Remember It Takes Two to Tango – When You Sign Your Tax Return, You Are Attesting, Under Penalties of Perjury That Your Return Is True and Correct – Don’t Become a Co-Conspirator
Let’s take a look at three recent Department of Justice investigations into unscrupulous tax return preparers.
Philadelphia Area Tax Preparer Creates False Business Losses
According to court documents and statements made in court, Abdoulaye Coumbassa owned and operated Abbi Tax Services and Accounting (Abbi Tax). From at least 2012 to 2015, Coumbassa prepared and filed fraudulent tax returns and related forms and schedules on behalf of his clients. By reporting fictitious businesses with false business losses, Coumbassa sought inflated refunds for his clients from the Internal Revenue Service (IRS). At times, Coumbassa included the fake business losses without the client’s knowledge. In total, Coumbassa caused a tax loss of $2.1 million to the IRS.
In addition to being sentenced to 24 months in prison, U.S. District Judge R. Barclay Surrick ordered Coumbassa to serve one year of supervised release and to pay approximately $250,000 in restitution to the United States.
Georgia Tax Preparer Creates False Business Losses, False Business Gains, and False Tax Credits
The US Justice Dept. announced that it filed a civil injunction suit seeking to bar Wesley Adam Kroll from owning or operating a tax return preparation business and preparing tax returns for others. The complaint also seeks an order that Kroll disgorge ill-gotten return preparation fees that he obtained through his alleged misconduct.
The complaint alleges that Kroll operated three tax return preparation stores in Albany and Moultrie, Georgia, under the names United Tax Service, American Tax Service, American Tax, and Tax South.
The government alleges that Kroll prepared tax returns claiming fabricated businesses and business-related profits or losses, and various false tax deductions and credits, including education, childcare, and earned income tax credits. The complaint estimates the lost tax revenue from federal tax returns prepared by Kroll and his employees exceeded $1.9 million. According to the complaint, the IRS took multiple steps to correct Kroll’s unlawful behavior, including conducting in-person educational visits with Kroll in 2012, 2014, and 2015; issuing him warning letters in 2013 and 2016; and assessing him with $182,500 in tax return preparer penalties. But, the government alleges, these efforts have failed to curb Kroll’s unlawful behavior.
Georgia Tax Preparers Shut Down for Improperly Claiming Tax Credits, False Business Losses, and False Itemized Tax Deductions
A federal court in Columbus, Georgia, permanently barred Stacy Lee and Heather Lee from preparing tax returns for others and from owning, operating, or franchising a tax return preparation business. The court also ordered Stacy Lee and Heather Lee to close their tax return preparation stores. Stacy Lee and Heather Lee consented to the relief.
According to the US Justice Department, Stacy Lee operated two tax return preparation stores under the names Fast Track Tax Service in Talbotton, Georgia, and TimeLee Tax Service in Columbus, Georgia. Stacy Lee’s daughter, Heather Lee, allegedly prepared tax returns at the two stores as well. From 2013 to 2018, Stacy Lee prepared 3,728 tax returns and Heather Lee prepared 1,116 tax returns, the complaint alleges.
The government further claimed that Stacy and Heather Lee prepared false federal income tax returns, understated federal income tax liabilities, and improperly claimed tax credits in order to obtain inflated tax refunds for customers. The defendants fabricated deductions for charitable contributions, unreimbursed employee business expenses, and medical expenses; reported profits and losses for fictitious businesses; and claimed false education credits, energy credits, and childcare credits.
“The Tax Division will work with its IRS partners to shut down return preparers who claim improper or illegal deductions and credits for their clients,” said Principal Deputy Assistant Attorney General Zuckerman. “Taxpayers should be vigilant so they do not file tax returns claiming false deductions.”
Tax Planning Tip #1
NEVER sign a tax return without first reviewing it. You are ultimately responsible for what is reported on your tax return, even if the preparer included fictitious business losses to increase your refund or decrease the taxes you owe.
Tax Planning Tip #2
Inflating business profits may sound counter intuitive as one may think that the taxpayer would be subject to additional income taxes, but some tax credits, such as the earned income tax credit, could result in additional refunds to the taxpayer by showing more business profits.
Tax Planning Tip #3
Due to taxpayers filing false returns claiming tax credits, and tax preparers preparing false returns claiming illegitimate child care and tuition credits, the IRS is now requiring tax preparers to perform due diligence by asking questions and documenting the taxpayer’s responses to the required questions in the IRS’s efforts to combat tax fraud.
Tax Planning Tip #4
When you engage an unscrupulous tax return preparer, you are increasing the odds that your return will be audited by the IRS. When the IRS identifies an unscrupulous tax preparer, it runs the returns prepared by that person through IRS computers looking for similarities. For example, if a preparer is claiming erroneous childcare or educational credits, the IRS computers will identify all taxpayers who have claimed those credits who used that tax preparer.
Tax Planning Tip #5
Return preparer fraud is one of the IRS’ Dirty Dozen Tax Scams and taxpayers seeking a return preparer should remain vigilant. The IRS has information on its website for choosing a tax preparer and has launched a free directory of federal tax preparers.
The three preparers discussed above is a very small sampling of the types of tax preparers to avoid. 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 website. An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page.
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.
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About F. Bryan Haarlander, EA, CTRS:
Bryan Haarlander is an IRS licensed Enrolled Agent and who owns and operates a specialized tax services firm serving clients in the western suburbs of Philadelphia, PA, which includes the cities of Chester Springs, Coatesville, Collegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia, Phoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks, Chester, Delaware, Montgomery and Philadelphia Counties, as well as clients in Delaware, New Jersey, New York and throughout the continental USA.
A Certified Tax Resolution Specialist, Bryan is well-known for his IRS tax resolution expertise and his book How to Resolve Your IRS Tax Debt Problems.
