Posts Tagged ‘preparer penalties’

Tax Roundup, 11/20/13: Are reports of the death of Instant Tax Service premature? And: film credits = bait car?

Wednesday, November 20th, 2013 by Joe Kristan
"Fez" Ogbasion, Instant Tax Service CEO.

“Fez” Ogbazion, Instant Tax Service CEO.

Is Instant Tax Service still dead?  Maybe not, reports TaxGrrrl: In Apparent Defiance Of Court Order, Fourth Largest Tax Biz In Country Preps For Sale :

Within a week of the Order, [founder “Fez”] Ogbazion was said to be engaged in discussions relating to the sale of the company, an activity that would appear to be barred under the injunction. Todd Bryant, General Counsel for ITS Financial, confirmed via email that “[a]n asset sale is being considered.”

It was a puzzle, though, as to who might be interested in purchasing the beleaguered company.

An insider, it turns out.  TaxGrrrl questions whether that will work, given that the court order seems designed to destroy the company and salt the earth so it can never return.  Judge for yourself (my emphasis):

Based on the foregoing, IT IS HEREBY ORDERED pursuant to I.R.C. §§ 7402 and 7408 that Defendants ITS Financial, LLC, TCA Financial, LLC, Tax Tree, LLC, and Fesum Ogbazion, and their representatives, agents, employees, attorneys, and/or any person or entity acting in active concert or participation with them, are PERMANENTLY ENJOINED from directly or indirectly, by use of any means:

A. Operating, or being involved with in any way, any work or business relating in any way to preparation of tax returns; and, accordingly, Defendants ITS Financial, LLC, TCA Financial, LLC, and Tax Tree, LLC shall cease to operate; and Defendant Fesum Ogbazion shall cease operating, or being involved with in any way, any work or business relating in any way to preparation of tax returns;

B. Acting as tax return preparers; and/or acting or operating as a franchisor of businesses relating in any way to preparation of tax returns;

C. Supervising or managing or assisting tax return preparers; and/or owning, operating, or engaging in work or a business relating in any way to preparation of tax returns;

D. Assisting with or directing the preparation or filing of tax returns, amended returns, claims for refund, or other related documents;

E. Representing before the Internal Revenue Service any person or organization whose tax liabilities are under examination or investigation by the IRS;

F. Organizing, promoting, providing, advising or selling any business or work of tax services;

They seem to be looking for a loophole here by selling assets, rather than stock, though the injunction against “selling any business” would seem to cover that.  I suspect the judge will make things clear in the coming days.

Prior coverage: Judge shuts down Instant Tax Service.


Instant Tax, meet Mo’ Money.  Owner of St. Louis tax prep franchise gets 20 months for 20130919-2fraud (

The owner of a Mo’ Money tax preparation franchise in St. Louis was sentenced to 20 months in federal prison on Tuesday after pleading guilty in July to conspiracy to commit tax fraud and aiding and abetting the preparation of false tax returns.

Jimi Clark, 57, of Memphis, Tenn., and four employees were arrested and indicted in October 2012 on one felony count each of conspiracy to commit tax fraud. All were accused of falsely claiming educational tax credits on at least 47 tax returns for 2009.

Refundable credits like the American Opportunity Credit and the Earned Income Credit are the fuel for the fraudulent return industry.


haroldLyman Stone,  California Film Tax Credit Faces Controversy, Delay (Tax Policy Blog):

 A recent FBI sting in California revealed that state Senator Ron Calderon may have taken up to $60,000 in exchange for pushing to lower eligibility requirements for California’s $100-million-a-year film tax incentive program. This isn’t the first time film incentives have been connected to corruption and scandal. Indeed, a scandal about misallocation of film tax credits ultimately led to the demise of Iowa’s program over the last few years.

Sometimes I think that Iowa’s Film Credit Program was just an elaborate “Bait Car” episode that ultimately didn’t run because the stealing was too easy.


Elizabeth MalmMaryland Governor Touts Benefits of Film Tax Credits, Despite Evidence to the Contrary  (Tax Policy Bl0g).  Iowa has stopped giving filmmakers money and is instead giving them time, with no apparent bad economic effects.

Kay Bell, Coast-to-coast concerns about film and TV tax credits


David Henderson, Saez You: Income Distribution without Key Components of Income.  It turns out one of the most-cited articles on income inequality leaves out a lot of income, particularly government transfers and welfare benefits.  He notes notes, increased transfers are always advocated as a cure for inequality, and yet by the measuring stick used, it can never “help.”


Clint Stretch, Turning Down the Heat on Energy Tax Policy  (Tax Analysts Blog).  He notes the new oil and gas boom, and that “Oil and gas tax incentives are not responsible.”


TaxProf, The IRS Scandal, Day 195

Source: The Tax Foundation

Source: The Tax Foundation

Howard Gleckman, Baucus Proposes International Tax Reform But Future Action Remains Uncertain (TaxVox)

According to the plan, passive income from overseas activities would continue to be taxed at U.S. rates. Most income from the sale of goods and services overseas would also be taxed at full U.S. rates. The draft would end the practice of deferral that allows firms to avoid U.S. tax on foreign earnings until they bring those profits home. However, income that is currently parked overseas would be taxed at a 20 percent rate payable over 8 years.

Baucus would move the U.S. closer to a territorial system favored by many multinationals and GOP lawmakers. Under such a system, income is taxed in the jurisdiction where it is earned rather than by the firm’s home country. While the plan does not fix a specific tax rate, staffers say Baucus is aiming to reduce the corporate rate from 35 percent to about 30 percent.

But in the Baucus plan, this shift closer to a territorial tax comes at a price. To limit the ability of multinationals to game the system, the plan would impose a stiff minimum tax on income earned overseas by foreign affiliates of U.S. parent companies.

Reducing the corporate rate is fine, but remember that most business income is taxed on 1040s anymore.


Tax Justice Blog,  Statement from CTJ Director Robert McIntyre: Is the Baucus Plan for Multinational Corporations a Prelude to a Middle-Class Tax Increase?


Peter Reilly has been playing hooky at the commemoration of yesterday’s 150th anniversary of the Gettysburg Address.  I’m jealous.

The Critical Question: Hasn’t the Government Done Enough to Mess Up Higher Education Finance? (David Brunori, Tax Analysts Blog)  Well, I’m sure they can always mess it up even more.

News from the Profession. Non-Traditional Holiday Celebrations at Accounting Firms, Care To Add Yours?



Judge shuts down Instant Tax Service

Thursday, November 7th, 2013 by Joe Kristan
"Fez" Ogbasion, Instant Tax Service CEO.

“Fez” Ogbazion, Instant Tax Service CEO.

Those of us who follow tax news more closely than is good for us have noticed that Instant Tax Service has been in the news quite a bit.  They may not be much longer.

Yesterday a federal judge in Ohio slapped ITS and its owner with an order “permanently enjoining” them “FROM OPERATING, OR BEING INVOLVED WITH IN ANY WAY, ANY BUSINESS RELATING IN ANY WAY TO PREPARATION OF TAX RETURNS.”  Lest you think I’m shouting, the judge was the one who went all-caps.

And reading the 233-page ruling, you can understand why the judge might raise his voice.  The opinion outlines dozens of outrageous alleged acts by the folks at ITS that would make a normal practitioner resign and contact counsel if they saw them at work.  Just a few, er, instances… (footnotes and citations omitted) from the opinion:

 On the same day the company deposited the $32,000 in forged customer checks into its payroll account, the company immediately used $14,000 from the forged checks (leaving $18,000 in the company’s payroll account).  One week later, the company had used another $12,000 from the forged checks (leaving only $6,650 in the account).  

 When customers first approached Defendants about the fraud,  Defendants made up stories to cover-up the forgeries.  Defendants told Taneika Grady that the forged checks were the result of a rogue employee, whom ITS Financial fired due to the misconduct.  Only Ogbazion [the owner of ITS], who devised and ordered this check fraud, had motive to ensure that Defendants lied to Grady.  Ogbazion also lied to Davis after she discovered the forgeries, telling her that ITS CFO Pete Samborsky was taking care of it 

The judge says ITS made a practice of filing “stub returns,” using only pay stubs rather than W-2s, to claim refunds for clients.  As the opinion notes, you can only do this if the employer fails to issue a W-2, and only after you have contacted the employer asking for one.  No problem!

In November 2008, ITS Financial held a paystub training session for Instant Tax Service franchisees and area developers. ITS called the training session the “Stub

The purpose of ITS Financial’s “Stub Shop” training was to instruct Instant Tax Service franchisees and area developers how to both prepare as well as transmit tax returns to the IRS based on paystubs, instead of Forms W-2. Attendees at the Stub Shop were also instructed how to avoid detection by the IRS.

But can’t you get in trouble for that?

During the “Stub Shop” training, David Franklin, an Instant Tax Service franchisee from Indianapolis and Ogbazion’s close friend, instructed attendees that any Instant Tax Service store caught paystub filing might have its EFIN suspended during the tax filing season by the IRS or by the bank providing ITS Financial loan products. Franklin instructed attendees that they should have backup EFINs that, with ITS Financial’s assistance, can be “turn[ed] on” to replace suspended EFINs and allow the store to keep filing tax returns electronically.

In case you’re wondering, that’s not typical in the tax business.

The opinion said that ITS preyed on primarily served low income individuals,  adding that “Instant Tax Service specifically targets African-American single mothers.”

So Fesum Ogbazion is out of the tax-prep business, absent a successful appeal — which seems unlikely.  Given the behavior outlined in the injunction opinion, criminal charges may follow.  Unfortunately the financial chaos inflicted on ITS customers will linger.

Cite: ITS Financial LLC, et al, DC-SD Ohio, No. 3:12-cv-95.



Tax Roundup, 8/29/2012: Envision an IRS exam. Also, weathering storms, and more!

Wednesday, August 29th, 2012 by Joe Kristan

Sometimes a “visionary” is just seeing things.  The Department of Justice yesterday announced that a “visionary” tax advisor has been enjoined from giving any more tax advice.  From the Department of Justice press release:

The civil injunction order against Scott A. Waage, of San Diego, was signed by Judge William Q. Hayes of the U.S. District Court for the Southern District of California. Waage agreed to the injunction without admitting the allegations against him. 

The government  complaint  in the case alleged that Waage, a self-proclaimed “visionary tax attorney,” promoted tax fraud schemes that helped customers evade income taxes through a concept he called “Strategic Integrated Planning.” According to the complaint, one of Waage’s schemes involved creating and using sham consulting corporations (purportedly headquartered in customers’ homes) that did not perform consulting services. Customers funneled funds to the sham companies to pay for and improperly deduct the customers’ personal expenses, the complaint alleged.  

They must have lowered the bar for what is “visionary.”  Using phony businesses to try to deduct personal expenses isn’t exactly the cutting edge of tax chiseling.

The injunction order requires Waage to give the government a list of all clients who used his tax planning or tax preparation services since 2001. Waage also must send his former clients notice of the injunction order.

That’s the problem when you use a “visionary” tax preparer who is willing to take “aggressive” positions that your everyday namby-pamby practitioner like me won’t touch.  When the preparer gets in trouble because he confuses “aggressive” with “absurd,” his clients can expect the IRS to take a close look at everyone on the client list.


“When the Storm is Over,” by Newgrass Revival

Kay Bell, When the storm’s over, don’t forget to claim possible tax help for your losses

Trish McIntire, Disaster Preparedness and Response

Jim Maule, More on Income Averaging:

 The special income averaging for farm and fishing income is available regardless of the economic status of the taxpayer. In the meantime, the taxpayer in Francis v. Comr., T.C. Summ. Op. 2012-7, a member of the Armed Forces not counted among the ranks of the wealthy, is stuck with a disappointing tax outcome caused by circumstances beyond his control. Why the better tax treatment for farming and fishing income and not for military back pay? Something about this nation’s tax priorities isn’t right, but those who pay attention have known that for a long time.

But weep for the farmers.  2012 US Net Farm Income At a New Record Even With The Drought! (Paul Neiffer)

Why You Need a Will (Missouri Tax Guy)

Tax headaches if money-market funds are allowed to break the buck? Floating NAVs could prove taxing (Robert N. Gordon)

Linda Beale,  Tax Extenders:  where the Senate stands.

Howard Gleckman,  Should Congress Curb Tax-Exempt Municipal Bonds?  (TaxVox)

Shock! Media Leaves Out Key Things in Covering Poll Showing Support for Taxing Rich (Joseph Henchman).  “Support for increasing taxes on the rich has been dropping over time, not increasing.”

Daniel Shaviro,  Why didn’t the IRS and Treasury do more about aggressive tax planning techniques of the sort that Romney appears to have used extensively?  Because they were legal, maybe?

It’s Wednesday, so it’s a Buzz Day for Robert D. Flach.

Anthony Nitti,  Blog Author Makes Appearance in Taxes Magazine; Though Regrettably, Not the Swimsuit Issue.  No disrespect, but I don’t regret for a moment that “Taxes” lacks a swimsuit issue.  There are vanishingly few practitioners you’d want to see that way.

News you can use: Look, It’s Okay, The Big 4 Doesn’t Want You (Going Concern)


Tax Roundup, 8/16/2012: Kansas bleeds again. Also: super-PACs and lottery punks.

Thursday, August 16th, 2012 by Joe Kristan

Kansas, since 1861.  In a decision that will prevent a new era of border ruffians, a Federal Appeals Court has ruled that Kansas is indeed part of the United States, and Kansas citizenship doesn’t get you out of paying income tax.

From the opinion:

Mr. Richmond does not challenge the mathematical computations underlying the notice of deficiency and the Tax Court’s decision.

     Instead, he contends that he is “a citizen of Kansas that earned a living through activities occurring solely under the jurisdiction of Kansas” and that he has not received “income,” as that term is defined for tax purposes, because he has not “engag[ed] in optional, or privileged activities that fall under Federal jurisdiction and result in a meaningful gain.”

Surprise, that doesn’t work.  IRS wins.

Cite: Richmond, CA-10, No. 12-9000.


In other Kansas News,  Federal Court in Kansas City, Kansas, Shuts Down 
Tax-return Preparer (Department of Justice Press Release).  The manager of an Instant Tax Service franchise was permanently barred from the tax prep business.  From the press release:

The government complaint  in the Kansas case alleges that Goitom managed an Instant Tax Service store in Kansas City, Kan., where he prepared false and fraudulent income tax returns for others. The United States accused Goitom of forging forms W-2, filing returns improperly based on paycheck stubs rather than W-2 wage statements, fabricating income for phony businesses to obtain larger tax credits, claiming false education tax credits and filing tax returns without customer authorization. The complaint also alleges that Goitom sold false and deceptive loan products to Instant Tax Service customers.

It’s a safe bet that his clients have heard from the IRS about their great refunds.


TaxProf, CRS: 501(c)(4)s and the Gift Tax. Paul Caron passes on a Congressional Research Service analysis of whether donations to political advocacy groups are subject to gift tax.  CRS says “the stronger argument” is that they are taxable, but the IRS has historically not attempted to tax such donations.  The report does address the argument I find persuasive, but pooh-poohs it (my emphasis):

…some have argued that while contributions to 501(c)(4) groups may be generally subject to the gift tax, those contributions made for advocacy-related purposes (e.g., issue advocacy, campaign activity, or lobbying) are exempt. Part of this argument is statutorily based, with the assertion that these types of donations may not be taxable gifts under at least three theories: (1) the donor may receive full and adequate consideration in the form of the organization’s advocacy on his or her behalf; (2) some are made within the ordinary course of business; and (3) advocacy related contributions were not the type of transfer that Congress intended the gift tax to cover. There is case law, albeit minimal, to support some of these conclusions; however, the holdings in these cases are not without controversy, and it is not clear the extent to which other courts would agree with their analysis.

The gift tax exists as a backstop for the estate tax.  It keeps people from getting their estates to the next generation tax-free by not waiting to die before passing it on.  Gifts to super-PACs don’t accomplish this.  Also, such gifts aren’t the “disinterested generosity” of a true gift; the giver gives the money to get the 501(c)(4) to advance the donor’s political point of view.


Jason Dinesen has the newest installment of his report on the nightmare his client faced when her recently-deceased husband’s identity was stolen:

So how did Brian’s identity get stolen? My guess is that someone looked on the “Death Master File.”

This is a file published by the government that gives all the information an identity thief could want. Basically, whenever someone dies, their name goes in this file, along with their date of birth, date of death and Social Security Number.

The continuing publication of the social security numbers of the newly-dead is a continuing scandal; it’s mind-boggling that the government hasn’t stopped making it so easy for identity thieves.


Janet Novack asks,  How Much Tax Would You Owe On A $320 Million Powerball Jackpot?  Well, Do you feel lucky, lottery punk? (Kay Bell)

Wisconsin trucker skids into “self-rental” ruleMy new post at, the Des Moines Business Record’s blog for entrepreneurs.

Tax Foundation, A Global Perspective on Territorial Taxation: (Via the TaxProf)

TaxGrrrl, What Romney and I Have in Common With More Than 10 Million Taxpayers.  He extends his return, like I do.  TaxGrrrl explains why extensions are often the right tax move.

Peter Reilly, American Working Abroad Gets Nasty State Income Tax Surprise

Anthony Nitti, Plaxico Burress Shoots Self in Foot (Not Literally This Time), Fails to Pay Taxes

Why blogging is better than buying ads:  Here’s 10 Embarrassing and Irrelevant Examples of Accounting Firm Advertising (Going Concern)


Tax Roundup, 8/9/12: IRS scolded for carelessly issuing ID numbers. Plus stupid vs. criminal, hitting bottom and digging.

Thursday, August 9th, 2012 by Joe Kristan

IRS Commissioner Douglas Shulman

IRS discouraged fraud detection in ID program (Huffington Post):

The Internal Revenue Service has been looking the other way instead of rooting out fraud when people apply for taxpayer identification numbers, Treasury Department investigators said Wednesday, exposing a shortfall with both financial and national security implications.

A member of Congress who sits on the House’s tax-writing committee responded to the report by calling on IRS Commissioner Douglas Shulman to resign, claiming the IRS is helping illegal immigrants defraud the government.

He wants the Commissioner to resign for that?  Considering that the Commissioner oversees the mailing of $5 billion annually to thieves, that he has terrorized and financially ruined otherwise law abiding Americans for footfault paperwork violations, and that he has, with questionable authority, imposed an expensive and futile preparer regulation scheme, this new outrage needs to take a number.

More coverage from the Wall Street Journal, Linda Beale and the TaxProf; read the TIGTA report here and a TIGTA press release here.

Instapundit on state film tax credits:

REPEAL THE HOLLYWOOD TAX CUTS!  (LOCAL EDITION):  La. film tax break program needs limits, budget group says.   “Louisiana has spent more than $1 billion over the past decade to attract movie productions to the state, but hasn’t received much in return besides the prestige of hosting big-name Hollywood actors, according to a report released today.  The left-leaning Louisiana Budget Project suggests state lawmakers should put tighter limits on the generous film tax break program, lessening the credits offered and capping the amount of money it can cost the state each year.”  Actually, it should be abolished, as should similar programs in almost every other state.  And this is something state Tea Party groups might even make common cause with lefties on.

A sadder-but-wiser Iowa repealed its version of the film credits this year after it collapsed in scandal and disgrace and the State Auditor reported that 80% of the credits were issued improperly or lacked documentation.  But in defense of the program, two filmmakers are moving to Iowa for up to ten years thanks to the film tax credit!

It’s time to register for this year’s ISU Center for Agricultural law and Taxation Farm Tax Schools!  I will be on the Day 1 panel at all eight sessions, starting with the October 29 school in Mason City.

We’re vacationing in the mountains this year, kids. The Plot Thickens for Swiss Bankers Involved In U.S. Evasion: (Jack Townsend):

Swiss bankers whose names were delivered to the United States in April as part of the crackdown on US tax evaders face the risk of arrest while travelling in some European countries, not just on US soil.

Well, the Alps are nice…

Stupidity is no crime: Were Reid’s Remarks About Romney’s Returns Unlawful? (TaxGrrrl)

We’re just getting started!  Have We Reached the Nadir of Tax Policy Discourse? (Going Concern)

“Bipartisan” means they’re ganging up on us: Wind energy tax breaks are bipartisan in Iowa (Ames Tribune)

Kay Bell has a new Carnival of Taxes for State Fair week!

Tax Policy Blog:  Misunderstanding Tax Reform: The Case of The Olympic Tax Elimination Act


Lawsuit challenges preparer regulation program

Tuesday, March 13th, 2012 by Joe Kristan

The libertarian public interest law firm Institute for Justice is suing the IRS today to shut down the preparer regulation program. From the IJ press release:

Congress never gave the IRS the authority to license tax preparers, and the IRS can


Kansas City tax advisor runs out of tax miracles at appeals court

Wednesday, August 17th, 2011 by Joe Kristan

There are no tax miracles.
Sure, lots of folks say there are, if you just hire them, or buy their book. There are always clients for those who promise a painless end to tax woes, and there’s always an audience that wants to hear that their old tax pros are just incompetents or wimps who are afraid to take on The Man.
A case decided by the Eighth Circuit Court of Appeals holds a lesson for these folks. The Eighth Circuit upheld an injunction against a host of tax plans promoted by former Coopers & Lybrand and Grant Thornton attorney A. Blair Stover. These included:
– A setup using a “parallel” C corporation with a November year end to suck all of the income out of an S corporation as “management fees” in December, providing an 11-month deferral of the tax on the income.
– A similar deal where the substance-free management company was owned by an ESOP, thus sheltering the income until it was withdrawn by the owner.
– Still another deal where the “management” C corporation was owned by a Roth IRA.
While these may have seemed attractive at the time, they worked out badly for the clients. From the Appeals Court opinion:

The IRS conducted a lengthy and costly investigation into Stover’s schemes. The district court found that agent Rhonda Kimball spent over three thousand hours (more than one year’s normal work) unraveling transactions for just two of Stover’s clients. It also found that even the most conservative estimate of the tax loss to the government caused by Stover’s schemes was $100 million, and potentially as high as $800 million. Agent Janice Mallon testified that a “reasonable estimation” of the government’s tax loss was $300 million. Apart from those costs, most of Stover’s clients had to pay other professionals to “undo” the structures Stover promoted, organized, and sold. Many had to pay penalties to the government.

Until things blew up, these taxpayers probably sneered at their wimpy old tax advisors, who weren’t willing to be really creative like Mr. Stover. In the end they had to pay extra to the IRS and to those milquetoast tax people who color inside the lines. One of these cases showed up in the Tax Court just last month. It’s something to keep in mind when you see one of those “pennies on the dollar” TV ads.
Cite: Stover, Case No. 08-6018-CV-SJ-ODS, CA-8, 8/16/2011
Kansas City attorney gets unwanted review of his tax work


CPA: Can’t Prepare Anymore

Tuesday, July 26th, 2011 by Joe Kristan

If you thought “CPA” only stood for “Certified Public Accountant,” you can learn something from a recent U.S. District Court case decided in Des Moines. The government sued to bar an Iowa tax practice from continuing to prepare tax returns. The judge noted one of the practitioners had been in trouble with the IRS before for improperly claiming to be a CPA on a power of attorney form:

Schwartz-Musin appealed the District Director


The Tax Preparation industry is an unregulated jungle of anarchy

Friday, July 1st, 2011 by Joe Kristan

Some headlines of non-regulation this week:
USDOJ: United States Sues Seattle-Area Man to Bar Him from Promoting Alleged


Preparers support higher penalties on negligent and fraudulent taxwriters

Wednesday, June 29th, 2011 by Joe Kristan

20110629-1.gifThe tax law is so complicated that errors and manipulation are rife. So what does a guy largely responisble for creating the problem do? Blame the preparers, of course. From Tennessee Tax Guy:

Yesterday, Senate Finance Chairman Max Baucus (D-Mont.) added several last minute changes, including the imposition of higher penalties on paid tax preparers, to a package of free trade agreements with foreign countries such as Korea, Panama and Colombia and a Trade Adjustment Assistance (TAA) program designed to provide relief to workers who have lost their jobs due to foreign trade.

We’d get much further with severe penalties for negligent and fruadulent tax legislation. Here are some ideas:
– For any effort to “solve” a problem with a new tax credit or deduction: a choice between two hours in the stocks in every county seat in the congresscritter’s home state, or riding a bike naked across Iowa in January.
– For every bill drafted with the fraudulent title of “temporary” to game the budget scorekeeping process, like the dozens of “extenders” passed every year or two, a choice between public flogging or resigning from office and permanent exile to a monastary, subject to an eternal vow of silence.
But this might be way too lenient.


I can’t use the tools I have. I need more tools.

Monday, May 9th, 2011 by Joe Kristan

The IRS is in the midst of imposing a huge new regulatory scheme on the nation’s tax preparer industry. It’s hard to be convinced that they’ll use their new powers well when you see how they use the posers they have. Janet Novack reports:

Over the course of a year, the Internal Revenue Service processed and paid out $12.1 million in fraudulent tax refund claims submitted using the stolen names and Social Security numbers of 5,108 dead people. Incredibly, the claims were all processed under the


One less tax preparer in Kansas City

Tuesday, March 29th, 2011 by Joe Kristan

The Justice Department reports that it has shut down a peddler of tax delusions in Kansas City. Gerald A. Poynter II has been permanently enjoined by a federal judge from preparing returns and promoting tax scams. From the Department of Justice Press Release:

The court found that Poynter, who uses the business name


Carmen Miranda can’t do your taxes

Thursday, March 10th, 2011 by Joe Kristan

The IRS has shut down another tax prep firm for allegedly fabricating deductions and credits. That’s not unusual, but there is a twist this time:

A federal court in Providence, R.I., has ordered that Michael Brier, the owner of the tax return preparation firm Refunds Now Inc., and his employees, Jeffrey Sroufe, Esther Santiago and Carmen Miranda, be permanently barred from preparing federal income tax returns for others, the Justice Department announced today. The permanent injunction order, to which the four individuals consented, applies to them personally and doing business under the names Refunds Now Inc., RNTS Inc., FTIRS Inc., POTIRS Inc. and IHIRS Inc.

The famous Carmen Miranda was “the Brazilian firecracker who mangled her English dialogue and caused all sorts of plot complications in some memorable 20th Century Fox musicals. “ This one mangled tax returns instead.


This man probably feels quite regulated

Friday, January 28th, 2011 by Joe Kristan

Some Illinois taxpayers are in need of a new tax return preparer. Sidney Dove, the proprietor of “Sid’s Tax” in Joliet, needs to find a new line of work:

A federal court in Chicago has permanently barred Sidney Dove, a tax-return preparer from Joliet, Ill., from preparing federal income tax returns for others, the Justice Department announced today. U.S. District Judge Charles Kocoras also ordered Dove, who does business under the name “Sid


Funny, you don’t look unregulated

Monday, October 11th, 2010 by Joe Kristan

The IRS proposals to impose a new regulation regime on preparers are misguided and foolish. When this is pointed out, some regulation boosters ask the question that Robert D Flach asks:

Since regulation does not work would you prefer that CPAs, attorneys, stock brokers, architects, engineers, doctors, etc not be regulated?

Robert, there is no such thing as an unregulated preparer industry. In fact, tax return preparation is regulated right now. Hardly a week goes by without the IRS announcing that it has sued or shut down another preparer for bad behavior. Preparers can and do go to jail for bad work. For preparers covered by the Enrolled Agent, CPA and Attorney designations, the IRS and state agencies are always at work investigating and disciplining bad actors.
The most important source of regulation, of course, is the client. Every time a client chooses or fires a preparer, regulation takes place at its most effective level. If a preparer is incompetent, clients will inflict punishment by walking away long before the IRS has any idea what is going on. This regulation, while imperfect, will always be more effective than anything the ponderous IRS behemoth will ever do.
What the IRS proposes wouldn’t be the first discipline in a nasty and brutish world of anarchy. It is the imposition of a specific sort of regulation regime: a new national occupational licensing regime, complete with barriers to entry and centrally-administered annual compliance requirements on an unprecedented national scale. This is superficially attractive to some preparers who are not Enrolled Agents, CPAs or lawyers because it gives their business the dignity of a licensed profession. It pulls up the ladder behind them, reducing their competition and allowing them to charge higher prices. I’m sure that many regulation advocates sincerely believe that the consumer will benefit by not being allowed to buy from unlicensed preparers, but it’s also true that many other regulation advocates likely see themselves as standing to benefit financially.
I believe the attraction of these currently unlicensed preparers to regulation is short-sighted, and that they will ultimately be losers to the benefit of the nationwide franchised preparation outfits. It’s also probable that the regulations will bring little benefit to consumers despite imposing costs on consumers and the preparation industry. But one thing is certain: the industry isn’t unregulated now.
Considering the pointless and burdensome nature of the IRS proposals, regulation advocates need to articulate what problems they are really trying to solve, and whether the answer to those problems is a vast new IRS bureaucracy.
Tax Policy Blog: Institute Criticizes New Tax Preparation Licensing Requirements Occupational Licensing Abuse Meets the IRS
Prior Coverage:
Institute for Justice speaks out on IRS power grab
Preparer testing? Only after Congresscritter testing, Treasury-secretary testing, and IRS agent testing.
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Institute for Justice speaks out on IRS power grab

Saturday, October 9th, 2010 by Joe Kristan

The libertarian public interest legal advocate Institute for Justice has joined the fight against the impending tax prep regulation regime. In an article in the Daily Caller, IJ attorney Dan Alban rips the proposed IRS power grab:

This scheme would disproportionately hurt small tax-return preparation businesses and independent preparers, many of whom may be forced out of business. Part-time and seasonal preparers


Don’t you feel more competent already?

Thursday, September 30th, 2010 by Joe Kristan

The IRS is still working out the kinks in its new system where all preparers will have to register for a new identification number. Tax Analysts reports ($link) system breakdowns and an entry field for preparer “CAF” numbers that was one digit short of the amount of digits in CAF numbers.
Russ Fox says he got registered without a hitch, but he has a nagging question:

As for getting $50 of value from this process, that remains to be seen.

Especially the part where even non-signing assistant preparers — whose ID number will appear nowhere on the return, making their registration useless for monitoring and enforcement — have to pay $50, plus the $14.25 to Accenture for running the system.
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If that’s not regulation, I’d hate to see what regulation looks like

Friday, September 17th, 2010 by Joe Kristan

Peter Pappas passes on word of an Orlando preparer shut down by the IRS for allegedly inventing deductions and dependents for clients. He then makes a puzzling comment at the end:

“Score a point for tax preparer regulation.”

It seems like the preparer was effectively regulated by being closed down. As for the additional regulation that Commissioner Shulman is imposing: somebody willing to commit blatant fraud isn’t going to have a change of heart because they have a registration number and have to pass some lame “proficiency” test.


St. Louis firm settles with IRS, survives

Wednesday, March 31st, 2010 by Joe Kristan

The IRS attack on a St. Louis CPA firm ended in a settlement yesterday that falls far short of what the IRS initially sought.
In February 2008 the feds sued Zerjav & Company P.C. to permanently ban its principals from the tax business as a result of a spectacular series of alleged violations:

The complaint alleges that Tiger Zerjav


IRS power grab over prep industry: the first invoice is announced

Monday, March 29th, 2010 by Joe Kristan

IRS Commissioner Doug Shulman is rolling out pieces of his power grab over the tax prep business:

Under the proposed regulations, the IRS will issue forms, instructions, or other guidance that will require paid tax return preparers to begin using PTINs for all tax returns and refund claims filed after Dec. 31, 2010. Currently, tax return preparers must use either a PTIN or their social security number on tax returns or refund claims that they prepare.
The proposed regulations also provide that tax return preparers must apply for a PTIN, regularly renew the PTIN, and pay associated user fees, which will be described in upcoming guidance. As part of the process, some tax return preparers would also be subject to a tax compliance check, which could include a review of the preparer