South Carolina Man Allegedly Owns Three Liberty Tax Service Stores Accused of Preparing Fraudulent Tax Returns
Three Columbia-area, South Carolina Liberty Tax Service franchises deliberately prepare false federal income tax returns in order to increase their customers’ refunds, according to a civil lawsuit filed today by the Justice Department. The United States’ complaint asks the U.S. District Court for the District of South Carolina to permanently bar the alleged franchisee for all three locations, Christopher Paul Haynes of Irmo, South Carolina, from preparing federal tax returns for others.
According to the suit, Haynes and his employees prepare tax returns that include misstatements such as false or inflated Schedule C (Profit or Loss From Business) income and expenses, bogus dependents, false filing statuses and improper unreimbursed employee business expenses. For example, the complaint alleges that Haynes’s employees included a bogus “arts and crafts” business on one customer’s tax return and a bogus “hair care” businesses on another’s. In each case, according to the complaint, the false statements purported to allow the customer to qualify for a larger Earned Income Tax Credit and receive inflated tax refunds from the Internal Revenue Service (IRS).
The lawsuit states that Haynes’s Liberty Tax Service offices have prepared more than 9,700 federal income tax returns since 2010. Based on adjustments the IRS has made to tax returns prepared and filed by Haynes’s Liberty Tax Service offices for 2010 to 2013, the average tax deficiency for tax returns audited in connection with the IRS’s investigation of Haynes is $3,834 per tax return, according to the suit.
The complaint also alleges that Haynes does not report to the IRS the wages he pays some of his employees, even though the report is required by law. According to the complaint, Haynes also fails to withhold and pay over to the IRS federal employment taxes for those same employees.
Return preparer fraud is one of the IRS’s Dirty Dozen Tax Scams for 2016. The IRS has some tips on its website for choosing a tax preparer and has launched a free directory of federal tax preparers. In the past decade, the Justice Department’s 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’s 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.
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