The Department of Justice is going to bring a civil action against the owner of a Mo' Money Taxes franchise in Nashville, Tennessee and against his girlfriend who worked in his store as a tax return preparer.
The prosecution says that they initially took notice of the work of Toney Fields and Trumekia Shaw when they learned that 100 percent of the 1,218 and 1,131 returns filed from their office in 2010 and 2011 claimed a refund. In 2009,
99 percent of returns claimed a refund. In 2011, 94 percent of those returns claimed the Earned Income Tax Credit.
The IRS examined 41 federal returns filed from their office in 2011 and found a 100 percent error rate. Given that the errors created inflated refunds, the IRS found those returns alone created tax deficiencies of more than $180,000. Estimates built from that sample lead the IRS to believe that this single franchise could have cost taxpayers more than $5 million in 2011 alone.
In a 2010 return for a client from Madison, Tennessee, Trumekia Shaw prepared return that claimed three dependents. The client had no dependents. The filing status was recorded as head of household, rather than as "single." Shaw also claimed a child tax credit and an EITC credit. The filer would have owed $1,538, but Shaw wrote the return to request a refund of $8,114.
Shaw told a different client from the same town that he could claim to have two dependents, even when he did not have any qualifying dependents. With that, she then filed a return with an EITC and a child tax credit which resulted in a refund of $7,861. According to the IRS, the filer should have paid $2,024 in taxes.
On behalf of a filer from Fayetteville, Tennessee, Fields recorded three dependents even though non lived with the filer. In fact, one was over 18 and neither a student nor with a qualifying disability. Fields then increased the client's wages into the "sweet spot" - the point in the income scale between $12,550 and $16,400 where a filer with three dependents can get the highest EITC credit.
For a Nashville nurse, Fields filed charitable contributions deductions of $6,300 and employee business expenses of $13,345 in 2009. The filers claims to have told Fields that her only business expenses were for uniforms. She could not provide receipts for those purchases and never made any charitable contributions. Later, he increased her home mortgage interest from $618 to $2,311.
The basic business model at the Nashville Mo' Money went like this:
- Open up on December 26th
- Collect information (social security number, dependents, address) from customers before the end of the year.
- Distribute refund anticipation loan materials.
- With paystubs in hand, complete tax return before w-2s arrive in the mail.
I one such instance, a filer with a job at Burger King signed her return on December 16th. Shaw reported $20,619 wages - a sum which must have been based on a guess from a recent paystub. When the client's w-2 did arrive, it showed that she had $21,181 in wage income.
Inevitably, this kind of approach required more w-2s than were on hand. But that was no problem, according to the IRS, because Shaw and Fields were handy with scissors and a photocopier. The IRS notes that more than a few w-2's came from the employer "Exxon Mobile." (sic)
Prior to buying a Mo' Money franchise in 2009, Fields worked as a file clerk in a Memphis MMT for five years and then as a MMT preparer for another two years.
Their customers now face large penalties, as well as costs for outstanding interest, because of taxes that are now deemed unpaid.