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BY ALICIA CRUZ
NEWJERSEYNEWSROOM.COM
Government officials have filed a lawsuit to bar a Newark tax preparer who they claim knowingly filed bogus tax returns for customers.
According to the Justice Department press release, the civil injunction complaint alleges that Luvander Hollaway fails to comply with due-diligence requirements imposed by federal law for tax preparers who claim the earned income tax credit (EITC) on their customers’ returns.
The EITC is a refundable tax credit available to certain low-income level individuals. Since the EITC is a refundable credit, individuals claiming the EITC often reduce their federal tax liability below zero, entitling the taxpayer to a refund from the U.S. Treasury. The amount of the credit is based in large part on the individual’s annual income and the number of dependents reliant on the taxpayer for financial support.
The government alleges that Hollaway knowingly allowed a customer to claim three dependents the customer had purchased social security numbers. The same taxpayer reportedly claimed a brother as a dependent, who was actually her fiancé and Hollaway allegedly knew this.
The complaint further states that despite previously assessed IRS penalties against Hollaway in 2006 for failure to comply with due-diligence requirements, he purportedly continued to file phony claims. Then, in 2011, the Justice Department says he missed a follow-up IRS investigation, which revealed additional failures and fraudulent claims. The government is arguing that Hollaway's flagrant disregard for the due-diligence requirements leaves them no choice but to request an immutable injunction that would permanently end Hollaway’s tax return scheme.Congress authorized the Treasury Secretary to impose “due diligence” requirements on federal income tax return preparers claiming the EITC for customers specifically because of the potential to abuse the EITC. These requirements obligate return preparers to make “reasonable inquiries” to ensure the customer is legitimately entitled to the EITC. Return preparers are also required to document their compliance with these requirements and maintain that documentation for three years.
