Federal Court Shuts Down Hawaii Tax Return Preparer

On Feb. 20, a federal court permanently barred a Kahului, Hawaii, man from preparing federal tax returns for others, the Justice Department announced today.

The U.S. District Court for the District of Hawaii issued the injunction finding that James A. Ericson knowingly and repeatedly violated the Internal Revenue Code by preparing returns that understated his customers’ tax liabilities and by taking unreasonable positions in filing his customers’ returns.  The court found that an injunction permanently barring him from preparing federal tax returns for others was necessary to prevent further recurrence of Ericson’s practices.  The court’s order applies to Ericson and “all those in active concert or participation with him.”

The complaint alleged that Ericson prepared roughly more than 1,000 tax returns per year.  According to the complaint, Ericson improperly understated his customers’ federal tax liabilities by fabricating business schedules, expenses and business income for non-existent businesses; claiming false or inflated credits; and deducting personal expenses that were not legally deductible.  The suit also alleged that Ericson falsely claimed to some of his customers that he was a former Internal Revenue Service (IRS) employee.  In total, the government’s complaint alleged that the loss to the U.S. Treasury from Ericson’s activities may have exceeded $31 million for tax years 2007 through 2012.

The court’s order requires Ericson to produce to the government counsel a list of all persons for whom he has prepared federal tax returns or claims for a refund since Jan. 1, 2008, and to notify all such persons of the injunction entered against him.

Return preparer fraud is one of the IRS’ Dirty Dozen Tax Scams for 2015.  The IRS has some tips on their website for choosing a tax preparer, and has launched a free directory of federal tax preparers.  In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers and tax scheme promoters.  Information about these cases is available on the Justice Department website.  An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page.  If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.