Justice Department Asks Federal Court to Bar Louisiana CPA from Claiming Allegedly Improper Tax Deductions

The following press release was published by the US Department of Justice on Dec. 9, 2008. It is reproduced in full below.

FOR IMMEDIATE RELEASE Tuesday, December 9, 2008 WWW.USDOJ.GOV TAX (202) 514-2007 TDD (202) 514-1888 Houma Area Man’s Allegedly Bogus Deductions Said to Cost Treasury $1.3 Million WASHINGTON - The United States has sued a Louisiana CPA, seeking to bar him and his business from claiming improper deductions on customers’ federal income tax returns, the Justice Department announced today. According to the government’s civil injunction complaint, Steven McCann, who operates SWMc Services in the Houma, La., area, has prepared nearly 1,000 federal income tax returns claiming fraudulent employee expense deductions for customers who work as mariners.

The complaint alleges that between 2000 and 2007, McCann prepared at least 985 federal income tax returns claiming the bogus "mariner’s tax deduction" or modified versions of it. The mariner’s tax deduction, according to the complaint, is an improper tax deduction taken for meals and incidental expenses by seamen who already receive free meals from their employers. These deductions are false, according to the complaint, because the expenses McCann claimed were never paid by his clients. Instead, the complaint alleges that their employers provided the items being deducted, including meals and other incidental expenses. Last year a federal court in Los Angeles barred another CPA , Martin A. Kapp, from promoting a similar scheme.

The complaint says the IRS estimates that McCann’s fraudulent filings cost the Treasury $1.3 million. The complaint asks the court to order McCann to turn over his customer list to the Justice Department.

"Courts have repeatedly and consistently held that the mariner’s tax deduction, like the one claimed by Mr. McCann on behalf of his customers, is frivolous," said Nathan J. Hochman, Assistant Attorney General for the Justice Department’s Tax Division. "The Tax Division will seek to shut down those who claim this bogus deduction wherever they are located. Since 2001, the Justice Department’s Tax Division has obtained injunctions against more than 360 tax return preparers and tax-fraud promoters." Information about the Justice Department’s Tax Division and its efforts to enjoin tax return preparers and tax-fraud promoters is available on the Justice Department Web site Complaint 08-1077

Source: US Department of Justice