Wednesday, May 10, 2017

Pickett Family Tax Prep Companies Sued

Three related return preparers in South Florida prepare false tax returns for their customers, according to a new civil lawsuit filed by the Justice Department. The suit filed in the Southern District of Florida asks the court to permanently bar Fred Pickett Jr. and his children, Jalisa Steele and Fred Pickett III, from owning, operating, or franchising a tax return preparation business and preparing tax returns for others. 

According to the complaint, Pickett Jr., Steele, and Pickett III, all of Belle Glade, Florida, operate a tax return preparation business with several stores in South Florida under the names of Five Star Tax Services, Five Star Financial, and Millenium [sic] Tax Professionals. According to the complaint, the business has prepared over 8,000 returns since 2011 from the store locations in Belle Glade, Clewiston, Moore Haven, and La Belle, Florida.

The complaint alleges that by repeatedly underreporting tax liabilities and claiming bogus refunds on behalf of their customers, the defendants have caused the United States to lose substantial tax revenue. According to the complaint, the defendants misreport income, deductions, and credits on their customers’ tax returns by:

Fabricating businesses and business-related profits or losses;
Manipulating, maximizing, or falsely claiming the Earned Income Tax Credit (EITC);
Claiming false education credits;
Claiming spurious fuel tax credits;
Fabricating retirement account contributions and deductions; and
Failing to provide customers with complete copies of their tax returns.

One of the alleged examples of such conduct involves a married couple whose tax returns were prepared by Pickett Jr. According to the complaint, unbeknownst to the couple, Pickett Jr. reported a fake equipment business on their joint 2013 and 2014 tax returns, with combined losses that exceeded $90,000. These bogus losses, along with other retirement account-related fabrications, caused the couple to receive significantly inflated refunds each year, according to the complaint.

The complaint further alleges that the Internal Revenue Service (IRS) audited 55 tax returns prepared by the defendants. The IRS determined that each of these 55 tax returns resulted in a deficiency with an average tax deficiency of $5,891 per return and a total revenue loss of $323,986, according to the complaint.

Return preparer fraud is one of the IRS's Dirty Dozen Tax Scams for 2017 and taxpayers seeking a return preparer should remain vigilant. The IRS has some tips on their website for choosing a tax preparer and has launched a free directory of federal tax preparers.

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 on 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.

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