FEDERAL COURT IN CHICAGO SHUTS DOWN TAX PREP FIRM

Seneca, Ill., Couple’s Firm Found to Have Profited by Defrauding IRS

WASHINGTON, D.C. - A federal court in Chicago has barred Neal and Royanne Reddy and their corporation, Royanne & Company Inc., from preparing tax returns for others, the Justice Department announced today. The court found that the Reddys, whose business offices are in Marseilles and Princeton, Ill., prepared more than 15,000 tax returns between 2002 and 2005.

In the preliminary injunction order entered in the civil case following a one-day trial, Judge Virginia M. Kendall of the U.S. District Court for the Northern District of Illinois noted that Royanne Reddy directed her firm’s employees to fabricate or inflate deductions to generate larger tax refunds for customers. Evidence at the trial, based on 72 tax returns prepared by Royanne & Company that the IRS audited, showed a 100 percent error rate, which the court found “appalling” and not “the product of loose controls or inadequate supervision,” but “the product of design.”

The court noted that the IRS estimated that the Reddys caused tax revenue losses totaling $13 million. In denying the Reddys’ request to stay the injunction pending an appeal, the court said they “have no right to continue to profit by defrauding” the U.S. Treasury.

The court order requires the Reddys to notify their customers of the court’s findings and post the court’s findings at their businesses and on their Web site. They must also file by June 8 with the court a list identifying their customers. The order will remain in effect indefinitely, until further order of the court.

Since 2001 the Justice Department has obtained injunctions against more than 240 tax preparers and tax-fraud promoters. Information on those cases is available at http://www.usdoj.gov/tax/taxpress2007.htm. More information about the Justice Department’s Tax Division can be found at http://www.usdoj.gov/tax