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Monday, January 9, 2017

Justice Department Files Lawsuit to Shut Down Detroit Tax Return Preparation Business

Preparer Fabricates Businesses and Falsifies Income and Expenses on Customers’ Returns

Tax Pioneer, a Detroit-area tax return preparation business, and its alleged owner, Dieasha Davis fraudulently maximize tax refunds by falsifying income and deductions on tax returns, according to a civil complaint filed by the Justice Department today. The suit, filed in federal court in Detroit, seeks to permanently bar Davis and Tax Pioneer from preparing federal tax returns for others.


According to the suit, Davis formerly managed and prepared tax returns for a Liberty Tax Service franchisee. Davis’ fraudulent preparation of tax returns allegedly encompasses both her time at Liberty Tax Service and, since 2013, at Tax Pioneer. The government’s complaint against Davis and Tax Pioneer alleges that the defendants improperly prepare tax returns that claim false or inflated income and expenses, bogus dependents, improper filing statuses, and false itemized deductions, all which fraudulently maximized customer refunds and refundable credits.


A few examples alleged in the complaint detail how Davis intentionally reduced her customers’ reported income tax liabilities by reporting false information. In January 2016, Davis prepared a tax return for a customer that reported over $18,500 in losses from a non-existent “Property Management Real Estate” business, according to the complaint. Davis also allegedly claimed a bogus expense deduction for the same customer reporting over $9,800 of fictitious mortgage interest. Also in January 2016, Davis prepared a tax return for another customer and added to this return $6,800 in fictitious wages in order to inflate a claim for the Earned Income Tax Credit (EITC), according to the complaint. The EITC is a benefit for working people who have low to moderate income; this credit can reduce the amount of tax owed and increase the amount of refund. The government alleges that Davis even concocted a Form W-2 to report these fraudulent wages.


The government also alleges that Davis encouraged customers audited by the Internal Revenue Service (IRS) to submit false records. According to the complaint, a preparer at Tax Pioneer reported a fictitious child care business on a customer’s tax return for two years and reported false income and expenses to make the business appear legitimate. The government alleges that after the IRS selected these returns to examine, the customer sought assistance from Tax Pioneer. Davis then provided this customer with blank worksheets, told the customer to add false business expenses and income using different color pens, and provide these bogus documents to the IRS, according to the complaint.


The IRS is reminding taxpayers that the 2017 individual income tax return filing season begins Jan. 23, 2017, and there is information available on the IRS’s website. Return preparer fraud was one of the IRS’s Dirty Dozen Tax Scams for 2016 and taxpayers seeking a return preparer should remain vigilant. 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. 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.

Press Release Number: 
Updated March 17, 2017