A Cautionary Tale About Tax Preparation

A cautionary tale out of Aberdeen, Maryland reflects why it is so important to research your preparer.  Charese Johnson, of the now-forfeited company Prodigy Accounting Services, may be one of the newest additions to the list of preparers enjoined, or “blocked”, from preparing returns for taxpayers.  Ms. Johnson has a history of preparing fraudulent federal tax returns that managed to shrink tax liabilities while claiming hefty refunds for clients.  Ms. Johnson generated these seemingly too-good-to-be-true returns using  the “redemption theory”.  The redemption theory centers around the idea that the federal government has a secret bank account open with the US Treasury for each citizen.  Taxpayers are able to use their secret account to redeem funds to pay towards tax liabilities or claim tax credits.

The redemption theory is deemed a frivolous tax position, meaning that such returns are rejected by the IRS.  In the matter of the specific returns that Ms. Johnson prepared, after a return was rejected, slight changes were made on the amended return and it was re-submitted, without correcting the frivolous aspects of the original return.  The IRS has identified at least 41 returns prepared by Ms. Johnson that have used the redemption theory to reduce taxpayer liabilities.   The IRS argues that the time it will need to spend to investigate future returns prepared by Ms. Johnson justifies the requested injunction.

To access the IRS directory of federal tax return preparers, please visit:  http://irs.treasury.gov/rpo/rpo.jsf.  To see the list of individuals and businesses enjoined from preparing returns, please visit: http://www.justice.gov/tax/program-shut-down-schemes-and-scams.