IRS Tax Attorney

Tax Return Preparer – section 6694 – Fraudulent tax returns: False statements. Two tax come back preparers and their accounting services business were permanently enjoined under Code Sec. 7408 because they engaged in conduct subject to penalty under Code Secs. 6700 and 6701. The preparers promoted and organized the plan that assisted their customers in preparing false taxation statements.

They falsely stated that those who participated in the plan had the right to exclude payment for personal services or labor from taxation. Moreover, the preparers had knowledge that their representations and advice were false or fraudulent and the documents prepared by them would be utilized to understate their customers’ right tax liabilities. Additionally, there is no sign that the preparers wouldn’t normally take part in violation of the tax code.

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NICHOLAS, USA District Court: This matter come prior to the Court on plaintiff’s motion for Default Judgement of Permanent Injunction. Defendants Archie J. Pugh, Jr., and Theodore Pugh were offered and also have failed to appear in this matter properly. Defendants Archie J. Pugh, Jr., and Theodore Pugh are marketing the so-called “Claim of Right” tax-evasion structure.

Accordingly to the complaint, the Pughs claim that all compensation or income are considered nontaxable falsely. Moreover, defendants also prepare income tax returns for customers predicated on the fraudulent Claim of Right program. Defendants market the Claim of Right program to customers of Archie’s Tax and Accounting Service. 250 to really have the Claim of Right taxation statements prepared.

As part of the system, defendants falsely inform their customers that they have a common-law and constitutional right (under the Fourteenth Amendment to the United States Constitution) to exclude from taxation all payment for personal services or labor rendered. Defendants falsely declare that I.R.C. § 1341 codifies this so-called common-law or constitutional right and entitles their customers to have a deduction in the amount of compensation earned, which in most cases eliminates a participant’s tax liability. Defendants declare that this is done by declaring an itemized deduction to offset income reported on W-2 forms, or by firmly taking a Schedule C deduction to offset any net income from self-employment. Ÿ Compensation earned is immune from taxation.

Ÿ Money earned in trade for personal labor or services will not constitute taxable income and may be deducted. Ÿ Income earned for labor is a not for income activity and thus deductible on tax returns. Defendants’ claims regarding the taxes benefits associated using their Claim of Right program are false. In addition, the taxation statements defendants have ready based on the Claim of Right tax-evasion plan are fraudulent, and understate their customers’ income based on this fake, discredited concept. Moreover, defendants know or have reason to learn that the tax-fraud plan they promote is unlawful and that their claims to customers about the scheme’s taxes benefits are false.

Indeed, other federal government courts have permanently enjoined other persons from promoting similar Claim of Right tax-fraud strategies, such as United States v. Lloyd, 2005 U.S. Dist. LEXIS 32747 (M.D.N.C. 2006 U.S. App. LEXIS 16254 (4 th Cir. Rule 55 of the Federal Rules of Civil Procedure provides that where a party fails to plead or otherwise defend against a complaint, and after entry of default, default judgment might be entered against such person.

Section 7407 authorizes the Court to enjoin a federal-tax-return preparer from participating in conduct at the mercy of charges under I.R.C. §§ 6694 or 6695 if the Court finds that injunctive alleviation is suitable. Section 6694 penalizes preparers on two grounds. First, under § 6694(a), a preparer is at the mercy of penalty for negligently understating a customer’s taxes liability credited to unrealistic positions. Second, under § 6694(b), a preparer is subject to penalty for any willful try to understate the taxes responsibility of customer or any reckless or intentional disregard of rules or regulations.

2. Defendants Have Continually and Repeatedly Engaged in Conduct At the mercy of Penalty Under IRC § 6695. Here, the Pughs prepared, but failed to sign their customers’ income returns or identify themselves as the tax return preparer. 4. Defendants Are Barred from Preparing Federal TAXATION STATEMENTS. Since a small injunction wouldn’t normally avoid the Pugh’s conduct, they should be altogether barred from planning returns.

8 Defendants whole return preparation business is targeted on preparing fraudulent returns that interfere with the administration of the internal revenue laws. Moreover, the Pugh’s deceptive returns limited by misuse of an individual IRS form, or an individual factual misrepresentation. Rather, the Pugh’s have falsified Forms 1040, Forms 1041A, and Schedules C. For these good reasons, the Court enjoins them from planning all federal tax returns. Section 7408 authorizes a court to enjoin individuals who have involved in any carry out subject to penalty under § 6700 if the Court finds that injunctive relief is appropriate to prevent the recurrence of such conduct.