contained the foreign earned income exclusion.
Typically, U.S. citizens may exempt some foreign earned income from the calculation of gross income if they are present in a foreign country for at least 330 full days out of 12 consecutive months. This period can be waived when the Secretary of the Treasury determines, after consultation with the Secretary of State, that individuals were required to leave a foreign country due to war, civil unrest or other conditions that preclude the normal conduct of business, among other things. In implementing this waiver provision, each year the Secretary of the Treasury publishes a list of countries that have been determined eligible for waiver requests. According to the suit, Cage ignored the published list of waiver-eligible countries in filing for his customers’ exclusion of foreign earned income. According to the government’s complaint, Cage, on behalf of some of these customers, claimed the foreign earned income exclusion for which his customers were not entitled, inappropriately reducing their tax liability.
According to the complaint, Cage’s activities have resulted in an estimated average tax loss of more than $12,000 per examined return. The United States alleges that the additional taxes due from Cage’s customers, excluding interest and penalties, is greater than $3.7 million and continues to grow as additional examinations are completed. After many of his customers had been audited, Cage failed to provide his Preparer Tax Identification Number (PTIN) on the tax returns he prepared, in violation of federal law, according to the suit.
Return preparer fraud is one of the IRS’ Dirty Dozen Tax Scams for 2015. The IRS has some tips on their website for choosing a tax preparer, and has launched a free directory of federal tax 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.