The U.S. District Court for the District of Connecticut has issued a permanent injunction against Juan Carlos Frias, a tax return preparer based in Connecticut, and his businesses, USA Tax LLC, Multi Latin Services LLC, and Connecticut Tax and Services Inc., in a decisive move to protect taxpayers and uphold the integrity of federal tax laws. Frias and his companies are permanently prohibited from preparing federal tax returns for third parties under the order.
Allegations and Findings
The Justice Department’s complaint against Frias and his businesses revealed a concerning pattern of fraudulent activities spanning from 2017 through 2021. During this period, Frias and his companies prepared over 10,000 tax returns. The complaint detailed that Frias and his firms systematically understated clients’ tax liabilities and inflated their refunds. They achieved this through various deceptive practices, including falsifying business expenses, reporting inaccurate filing statuses and dependents, claiming bogus education and residential energy credits, and fabricating itemized deductions, such as medical and dental expenses, charitable donations, and impairment-related work expenses.
A significant aspect of the complaint was that Frias operated as a “ghost preparer.” According to the IRS, anyone paid to prepare or assist in preparing federal tax returns must possess a valid Personal Tax Identification Number (PTIN) and sign the tax return. Ghost preparers do not sign the tax returns they prepare, thereby attempting to evade detection and accountability. This practice is often a red flag indicating potential fraudulent activity.
Court’s Order and Compliance Requirements
The court’s order, which Frias and his businesses consented to, mandates strict compliance measures to ensure they adhere to the injunction. The United States is authorized to conduct post-judgment discovery to monitor compliance. Specifically, the order requires Frias and his businesses to:
Notify Affected Clients: They must send notices of the injunction to every individual for whom they prepared federal tax returns, amended returns, or refund claims from January 1, 2018, to the present.
Public Display of Injunction: They must post a physical copy of the injunction at all their business locations and an electronic copy on any business websites, social media sites, or profiles they maintain or create over the next five years.
Official Statements and Guidance against Frias
Deputy Assistant Attorney General David A. Hubbert of the Justice Department’s Tax Division underscored the importance of this injunction in the broader effort to protect taxpayers from unscrupulous preparers. The IRS has long been vigilant against tax preparers who exploit their clients, and this case exemplifies their commitment to identifying and prosecuting fraudulent practices.
Protecting Taxpayers
The IRS offers resources to help taxpayers choose reputable tax preparers. They have launched a free directory of federal tax preparers, accessible on their website, which provides information about certified preparers. The IRS also warns taxpayers to be cautious of ghost preparers and outlines other common fraudulent practices. Taxpayers are encouraged to verify the credentials of their tax preparers and ensure that the preparer signs the return and includes their PTIN.
Historical Context and Ongoing Efforts
Over the past decade, the Justice Department’s Tax Division has secured injunctions against hundreds of dishonest tax preparers. These actions are part of a broader initiative to safeguard taxpayers and maintain the integrity of the tax system. Detailed information about these cases, including an alphabetical list of enjoined individuals and businesses, is available on the Justice Department’s website.
Taxpayers who suspect that an enjoined individual or business may be violating an injunction are urged to report their concerns to the Tax Division.
Conclusion
The permanent injunction against Juan Carlos Frias and his businesses marks a significant victory in the fight against tax fraud. It serves as a warning to other preparers engaging in similar practices and reassures the public of the government’s dedication to protecting taxpayer interests. As the IRS and the Justice Department continue their efforts, taxpayers are reminded to remain vigilant and informed when selecting a tax preparer, ensuring they choose professionals who comply with all legal requirements and ethical standards.
