Federal court issues injunction closing 3 CT tax businesses permanently. They had 10,000+ customers.

The U.S. federal court has issued a permanent injunction closing three Connecticut tax preparation businesses, according to federal authorities.

The permanent injunction issued by the U.S. District Court for the District of Connecticut is against Connecticut tax return preparer Juan Carlos Frias, and his businesses, USA Tax LLC, Multi Latin Services LLC and Connecticut Tax and Services Inc., “permanently barring them from preparing federal tax returns for others.”

Federal authorities, citing the Justice Department’s complaint, said that, from 2017 through 2021, Frias and his companies prepared over 10,000 tax returns for customers.

The complaint alleges that, “during those years, Frias and his companies displayed a pattern of filing tax returns that understated customers’ liabilities and inflated their refunds by falsifying business expenses, reporting false filing statuses and qualifying children or dependents, claiming false education and residential energy credits and fabricating erroneous itemized deductions, including medical and dental expenses, charitable deductions and impairment-related work expenses,” according to federal authorities.

Federal authorities also said, “The United States alleges that Frias acted as a ghost preparer”

Authorities noted that the IRS requires anyone who is paid to prepare or assists in preparing federal tax returns is legally to have a valid Personal Tax Identification Number and paid preparers must sign and include their PTIN on the return. “Not signing the return, commonly known as ‘ghost preparation’ is often a red flag that a preparer is attempting to avoid detection by the IRS.”

Federal authorities also said that, according to the court’s order, “Frias and his businesses consented to entry of the injunction, which permits the United States is permitted to conduct post-judgment discovery to monitor compliance with the injunction.” The injunction states that agreeing to the injunction is not an admission of any wrongdoing.

The order requires:

• That they send “notice of the injunction to each person for whom Frias and his companies prepared federal tax returns, amended tax returns or claims for refund between Jan. 1, 2018, to the present.”
• Post a “paper copy of the injunction at all physical locations where they conducted business and an electronic copy of the injunction on any business website, social media site or social media profile they maintain and create over the next five years.”

“Taxpayers seeking a return preparer should remain vigilant against unscrupulous tax preparers. The IRS has information on its website for choosing a tax return preparer and has launched a free directory of federal tax preparers,” federal authorities said in a statement. “The IRS warns taxpayers to avoid ghost preparers and lists other improper acts that tax preparers engage in to take advantage of their unsuspecting customers.

“In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers. Information about these cases is available on the Justice Department’s website,” the statement said. “An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found 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.