Feds accuse trio of improprieties in tax business

3/8/2006

Three Hillsdale residents have been accused by the U.S. Department of Justice of costing the government more than $25 million by operating a tax-preparation business that filed returns with improper deductions.

The government filed a complaint Monday in U.S. District Court in Grand Rapids, Mich., against Joyce Stone, Charles Freed, and Julie Shafer.

The complaint alleges that Ms. Stone and her son, Mr. Freed, who operate Stone and Associates out of their Hillsdale home, along with Ms. Shafer, a friend of Ms. Stone's, prepared customers' returns claiming improper deductions, including fictitious or inflated charitable contributions and employee expenses.

The business also is a defendant in the lawsuit.

Ms. Stone and Ms. Shafer denied any wrongdoing. Ms. Stone said her attorney told her there were questions about some of the returns. "I thought we got that straightened out," she said.

Ms. Shafer said she learned about the complaint from a reporter.

Mr. Freed could not be reached for comment.

The government said Ms. Stone and Mr. Freed prepared income tax returns for about 1,000 clients. Ms. Shafer prepared returns for more than 1,000 clients and also assisted in the e-filing of returns prepared by Ms. Stone and Mr. Freed, according to the complaint.

Based on projections made from 115 audited returns, Ms. Stone, Mr. Freed, and Ms. Shafer may have cost the U.S. Treasury more than $25 million in the tax years 2000 through 2003, the complaint said.

The government also asked to court to direct the defendants to turn over their customers' names, telephone and Social Security numbers, and mailing and e-mail addresses to prosecutors.

The government's complaint is part of an ongoing crackdown on tax return preparers who are giving false advice.

"The Justice Department is working vigorously to stop the preparation and filing of the false or fraudulent returns that unfairly shift the tax burden to honest American taxpayers," said Eileen O'Connor, assistant attorney general for the Justice Department's tax division.

Information from the Associated Press was used in this report.

Contact George Tanber at:

gtanber@theblade.com

or 734-241-3610.