U.S. SUES TO BAR ST. LOUIS CPA AND SON FROM PREPARING TAX RETURNS FOR OTHERS

Tax Preparers Allegedly Helped Customers Set Up Sham Corporations to Claim Bogus Tax Deductions; Cost to Treasury Estimated at $29.5 Million

WASHINGTON – The United States has brought a civil injunction suit in federal court in St. Louis, seeking to permanently bar Frank L. Zerjav Sr. And Frank L. “Tiger” Zerjav Jr. from preparing federal tax returns for others, the Justice Department announced today. According to the government complaint, Zerjav Sr. is a certified public accountant.

Also named in the suit were the Zerjavs’ businesses—Zerjav & Company L.C., Zerjav & Company P.C. and Advisory Group USA L.C. The complaint, filed in the U.S. District Court for the Eastern District of Missouri, alleges that the defendants helped customers set up sham corporations and engage in sham transactions with the corporations, in order to claim fraudulent tax deductions. The complaint alleges that Tiger Zerjav’s co-workers have called him “the magician” because numbers on tax returns co-workers prepare are “magically” different after he reviews and edits them.

According to the complaint, the defendants’ bogus deductions reduced many customers’ reported income so dramatically that the clients claimed to be qualified for the Earned Income Tax Credit. That credit was intended to help the working poor.

Among the defendants’ alleged improprieties cited in the complaint were tax deductions claimed for such non-deductible personal expenses as children’s day camp, residential landscaping costs, cable television bills, house cleaning expenses, baby-sitting expenses and fitness center dues.

Defendants allegedly prepared a federal income tax return for one client’s corporation that fraudulently deducted $25,000 for the client’s personal purchase of a sport utility vehicle. According to the complaint, the client, a former National Hockey League player, had bought the SUV and owned it personally. Under federal tax law he was not permitted to deduct the cost of the vehicle, so defendants fraudulently treated the vehicle as being owned by his corporation and had the corporation deduct it.

The suit alleges that defendants have prepared at least 3,700 federal tax returns for customers in 30 states since 2004. The complaint alleges the defendants’ misconduct may have cost the U.S. Treasury as much as $29.5 million.

“John F. Kennedy once said that the integrity of our tax system depends on the ‘continued willingness of the people honestly and accurately to discharge the annual price of citizenship,’” said Nathan J. Hochman, Assistant Attorney General for the Justice Department’s Tax Division. “Civil injunction suits, like the one brought today, send a loud and clear message that the Tax Division and the IRS will vigorously seek to stop purveyors of fraudulent tax schemes whose goal is to defeat our tax system and illicitly shift the burdens of citizenship onto the backs of others.”

Since 2001, the Justice Department’s Tax Division has obtained more than 305 injunctions to stop the promotion of tax fraud schemes and the preparation of fraudulent returns. Information about these cases is available on the Justice Department website, as is information about the Justice Department’s Tax Division.