The Tax Fraud Blog – Qui Tam Attorneys

The IRS and the Justice Department work together to combat tax scams and to issue heavy fines and imprisonment for promoters. Meanwhile, taxpayers who become involved in these schemes must repay all taxes due plus interest and penalties.

The IRS has published its annual list of “dirty dozen” tax scams in 2011:

1. Hiding Income Offshore
2. Identity Theft and Phishing
3. Return Preparer Fraud
4. Filing False or Misleading Forms
5. Frivolous Arguments
6. Nontaxable Social Security Benefits with Exaggerated Withholding Credit
7. Abuse of Charitable Organizations and Deductions
8. Abusive Retirement Plans
9. Disguised Corporate Ownership
10. Zero Wages
11. Misuse of Trusts
12. Fuel Tax Credit Scams

A full discussion of the “dirty dozen” is available on the IRS’s website.

On February 24, 2010, the Justice Department announced that the Honorable Marcia Crone of the U.S. District Court for the Eastern District of Texas has permanently barred twelve (12) people from promoting an alleged tax fraud scheme involving false income tax credits. The twelve (12) are among thirty-two (32) defendants named in a civil injunction lawsuit who allegedly helped customers claim more than $30 million in false federal income tax credits designed for producers of fuel from non-conventional sources. A total of 23 of the 32 defendants have now been barred. The thirty-two (32) defendants include four (4) Certified Public Accounts, twenty-seven (27) tax preparers and one other individual.

According to the government’s original complaint, the tax fraud scheme involved claiming tax credits based on the purported recovery and sale of methane from landfills in Puerto Rico, Illinois, New York, Ohio, and Connecticut. The complaint averred that no methane was ever produced or sold and that the defendants allegedly created fictitious business records to falsely document the purported production and sales. The tax preparers allegedly sold interests in the fictitious methane production facilities to thousands of customers in at least fourteen (14) states across the country and prepared income tax returns for customers claiming tax credits based on the fictitious methane sales.