Justice Department seeks to shut down Texas return preparer | Takeover bid
The United States has filed a lawsuit with the United States District Court for the Eastern District of Texas to prohibit a tax preparer in Beaumont, Texas from owning or operating a tax preparation business tax returns and preparing federal tax returns for third parties.
The civil complaint filed against Michelle Denise Johnston alleges that, since at least 2011, she has been operating a tax preparation business in Beaumont under the name “Allen and Johnston Tax Service”. According to the complaint, Johnston prepared and filed tax returns that underestimated the federal tax obligations of its clients by (1) fully fabricating businesses and related business expenses; (2) unduly inflate these expenses for existing businesses; and (3) improperly fabricate or inflate itemized deductions for damage losses and mortgage interest deductions.
The complaint further alleges that Johnston engaged in a “refund skimming” scheme that “doubles” his tax preparation fees. According to the complaint, clients paid Johnston a preparation fee directly, ranging from $ 200 to $ 500, based on the preparation of an “interim tax return” that showed a modest refund. The complaint alleges that Johnston then took the interim return and inflated and / or fabricated deductions, credits and losses to create a larger tax refund. According to the complaint, Johnston filed the fabricated statement with the IRS, which filed the inflated refund with a third-party vendor. The complaint alleges that Johnston then forced the seller to pay his customer the amount stated on the interim statement and deducted a second preparation charge from the remaining funds. According to the complaint, the scheme happened without the knowledge of his clients because Johnston only provided them with an incomplete copy of the return or a copy of the return different from the one filed with the IRS.
According to the complaint, Johnston prepared more than 3,100 tax returns in total for the 2018 to 2020 tax years. As a result, according to the complaint, Johnston cost the United States significant loss of tax revenue. The complaint further alleges that Johnston harmed its customers, who may be required to reimburse refunds claimed on their behalf, as well as penalties and interest.
Acting Assistant Attorney General David A. Hubbert of the Justice Department’s Taxation Division made the announcement.
Tax preparer fraud is one of the IRS’s tax scams, and taxpayers looking for a tax preparer should remain vigilant. (More information can also be found here.) The IRS has information on its website for choosing a tax preparer, has launched a free directory of federal tax preparers, and offers information on how to avoid “ghost” tax preparers, whose refusal to sign a return should be a wake-up call to taxpayers. The IRS also has a list of important reminders for taxpayers who are about to file their 2020 tax returns, including how to prepare for a smooth filing process.
Over the past decade, the Taxation Division has obtained injunctions against hundreds of unscrupulous tax preparers. Information on these cases is available on the website of the Ministry of Justice. An alphabetical list of those required to prepare returns and promote tax schemes can be found on this page. If you believe that any of the affected individuals or businesses may violate an injunction, please contact the Taxation Division with details.