Penny Jones, Tax Scam, Idaho 2023

A federal court has permanently barred Penny Jones from preparing federal tax returns for others and from promoting the use of false tax forms, the Justice Department announced today. Jones, a resident of Idaho, operated a tax preparation business using a post office box in Shelley, Idaho.

According to the court order, Jones prepared more than 400 federal tax returns claiming fraudulent tax refunds exceeding $168 million. The scheme, which the court found was rooted in the long-discredited “redemption” theory, involved the use of false Internal Revenue Service (IRS) forms, including Form 1099-OID, for requesting refunds based on phony claims of large income tax withholding.

The court found that this theory has been “routinely rejected” by other courts, that the forms attached to tax returns prepared by Jones were “phony,” and that Jones knew her actions were fraudulent.

The court order requires Jones to provide the government with a list identifying all persons for whom she prepared federal tax returns for tax years 2005 through 2009.

Return preparer fraud and bogus refund claims based on false Forms 1099-OID are two of the IRS’s “Dirty Dozen” tax scams for 2011. In the past decade, the Justice Department’s Tax Division has obtained injunctions against hundreds of dishonest return preparers and tax fraud promoters.

Jones’s actions are a prime example of the types of tax scams that the IRS warns taxpayers about each year. The agency urges taxpayers to be cautious when dealing with tax preparers and to only use reputable and licensed professionals to prepare their tax returns.

In a statement, the Justice Department noted that it will continue to crack down on individuals and entities that engage in tax scams and other forms of financial fraud.

Penny Jones, Permanently barred from preparing federal tax returns and promoting false tax forms, Shelley, Idaho, 02/22/2023, No prison time or fine specified, $168 million in fraudulent refunds claimed.

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