The United States filed a civil injunction suit seeking to bar Gregory C. Diedrich and Saginaw Financial from owning or operating a tax return preparation business and preparing tax returns for others, the Justice Department announced today.
The complaint, filed in the U.S. District Court in Las Vegas, Nevada, alleges that the defendants prepare and file tax returns that overstate their customers’ refunds, and that they fail to conduct the required due diligence, including taking reasonable steps to ensure that information provided by customers is accurate. The complaint alleges that the defendants engaged in misconduct, including fabricating business income and claiming false deductions, such as for charitable contributions and phony business expenses. For example, according to the complaint, Saginaw and Diedrich prepared a tax return for a married couple claiming over $16,000 in false deductions for travel, mileage, and a cell phone without receiving any supporting documentation, and prepared a return for another customer that reported income not received by the customer in order to maximize her Earned Income Credit. In the complaint, the government estimates the lost tax revenue from Saginaw and Diedrich’s actions to be over $1.5 million for the 2017 tax year alone.
According to the complaint, the IRS has taken multiple steps to correct Diedrich and Saginaw Financial’s unlawful behavior, including scheduling personal visits, and, later, assessing substantial financial penalties, but these efforts have failed to curb Saginaw and Diedrich’s unlawful behavior.
The complaint seeks an order permanently barring Diedrich and Saginaw Financial from preparing federal tax returns for others, and requiring Diedrich and Saginaw Financial to send a notice of the injunction to all customers who have retained them since 2016.
Return preparer fraud is one of the IRS’s Dirty Dozen Tax Scams. Taxpayers seeking a return preparer should remain vigilant. The IRS has information on its website for choosing a return 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. Information about these cases is available on the Justice Department’s 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.