I’ve seen reports of Bozo tax preparers inventing deductions and dependents. This is the first time I’ve heard of a tax preparer inventing a business from scratch on a tax return. The results were good…for a while.
Ramona Johnson was the manager of Tax Office One in Fort Worth, Texas; her daughter-in-law, Nekia Everson, was a tax preparer. From 2008 through 2011 the business earned in $1.9 million in fees, so it was producing a good amount of revenue. And they were probably getting good refunds for their clients. After all, they did the “normal” things for Bozo tax preparers; phony dependents and itemized deductions for personal expenses were the norm (so that taxpayers would qualify for the Earned Income Credit). But then:
On some returns, Johnson and Everson would completely fabricate a Schedule C business, including income and expense items. For some taxpayers, Johnson would create a false and fraudulent Schedule C reflecting the taxpayers had a profit from a nonexistent business. This false profit, together with claimed dependents (both fraudulent and actual), would be used to claim the taxpayer was entitled to an earned income tax credit.
Of course, while they had gross receipts of $1.9 million, somehow the gross receipts didn’t make it onto the personal tax returns. Ms. Johnson neglected to include tax preparation income on her 2009 and 2010 returns:
In addition, the government presented evidence that for calendar years 2009 and 2010, Johnson filed tax returns in which she reported total income of $2,850 and $16,906, respectively, when she well knew that the income amount was understated in that it did not include income she received for her work preparing tax returns.
Ms. Johnson and Ms. Everson will have plenty of time to think about whether preparing accurate tax returns would have been a better strategy. Ms. Johnson will be at ClubFed for 170 months (over 14 years); Ms. Everson will be there for 95 months (just under 8 years).
For taxpayers the usual rules apply: If it sounds too good to be true, it probably is.