Return preparer fraud continues to be a major concern of the IRS. A recent case out of Las Vegas details how a husband and wife team of tax return preparers advised clients to participate in an illegal tax scheme. A federal court has imposed an injunction order on the couple, which permanently bars them from preparing federal tax returns for others and advising people on federal taxes. The full press release is shown below:
Las Vegas Federal Court Permanently Bars Husband and Wife from Preparing Federal Tax Returns for Others and from Giving any Advice Related to Federal Taxes
A federal court in Las Vegas has permanently barred a husband and wife from preparing federal tax returns for others and from providing any advice related to federal taxes, the Justice Department announced today.
Judge Richard F. Boulware II entered the injunction order after sanctioning Wayne Reeves and Diane Vaoga for willfully refusing to comply with previous court orders directing them to participate in discovery. The court had warned Reeves and Vaoga that sanctions, including entry of the injunction against them, might be imposed for failure to comply with court orders.
In its injunction order, the court found that Reeves orchestrated and promoted, and that Vaoga assisted in, an illegal tax scheme. According to the order, Reeves advised clients to set up sham trusts and have their wages directed into accounts for those trusts as a way to improperly reduce their tax liability. Reeves also instructed clients to name him, Vaoga or another trusted third party as a signatory on their trust accounts. Both Reeves and Vaoga acted as trustees and sent clients pre-signed blank checks to allow them access to their money, collecting fees in the process. Reeves and Vaoga advised clients that there were numerous tax benefits associated with these trusts, including that the income from the trusts was nontaxable and did not need to be reported on tax returns; that clients could deduct personal expenses and count them as business expenses of the trusts; that clients worked for the trusts and thus were paid in tax-deductible management fees; that clients no longer needed to file federal tax returns; and that there were no problems with the Internal Revenue Service (IRS) in making these financial arrangements. The court found that Reeves engaged in this conduct knowing that such actions would improperly result in the understatement of his customers’ tax liability.
Return preparer fraud is one of the IRS’s Dirty Dozen Tax Scams for 2014. The IRS has some tips on their website for choosing a tax preparer. In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers and tax scheme promoters. Information about these cases is available on the Justice Department 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.