Justice Department Seeks to Stop Louisiana Tax Return Preparer From Preparing Federal Tax Returns
Return Preparer Allegedly Claims False Business Losses and Earned Income Tax Credits for Her Customers
A Louisiana tax return preparer, Finecia Draper of Simmesport, Louisiana prepares fraudulent tax returns for her customers, according to a new civil suit filed by the Justice Department. The suit, filed in federal court in Alexandria, Louisiana asks the court to permanently bar Draper from preparing federal tax returns for others. The suit also asks the court to order Draper to turn over a list of all taxpayers for whom she has prepared returns since Jan. 1, 2013.
The complaint alleges that Draper, who prepares returns through her business Unlimited Fashion located at 245 Moreau St. in Simmesport, prepares returns that fraudulently understate her customers’ income tax liabilities and/or overstates the refunds they are entitled to receive. According to the complaint, Draper does so by fabricating or inflating business losses claimed on her customers’ returns. In many of the examples cited in the complaint, the taxpayer did not even own or operate a business. The bogus losses that Draper claims fraudulently understate the income her customers earned which results in underreporting their tax liabilities and overstating the refunds they are due, according to the complaint.
The complaint additionally alleges that Draper also fraudulently claims and/or inflates the Earned Income Tax Credit (EITC) on returns she prepares. The EITC is a benefit for working taxpayers with low to moderate income. The amount of EITC a taxpayer can claim is determined by the amount of income the taxpayer earned and the number of dependents a taxpayer claims. The complaint alleges that Draper uses false business losses to improperly reduce the earned income on her customers’ returns and claims improper dependents, to maximize the EITC. The complaint alleges that Draper does so without doing the due diligence required by Internal Revenue Service (IRS) regulations and despite being previously penalized over $97,000 by the IRS for failure to exercise the required due diligence.
From 2011 to 2015, Draper prepared over 2,000 returns, according to the complaint. The complaint alleges that audits of 163 returns prepared by Draper in 2011, 2012, and 2013 revealed that she overstated refunds and understated tax liability on 134 (82 percent) of these returns which resulted in a tax loss of over $275,000 in the aggregate.
Return preparer fraud is one of the IRS’s Dirty Dozen Tax Scams for 2017 and taxpayers seeking a return preparer should remain vigilant. The IRS has tips on its website for choosing a return 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.