A federal court in the Southern District of Florida has permanently enjoined a West Palm Beach tax return preparer and her business from preparing federal income tax returns for others, the Justice Department announced today. According to the court’s order, it issued the injunction in response to violations of a prior order in the case that had allowed the preparer and her business to prepare returns subject to certain restrictions.
In April 2017, the United States filed a complaint against Lena D. Cotton and Professional Accounting LDC LLC, that alleged the defendants prepared returns with improper education credits, manipulated filing statuses, and improper vehicle deductions, among other issues. In November 2017, the court permanently enjoined both defendants from this and other specific conduct and required defendants to engage a “neutral monitor” to “determin[e] and/or secur[e] compliance” with injunction.
In an August 2019 order, the court held Cotton and Professional Accounting LDC in contempt of the November 2017 order and “imposed additional limits on [d]efendants’ operations[,]” including restrictions on the number and type of returns they could prepare. The order stated that “[t]hese new restrictions are [d]efendants’ final opportunity” and that the remedy for any further violations “shall be a permanent ban on tax return preparation.”
On Jan. 27, 2021, the court issued an order holding defendants in contempt a second time. According to the order, defendants “have attempted to circumvent the terms of the injunction” and subsequent orders “and have, in some cases, violated the restrictions placed upon them by those [o]rders.” In particular, the court found that Cotton and Professional Accounting LDC “in effect . . . employ[ed] and overs[aw]” other individuals and entities who prepared prohibited returns out of Professional Accounting LDC’s West Palm Beach office, with Cotton and Professional Accounting LDC “retaining a great deal of the profits.” In light of previous violations by Cotton and Professional Accounting LDC, the court found that “any remedy short of a permanent injunction on return preparation is inadequate.”
In addition, the court barred Cotton and Professional Accounting LDC from selling their customer lists to certain non-party individuals or entities, citing the “significant risk” that any such sale could be an “attempt to perpetuate” the “fraudulent schemes” employed by defendants. According to the order, defendants “in effect . . . employ[ed] and overs[aw]” these non-parties and both “individually and through [the non-parties]” attempted to evade and/or violate the restrictions imposed by the injunction and ensuing orders. The order states, “the evidence tends to support a finding that [the non-parties] were aware of” the restrictions that had been placed on defendants and that “most of them worked in active concert or participation” with defendants.
The order specifically names the following individuals and entities: Anthony Boone, Donellar Wims-Boone, Latesha Temple, Melissa Morgan-Wright, Kelly Dunlop, Matthew Dunlop, Richard Wise, Professional Accounting by R&K, Professional Accounting by MM, and Temple Financial Solutions. The order finds that Morgan-Wright founded Professional Accounting by MM. It further finds that Wise and Kelly Dunlop formed Professional Accounting by R&K, and that Matthew Dunlop and Wims-Boone are also “involved with” that entity. Additionally, the order finds that Temple formed Temple Financial Solutions, and Boone prepared tax returns using Temple Financial System’s federal preparer identification. According to the order, Boone, Wims-Boone, Temple, Morgan-Wright, and Kelly and Matthew Dunlop all “previously worked in some capacity for [defendants],” and Wise is a former customer.
According to the order, defendant Cotton referred customers to Temple Financial Solutions, Professional Accounting by MM, and Professional Accounting by R&K, all three of which operated out of defendant Professional Accounting LDC’s office. The order notes that “[a]s of May 13, 2020, approximately 80% of the returns filed in 2020” by the non-parties “were for customers that previously used [d]efendants as their return preparer.” The order notes that “customers who previously had returns prepared by [d]efendants may have thought they were returning to [d]efendants’ business.” In addition, according to the order, defendants “retained a great deal of the profits” on the returns prepared by the non-parties and at least some of the non-parties were compensated by defendants like employees.
Return preparer fraud is one of the IRS’ Dirty Dozen Tax Scams and taxpayers seeking a return preparer should remain vigilant (more information can also be found here). The IRS has information on its website for choosing a tax preparer and has launched a free directory of federal tax preparers. In addition, IRS Free File, a public-private partnership, offers free online tax preparation and filing options on IRS partner websites for individuals whose adjusted gross income is under $72,000. For individuals whose income is over that threshold, IRS Free File offers electronical federal tax forms that can be filled out and filed online for free.
In the past decade, the Department of Justice’s Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers. Information about these cases is available on the Justice Department website. An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page. If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.