Feds Seek To Shut Down Florida Tax Preparers Allegedly Costing Taxpayers Millions

The U.S. Department of Justice has filed a complaint seeking to bar nine Florida tax return preparers and their associated business from assisting in preparing federal income tax returns for others.

Background

According to the complaint, Richard Louis—sometimes known as the “Taxman,” Teddy Davis, James Merrill, Daniel Ouku, Demetrius Knowles, Harold Bornelus, Joseph Garrett, Marlyne Wah, and Romeo Davis prepared and filed thousands of federal income tax returns for customers through or in connection with an unincorporated business referred to as Taxman.

Specifically, the court documents state that Louis is a paid tax return preparer who operates a tax return preparation business, Tax Man Financial or Tax Man, Inc., in Fort Lauderdale, Florida. His codefendants are alleged to have worked with him to prepare tax returns. Louis and his codefendants generally charge between $90 and $250 per return, depending on complexity.

Allegations

Prosecutors claim that Louis and his codefendants understated the tax their customers owed and overstated the refunds to which they were entitled through various schemes.

One scheme used by the defendants was to claim fraudulent Residential Energy Credits on their customers’ tax returns. According to the complaint, Louis and his codefendants made up purchases for qualifying solar equipment and, in most cases, did not discuss the Resident Energy Credit with the clients. While the average rate of Florida taxpayers claiming the credit was 2.13%, Louis and his codefendants reported much higher rates, ranging from 28.74% to a whopping 78.26%.

Louis and Taxman also allegedly falsified and overstated business and itemized deductions on their customers’ tax returns, including filing Schedules C (business schedules) for customers they know do not own or operate a business. Some customers did not know that Louis and his codefendants were filing returns showing business losses.

Returns were also prepared for customers that did not correctly reflect Schedule A deductions, including charitable deductions. In one instance, the complaint alleges that a customer reported donations of $200-300 to church—but Louis reported $8,903 in charitable deductions. In another example, a customer said she had $1,500 in medical expenses, but Louis reported $12,982. The same kinds of misreporting were made with respect to real estate taxes and mortgages—on one occasion, Louis is said to have included mortgage interest twice.

Louis and his codefendants are also alleged to have prepared tax returns for customers claiming the incorrect filing status by using the head of household status or single filing status for married couples who should have filed as married.

Damages

The IRS estimates that the United States has lost millions of dollars in tax revenue due to the defendants’ actions. The complaint states that if the defendants continue to act as tax return preparers, “their conduct will result in irreparable harm to the United States.”

A permanent injunction, the feds argue, is the appropriate solution. They have also asked for, among other things, a list of customer names, Social Security numbers, and contact information.

Many taxpayers who sought assistance from the defendants have already had to amend their tax returns.

Be Careful

Remember—it’s your signature on the line. The DOJ reminds you to be careful when choosing a tax preparer. You can find a searchable directory of preparers in your area who currently hold professional credentials recognized by the IRS or an Annual Filing Season Program Record of Completion on the IRS website.

An alphabetical listing of those who have been enjoined from preparing returns and promoting tax schemes can be found on this page. If you believe that one of those persons or businesses may be violating an injunction, contact the DOJ Tax Division with details.