JUSTICE DEPARTMENT SEEKS TO STOP ALLEGED WASHINGTON STATE TAX SCAM

Gig Harbor Woman Allegedly Sells Fraudulent “Corporation Sole” Program

WASHINGTON, D.C. - The Justice Department announced today that it has filed a lawsuit asking a federal court to bar a Gig Harbor, Washington woman from marketing an alleged tax-fraud scheme. The complaint in the civil injunction case—filed in the U.S. District Court for the Western District of Washington—alleges that Rita I. Johnson, conducting business as Estate Preservation Association, falsely advises customers that they can use a so-called “corporation sole” to avoid paying federal income taxes.

According to the government’s complaint, more than 100 persons have purchased or participated in Johnson’s corporation sole program, each paying Johnson between $2,500 and $3,500. The suit asks the court to bar Johnson from continuing the promotion and to provide the Justice Department with a list of all her customers’ names, mailing and e-mail addresses, telephone numbers, and Social Security numbers. The complaint states that some states authorize corporations sole as a means of enabling religious leaders to hold property and conduct business, but that tax benefits are available to a corporation sole, or to any other organization, only if it qualifies as a religious or charitable organization under the Internal Revenue Code.

“People who promote tax evasion harm us all,” said Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division. “Not only do they shift the tax burden onto the shoulders of law-abiding taxpayers, but they also diminish public confidence in the Nation’s tax system.”

Corporation sole scams are listed in the IRS’s annual list of the “Dirty Dozen” tax scams http://www.irs.gov/newsroom/article/0,,id=136337,00.html.

More information about the Justice Department's efforts against tax-scam promoters can be found at http://www.usdoj.gov/tax/taxpress2005.htm. Information about the Justice Department's Tax Division can be found at http://www.usdoj.gov/tax.