Crime & Courts

U.S. attorney says preparer falsified clients' tax returns

The U.S. District Court in Kansas City, Kan., has issued a permanent injunction against a Kansas City, Kan., tax preparer for falsifying client tax returns.

Carlos Cruz prepared tax returns in Kansas City, Mo., and Kansas City, Kan., under the business name of Carlos Income Tax Services. The injunction stopping the business was sought by Lanny Welch, U.S. attorney for Kansas.

Welch accused Cruz of disregarding the information on clients' W2 income tax forms and advising one client to "just tell me how much you want to pay or want for a refund."

The U.S. attorney also contended in court documents that Cruz gave customers bad advice on deductions and prepared returns with false or unsubstantiated Schedule C wages, or automobile and general expenses, and claimed false or inflated expenses on Schedule A forms.

The Internal Revenue Service reviewed 81 federal tax returns Cruz prepared for tax years 2002 through 2007 and found that 77 were prepared incorrectly or required adjustments and 75 required clients to pay additional taxes.

In addition, the IRS found that at least 26 of the 81 returns reflected false, inflated to unsubstantiated amounts of state income and personal property taxes paid as a deduction. Another 20 returns reflected false, fraudulent or inflated amounts of real estate taxes and mortgage interest paid as a deduction.

The federal court gave Cruz 20 days to answer Welch's complaint and request for an injunction. The court issued the permanent injunction when Cruz did not respond.

The court also ordered Cruz to mail everyone for whom he prepared taxes a copy of the court order and furnish the U.S. attorney's office with a list of all of his clients for the past five years.