Court Shuts Down South Carolina Tax Business

June 15, 2010 - A federal court in Columbia, S.C., has permanently barred Winston Able of Blythewood, S.C., from preparing federal income tax returns for others, the Justice Department announced today. The court found that Able prepared approximately 200 tax returns that contained fraudulent claims for tax refunds totaling over $13 million, based on fictitious claims of tax withholding.

Able’s tax fraud scheme is known as the "redemption" or "OID redemption" scheme. It is based on a frivolous theory that the government commits a fraud when it attempts to collect tax debts and that this purported fraud allows people to "charge back" debts that the government purportedly owes to them, to eliminate their liability to the government.

Customers who participate in the redemption scheme can be subject to sizeable penalties for filing returns with excessive false refund claims—including a penalty equal to 20 percent of the amount improperly claimed. The penalty applies even if, as usually happens, the Internal Revenue Service (IRS) detects the false claim and blocks a tax refund.

Federal courts in California and Georgia have recently enjoined other promoters of the scheme.

John A. DiCicco, Acting Assistant Attorney General for the Justice Department’s Tax Division, thanked Justice Department trial attorney John R. Monroe, who handled the case, and Shauna Henline of the IRS’ Small Business/Self-Employed Division, who conducted the investigation.