Posted On: August 13, 2007 by Mitchell A. Port

CPA In Bakersfield, California, Prohibited From Advising Customers Not To File Tax Returns

After a two-day hearing in Fresno, California, the U.S. District Court for the Eastern District of California recently issued a preliminary injunction against Lowell Baisden, a Certified Public Accountant. The injunction prevents him from promoting his tax scheme.

The California court found that Baisden’s tax scheme involved a plan which encouraged and assisted customers to create corporations into which they had their incomes deposited for the purpose of decreasing their tax liability. The court also found that Baisden prepared tax returns in California which characterized wages as rent, which is not subject to self-employment or employment taxes.

Several of Baisden’s customers are physicians and nurse anesthetists, many of whom have not filed past-due tax returns. According to Baisden’s plan, the customers created real estate and forestry corporations, but almost all of the income reported by the corporations was derived from their income from their jobs in the medical profession. Baisden reported deductions for the corporations for customers’ car expenses, lawn care expenses and expenses related to their personal residences.

The California court also found that Baisden prepared tax returns that identified customers as investors when they were actually physicians or nurses. The tax returns claimed business deductions for non-deductible personal expenses of customers or for which he and his customers did not have supporting documentation. The tax returns he prepared also failed to report compensation to owners of those corporations.

Finally, the court found that Baisden engaged in misconduct by falsely advising his clients not to comply with IRS document and meeting requests, filing meritless requests to delay civil audits, advising clients to make insufficient estimated tax payments, and advising customers not to file lawfully due returns.

Since 2001, the Justice Department has obtained injunctions against more than 230 tax preparers and tax-fraud promoters. More information about these cases is available on the Justice Department Web site. More information is available about the Justice Department’s Tax Division.

If you have a tax controversy you wish to discuss with a California tax attorney, call Mitchell A. Port at 310.559.5259.