Justice Department Seeks to Shut Down Indiana Tax Preparer
The Justice Department announced today that it has asked a federal court in Indianapolis, to bar Cynthia Hawk, who operates Gain Tax Services, from preparing tax returns. The civil injunction suit alleges that Hawk fails to comply with due diligence requirements imposed by federal law on tax preparers who claim the earned income tax credit (EITC) on customers’ income tax returns. According to the complaint, Hawk also falsified customers’ incomes in order to claim the maximum EITC for them.
The EITC is a refundable federal income tax credit available to certain low to moderate income working individuals and families. As a refundable credit, the EITC may entitle a taxpayer to a refund from the U.S. Treasury. The amount of the EITC depends on the taxpayer’s income, filing status and claimed number of dependents. The maximum credit in 2010 was $5,666. The range of earned income generating a maximum EITC is sometimes called the “sweet spot.” According to the complaint, Hawk fabricated businesses and reported fake business income on her customers’ tax returns to reach the EITC sweet spot.
The complaint alleges that the Internal Revenue Service (IRS) determined that Hawk failed to comply with due-diligence requirements when claiming the EITC for her customers. The IRS penalized Hawk in 2011 for her failures. When the IRS performed a follow-up investigation in 2012, as it routinely does, the complaint alleges that it again found ongoing failures and fraudulent claims by Hawk. According to the complaint, Hawk, who previously prepared tax returns in Atlanta, prepared at least 1,501 returns from 2009 through 2012, with unusually high refund rates ranging from 96 to 99 percent these years.
The complaint also alleges that Hawk claimed education credits on her customers’ tax returns, when the customers did not actually have any qualifying education expenses.
In the past decade the Justice Department’s Tax Division has obtained injunctions against hundreds of tax-return preparers and tax-fraud promoters. Information about these cases is available on the Justice Department’s Tax Division website www.justice.gov/tax.
United States v. Cynthia E. Hawk, etc.
Complaint for Permanent Injunction and Other Equitable Relief (PDF)