Three Columbia-area Liberty Tax Service offices are under the gun after a civil lawsuit filed with the Justice Department Tuesday alleged they prepared false income tax returns to increase their customer’s refunds.
The complaint asks the U.S. District Court for the District of South Carolina to permanently bar Christopher Paul Haynes, of Irmo, the alleged franchisee for all three locations since 2008, from preparing federal tax returns for others.
The offices listed in lawsuit are located at 2700 Broad River Road, 4058 West Beltline Road and 599 St Andrews Road.
The suit alleges that Haynes and his employees would prepare tax returns that include misstatements such as false or inflated Schedule C – profit or loss from business – income and expenses, bogus dependents, false filing statuses and improper reimbursed employee business expenses.
Haynes would instruct his employees, who were not required to have previous experience in filing tax returns, to prepare as many tax returns as possible, the suit states. In doing so, the offices were able to obtain significantly inflated refunds for their customers and, in turn, collect higher preparations fees.
One complaint alleges that Haynes’ employees included a bogus “arts and crafts” business on one customer’s tax return and a bogus “hair care” business on another return. In each case, the false statements purported to allow the customer to qualify for a larger earned income tax credit and receive inflated tax refunds from the Internal Revenue Service.
Haynes’ Liberty Tax Service offices prepared more than 9,700 federal income tax returns since 2010, the suit states.
Based on adjustments the IRS has made to tax returns prepared and filed by Haynes’ offices between 2010 and 2013, the average tax deficiency for tax returns audited in connection with IRS’ investigation of Haynes is $3,834, the suit states.
During the 2015 tax season, almost all of the 1,471 customers who sought tax filing services Haynes’ locations received an income tax refund, the suit states.
But many of Haynes’ customers have low to moderate incomes and were not aware of tax law and proper refund preparation, and they often “have no knowledge that Haynes’ employees file fraudulent tax returns,” the suit states.
The complaint also alleges that Haynes does not report to the IRS the wages he pays some of his employees. Haynes also allegedly fails to withhold and pay over to the IRS federal employment taxes for those same employees.