DOJ Seeks to Shut Down Alleged Serial Fraudulent Return Preparer

By:
Chris Gaetano
Published Date:
Jun 8, 2021
GettyImages-641141038-tax-fraud

The U.S. Department of Justice announced that it has filed a complaint against a tax preparer in Georgia who has allegedly been filing fraudulent tax returns for the past seven years.

The preparer, Shondre D. Pitts, runs a Macon-area tax practice called First Choice Tax Services. While tax preparers generally should work to get their clients the best deal they can, Pitts seemed to have gone past the line and into fraud. The DOJ believes him to have a long history of preparing fraudulent returns, including returns that claimed false itemized deductions, false income and business expense deductions, and fabricated business losses in order to fraudulently reduce the customer’s liability or claim improper tax credits. The DOJ further alleged that the returns Pitt prepared falsely claimed earned income tax credits, residential energy credits, additional child tax credits and education credits.

While this may have saved clients money in the short term, the DOJ said he harmed them in the long run, as his customers may face large income tax debts and may be liable for penalties and interest.

The IRS has said that it is because of cases like this that it has been seeking to regulate all paid return preparers for years. The IRS announced in 2010 that it intended to compel individuals who are required to sign a federal tax return as paid return preparers to register with the IRS and pay a user fee, as well as make mandatory the use of preparer tax identification numbers (PTINs). The program was initiated in response to an internal study indicating that many taxpayers were being ill-served by their preparers, and voicing alarm that such a large industry was largely unregulated. While CPAs, attorneys and enrolled agents were subject to professional standards, the report found that "a large share of tax return preparers do not pass any government or professionally mandated competency requirements before they prepare a federal tax return."

The program, however, was shut down by the D.C. Circuit Court of Appeals in 2014, which held that it overstepped the IRS's authority. Since then, registration has been voluntary, and another case in the D.C. Circuit held that so long as the IRS doesn't mandate registration, ithe voluntary program does not run afoul of the previous decision.

President Joe Biden may revive the program's mandatory nature, though: One of the provisions in his American Families Plan would give the IRS authority to regulate paid tax preparers, as it had wanted to before. The White House said that tax preparers will be vital in helping people claim the new tax credits that will come with the package, and so it believed that it's important to ensure that they are regulated.

Click here to see more of the latest news from the NYSSCPA.