The word “thief” is commonly applied to many individuals including those who rob banks, burglars, and purse-snatchers. But the term is generally not associated with tax preparers. In fact, most tax preparers diligently go about their business and work hard to ensure that their clients receive the most favorable tax treatment possible. But like all professions, there are some bad apples. And tax preparers that lie to receive fraudulent refunds aren’t just committing a crime, they are putting their clients at risk by exposing their tax affairs to the heavy scrutiny of the IRS and in certain circumstances, the Department of Justice.
According to a press release by the Department of Justice, Sherri Davis, 42, and her son, Andre Davis, 24, were sentenced late last week on counts related to their illegal activity as tax preparers. The duo operated Washington, D.C.-based tax preparation service Davis Financial Services (formally 2FT Fast Facts Tax Service). According to court documents, Sherri and Andre filed several tax returns for the preparation service’s clients that included inflated Schedule A itemized deductions and wholly fictional Schedule C business expenses. The Department of Justice alleged that some returns filed by the preparation businesses included completely fabricated Schedule C businesses that were used to generate losses that enabled the taxpayer to receive a refund.
Sherri and Andre Davis were each convicted by a federal grand jury back in January of one count of conspiracy to defraud the United States. Sherri Davis was additionally found guilty of 25 counts of aiding and assisting in the preparation and filing of false federal individual income tax returns and three counts of filing false tax returns for herself. Finally, Andre Davis was also convicted of one count of aiding and assisting in the preparation and filing of a false federal individual income tax return.
The sentences that were handed down by U.S. District Court Judge Thomas Hogan were not particularly lenient. Sherri Davis was sentenced to serve four years in a federal prison, followed by three years of supervised release, and was ordered to pay restitution of nearly $650,000 to the IRS. Andre Davis didn’t receive any jail time, but was sentenced to serve a year of home-confinement and was ordered to pay nearly $40,000 in restitution.
Although the United States was defrauded out of hundreds of thousands of dollars by the Davis-duo, the taxpayers that sought their services were also potential victims. Regardless if the customers of the fraudulent tax preparation service knew about the shady practices of Sherri and Andre Davis or not, the taxpayer is ultimately responsible for any position on their tax return. If the IRS investigates a tax preparer, they will likely look into the tax affairs of all of the clients of the preparer, as well. The bottom line is: if your tax preparer goes down for tax fraud, the taxpayer will likely go down with them. This is especially true if the taxpayer knew of the fraudulent activity and sought out the services of the tax preparer for that purpose.
But most taxpayers don’t have bad intentions when having their taxes prepared and likewise, the vast majority of tax preparers are honest professionals who diligently follow the law when assisting their clientele. Whether you are a tax preparer who is being investigated or a taxpayer who is being threatened with an audit or an investigation, the best action that you can take is contacting an experienced tax attorney.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have experience in representing both tax preparers and taxpayers in various forms of audits, investigations, and full-blown civil and criminal litigation. When the IRS is breathing down your neck, it is in your best interest to have a seasoned tax attorney on your side to zealously advocate for your best interests. Many taxpayers and tax preparers believe that they can talk their way out of an investigation or other encounter with the IRS or Department of Justice. But in reality, many talk their way right into a federal prison cell. Don’t make the same mistake: contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.