JUSTICE DEPARTMENT SUES TO STOP ALLEGED ILLINOIS TAX SCAM INVOLVING MORE THAN $12 MILLION

Cook County Tax Preparers Allegedly Claimed Bogus Income Tax Deductions and Credits for Customers

WASHINGTON – The United States has asked a federal court in Chicago to bar a South Holland, Ill., tax preparer and her company from preparing tax returns for others, the Justice Department announced today. The government complaint, filed in federal court in Chicago, alleges that LaShawn Littrice and Diamond Accounting & Financial Services Inc. fabricate phony tax deductions and credits for their customers, most of whom are from the Chicago area.

Papers filed in the case allege that the defendants prepared and filed over 3,800 tax returns between 2003 and 2005, with tax losses from their misconduct projected at more than $12 million during that time. Instances of alleged fraud cited in court papers include the defendants making up medical, charitable and business tax deductions for customers who had not asked for such deductions, had no records to support the deductions, and were clearly not entitled to them.

One of many examples alleged in court papers involved a married couple who “went to the defendants for return preparation after having heard from coworkers that Littrice could generate large tax refunds. It was not until the Internal Revenue Service [IRS] examined their 2003 to 2005 returns that they realized that Littrice had claimed thousands of dollars of employee business expense deductions. The [couple] did not discuss employee business expenses with Littrice and provided her with no documentation regarding such expenses.”

The court papers state that “Littrice also falsely claimed between $7,821 and $9,072 in annual charitable contributions despite the [couple] telling her that they donated no more than $20 a week to their church. Their 2005 return claimed a $6,000 child care expense allegedly paid to St. Walter School. The [couple] never heard of that school and never used its services. Littrice simply fabricated the item (and others).”

“Return preparers who claim bogus deductions for their customers must be stopped,” said Nathan J. Hochman, Assistant Attorney General for the Justice Department’s Tax Division. “Taxpayers who think they have found the ‘magic pill’ to get out of their tax obligations will confront the stark reality that, when caught, they face paying all their tax owed as well as penalties and interest, in addition to the potential of being criminally prosecuted.”

Return preparer fraud is identified by the IRS on its Web site as one of its 2008 “Dirty Dozen” tax scams.

Since 2001, the Justice Department’s Tax Division has obtained more than 330 injunctions to stop tax fraud promoters and dishonest tax preparers. Information about these cases is available on the Justice Department’s Web site, as is information about the Justice Department’s Tax Division.