Justice Department Sues Detroit-Area Tax Preparation Franchisor, Four Others Using Franchise Name, to Stop Alleged Tax Fraud | OPA
The United States has filed four civil injunction suits in federal court in the U.S. District Court for the Eastern District of Michigan. The suits seek to enjoin a Detroit-area tax preparation franchisor from owning, operating and franchising tax preparation businesses and to prohibit the franchisor, as well as certain others that have agreements to operate using her business’s name, from preparing tax returns for others. The complaints also request that the court require all defendants to disgorge the return preparation fees they obtained by preparing allegedly false and fraudulent tax returns.
The complaint against Jeanisia Allen alleges that she owns, operates, and franchises a tax return preparation business known as “The Tax Experts” through co-defendants First Choice Tax Solutions LLC, The Tax Experts Inc., The Tax Experts LLC, and Top Notch Taxes Inc. The other three complaints allege that Jennifer Sherman, Erica McGowan, Annetta Powell, and Jasmine Powell have each entered into agreements with Jeanisia Allen and her entity, The Tax Experts LLC, to use the name “The Tax Experts.”
Each of the government’s complaints allege that the defendants and their entities prepare and file tax returns to falsely increase their customers’ refunds, and profit through high and often undisclosed preparation fees at the expense of their customers and the U.S. Treasury. The complaints allege that the defendants engaged in misconduct, including falsely claiming the earned income tax credit; fabricating businesses, business income and expenses, resulting in understated tax liabilities; claiming false education credits; and claiming improper filing statuses. The complaints each allege that defendants’ activities have harmed their customers, who now may be liable for sizable penalties and interest.
According to the complaint against Allen, The Tax Experts has operated at least 32 stores, primarily in metro-Detroit, but also in Chicago and Los Angeles. Over the course of three years (2017, 2018, and 2019), businesses operating as “The Tax Experts” allegedly prepared more than 17,000 federal tax returns claiming over $82 million in tax refunds. The complaint alleges that Allen and The Tax Experts failed to train, oversee and control businesses that operate under an agreement to use that name, including failing to review tax returns prepared at franchise stores, resulting in the preparation of false or fraudulent tax returns exhibiting common and widespread false income, expenses, claims, credits and deductions. According to the complaint against Allen, the IRS examined 716 federal tax returns prepared by The Tax Experts, resulting in a total additional tax owed to the United States of $3,552,114, or an average of $5,349.57 for each adjusted return.
“Particularly during this time of year when honest taxpayers are filing their returns, we want the public to know that, working with our partners at the IRS, the Justice Department will pursue those who would abuse our nation’s tax laws,” said Acting Assistant Attorney General David A. Hubbert of the Justice Department’s Tax Division. “Fraudulent tax return preparers too often seek to take advantage of their customers and the U.S. Treasury, undermining our tax system.”
Return preparer fraud is one of the IRS’ Dirty Dozen Tax Scams and taxpayers seeking a return 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 red flag 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.
In addition, IRS Free File, a public-private partnership, offers free online tax preparation and filing options on IRS partner websites for individuals whose adjusted gross income is under $72,000. For individuals whose income is over that threshold, IRS Free File offers electronic federal tax forms that can be filled out and filed online for free.
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 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.