IRS Posts “Dirty Dozen” Tax Scams for 2007 and Files Injunctions Against Tax Preparers to Stop Shams
Earlier this year, the IRS posted a list of the 12 most blatant tax scams. These scams included among others:
Abusive Roth IRAs (shifting under-valued property to Roth Individual Retirement Arrangements), Disguised Corporate Ownership (domestic shell and other entities formed and operated to disguise ownership of business or financial activity), Zero Wages (showing little or zero wages or rebuttal or wages and taxes reported by the taxpayer to the IRS), Return Preparer Fraud (dishonest tax preparers), Trust Misuse (improperly transferring assets into trusts which do not deliver the promised tax benefits), Structured Entity Credits (improperly setting up partnerships to own and sell state conservation easement and federal rehabilitation or other credits without a valid business purpose), and Abuse of Charitable Organizations and Deductions (improperly shielding income or assets including the overvaluation of contributed property).
The IRS is proceeding against several tax preparation services as noted in recent news reports which involve one or more of the common scams listed by the IRS:
On November 14, 2006, a Nevada federal court permanently barred James DiLillo of Las Vegas from continuing to prepare taxes and promoting a tax scheme that allegedly concealed his clients’ funds though the creation of sham trusts. According to the complaint, this scheme was promoted in 8 different states and has cost the U.S. Treasury over $2.25 million since 2002.
On November 16, 2007, the Department of Justice announced that Archie Pugh, Jr. and Theodore Pugu were enjoined from preparing tax returns for other people. They had operated Archie’s Tax and Accounting Service in Jamaica, N.Y. The injunction issued out the of Eastern District of New York said that they charged customers to prepare income tax returns using the “claims of right tax-evasion scheme,” which fraudulently claims that compensation paid for work is not subject to income tax. The court has found that this misconduct has caused losses to the U.S. Treasury in excess of $2.4 million.
On November 16, 2007, the Department of Justice announced that the operators of Century One Resorts, Ltd. COA Financial Group LLC. and Eagle Financial Services LLC. in San Diego, California were barred from preparing tax returns for others. The suit was specifically filed against Roosevelt Kyle and Rebecca Tyree of San Diego and their businesses. It is alleged that this misconduct of understating their customers’ tax liabilities by preparing returns with fabricated business-expense and charitable deductions has cost the United States Treasury a total of $18 million. According to the complaint, it appears that the IRS has penalized Roosevelt Kyle three times in the past for understating his customers’ tax liabilities. In 2002 he was found guilty of failing to file his own 1995-1998 tax returns.
The IRS is following up with complaints and injunctions against operators of tax preparation services who promote fraudulent tax schemes. Such evidence could be the basis of a tax whistleblower lawsuit.
To learn more about being a tax whistleblower contact us.
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Abuse of Charitable Organizations and Deductions, Abusive Roth IRAs, claims of right tax evasion scheme, fabricated business expense and charitable deductions, Return Preparer Fraud, tax scheme
