11/20/2009

News / Tennessee Woman Barred from Preparing Federal Tax Returns for Others; Judge Issues Preliminary Injunction

Preparer Claimed Large Tax “Refunds” Based on Phony Claims of Large Tax Withholding

WASHINGTON – A federal court today issued a preliminary injunction barring Karen Liane Miller of Nashville, Tenn., from preparing federal income tax returns for others. The court order found that Miller promotes a tax defier scheme that claims large fraudulent tax refunds for customers. The order, entered by U.S. District Judge Aleta A. Trauger, remains in effect while the lawsuit is pending. Violation of an injunction can result in civil and criminal sanctions, including fines and imprisonment.

The court found that Miller repeatedly prepared federal income tax returns claiming bogus refunds in "astonishing" amounts, based on a tax fraud scheme known as the "redemption" scheme. The court held that Miller prepared and filed 41 income tax returns for customers in 2009 claiming more than $8.3 million in fraudulent refunds. The court said that the redemption scheme is based on a frivolous theory that the federal government maintains secret accounts for its citizens, and that taxpayers can gain access to funds in those accounts by issuing IRS 1099-OID forms to their creditors.

The case against Miller is one of seven lawsuits the Justice Department filed across the nation in October, which seek permanent injunctions against tax preparers who allegedly promote the redemption scheme. The defendants in those cases allegedly prepared tax returns fraudulently requesting a total of $562.4 million in refunds. Under the scheme, participants file a series of false IRS forms, including tax returns, amended returns, and Forms 1099 (including Form 1099-OID) or Forms W-2, to request fraudulent tax refunds based on phony claims of large income tax withholding.


John A. DiCicco, Acting Assistant Attorney General for the Justice Department's Tax Division, thanked Brian Corcoran, the Justice Department trial attorney who handled the case and Shauna Henline, the Internal Revenue Service senior technical advisor who conducted the investigation.

http://www.justice.gov/opa/pr/2009/November/09-ag-1260.html

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