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Florida Tax Preparer Banned from Filing Returns After Court Finds Evidence of Fraud

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Florida Tax Preparer Banned from Filing Returns After Court Finds Evidence of Fraud

San Diego Federal Tax Return Audit Attorney

Last month, the United States Department of Justice issued a press release announcing that defendant Ndaiziwei Kaya Chipungu and his tax preparation business, Society Financial Solutions, LLC, would be banned from preparing and filing tax returns, or from assisting with such services, after a Florida federal court found Chipungu guilty of numerous tax violations. According to court records, these violations included, but were not limited to, “Fabricating itemized deductions,” “improperly claiming false filing statuses,” and “claiming education credits to which… customers are not entitled”: all common examples, when executed willfully, of tax fraud. With the April 15 deadline to file 2018 taxes rapidly approaching, it may feel tempting to fudge the filing process – but be careful. Working with a tax preparer who breaks the rules and engages in fraud could cost you your money, your business, and even your freedom.

Tax Preparer Claimed False Credits, Deductions, Filing Statuses for Clients

A DOJ press release reports that Chipungu and the entity Society Financial Solutions are permanently banned from providing tax preparation services, per an injunction order dated February 22, 2019. In addition to imposing the ban, “The court also ordered that Chipungu and Society Financial Solutions… disgorge $487,879.24, representing the ill-gotten gains that they received for the preparation of tax returns.”

According to a court report and recommendation on the motion for judgment against Chipungu, he began preparing tax returns professionally in 2009 or earlier, becoming in 2011 “the sole member and registered agent” of what, in 2012, would be named “Society Financial Solutions.” (For more information about single-member LLCs, see our recent article discussing U.S. entity formation for non-resident aliens doing business in the United States.) Through this entity, which used various names while operating out of the Winter Park area, Chipungu “personally prepared at least 1,081 tax returns” during the period from 2011 through 2018.

Unfortunately, Chipungu used his knowledge of the tax code to help clients defraud the government and circumvent the law – while simultaneously “charging deceptive and unconscionable fees” for the service. The aforementioned court report lists, in addition to the “unconscionable fees,” eight separate violations of the Internal Revenue Code (IRC):

  1. “Failing to identify the actual paid preparer of the tax return”
  2. Claiming false deductions (which, as the IRS noted, was also among the Dirty Dozen top tax frauds of 2018)
  3. Claiming false filing statuses, such as “married filing jointly” or “head of household,” when not applicable
  4. Falsely claiming IRS education credits, which presently include the lifetime learning credit and American Opportunity Tax Credit (AOTC)
  5. Falsely claiming the Earned Income Tax Credit (EITC), which is only available to qualified “working people with low to moderate income”
  6. Avoiding due diligence rules to increase the aforementioned EITC
  7. Not providing clients with copies of tax returns for recordkeeping
  8. Reporting false information concerning business expenses and income

One detail from the report is particularly important: the IRS discovered tax preparer fraud by performing tax audits (“examinations”), which revealed that among five dozen returns prepared by Chipungu – 31 for 2014, plus 29 for 2015 – 100% resulted in tax deficiencies. If an IRS tax audit reveals indicators (“badges”) of fraud, the next step may be a criminal investigation.

California Criminal Tax Defense Lawyers Providing IRS Audit Representation

Federal laws make it a crime to knowingly prepare, or to assist in preparing, a false or fraudulent tax return. For example, under 26 U.S. Code § 7206(2), it is a felony offense to knowingly aid or assist with the preparation of false returns, which is punishable by up to three years in prison and/or fines of up to $100,000. If you or your tax preparer files a state, federal, personal, or business income tax return that contains serious errors or misstatements, the consequences can be devastating.

At the Tax Law Office of David W. Klasing, we are seasoned criminal tax defense attorneys who represent individual taxpayers and business entities, including CPAs, tax attorneys, and tax preparation companies. Providing skillful representation throughout the state of California, our Oakland criminal tax audit lawyers have more than 20 years of experience handling highly sensitive audit scenarios where issues of criminal liability are at stake, including eggshell audits and reverse eggshell audits. If charges have already been filed or an IRS criminal investigation is pending, we will move swiftly to build a comprehensive strategy focused on minimizing penalties, mitigating losses, and protecting your constitutional rights.

If you need dependable, trustworthy tax help, contact the Tax Law Office of David W. Klasing online, or call (800) 681-1295 to schedule a reduced-rate appointment today. Our services are available in both Northern and Southern California.

Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices San BernardinoSanta BarbaraPanorama CityOxnardSan DiegoBakersfieldSan Jose, San FranciscoOakland and Sacramento.

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