Warrants Issued To Search Tax Prep Business Following Phone refund Abuses

Requests for exorbitant phone tax refunds has prompted the Internal Revenue Service to send special agents into seven cities to execute search warrants at tax prep businesses.

According to affidavits filed in federal court, the agency is seeking evidence from preparers suspected of filing returns on behalf of clients that requested “egregious amounts” for this year’s special telephone excise tax refund.

Investigators served warrants at tax businesses in Riverside, Calif.; Dallas, Tyler and Athens, Texas; and Atlanta, Miami and New Orleans. The special agents temporarily closed the businesses, seizing computers and documents to use in their investigations. Along with carrying out enforcement action in those seven cities, the IRS said that other tax preparers across the nation who are preparing questionable telephone tax refund requests began receiving visits from IRS auditors and special agents last week.

Potential abuses aside, out of early filers the IRS said that nearly one in three are failing to request the special refund.

To make the refund easier to calculate, the government established a standard refund amount, based on personal exemptions, ranging from $30 to $60. Some return preparers are requesting thousands of dollars in refunds for their clients -- in some cases suggesting that the taxpayer paid more for telephone service than they received in income. In several instances, taxpayers requested a refund of $30,000. Other requests appear to be for the entire amount of the taxpayer’s phone bill, rather than just the 3 percent long-distance tax.

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