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Friday the 13th, indeed: Feds sue to shut down Clive tax preparer

February 13, 2009

Don't tell the folks at SSC Services, Inc, a Clive, Iowa tax prep firm, that Friday the 13th isn't unlucky. The Justice Department today sued the suburban Des Moines firm and two of its operators, Howard Musin and Jill Schwartz-Musin, to bar them from preparing tax returns.

According to the complaint filed today in U.S. District Court in Des Moines, the firm fabricated deductible expenses for its clients, which included a number of Shaklee distributors. From the Justice Department press release:

The complaint also alleges the couple claim fabricated business expenses on customers’ returns—sometimes for tens of thousands of dollars—in order to reduce their taxes. The suit alleges the couple improperly claimed business expense deductions on customers’ returns for costs of such personal items as clothing, hair care, nail care, use of tanning salons, a hot tub, furniture in a vacation home, gifts to family members and vacation trips to Sweden and Cancun, Mexico. In what the complaint calls an egregious example of misconduct, the couple allegedly claimed business deductions on one customer’s return for wedding expenses that included payments for flowers, photography and makeup.

A "supporting memorandum" filed with the case says that the firm's owner pleaded guilty in 2000 to criminal charges relating to return prep, and that she hired another person to prepare and sign returns:

After serving her criminal sentence, Schwartz-Musin enlisted Musin to prepare and sign fraudulent tax returns. During a recent series of 168 audits of Defendants’ customers by IRS agents, 98 percent of the returns that SSC Services prepared and Musin signed contained significant errors.

Among the alleged errors are deductions for "image" expenses:

Musin and Schwartz-Musin encouraged their customers to deduct as business expenses personal expenditures made to benefit the customer’s personal appearance, including expenses associated with hair care, nail care, tanning, and personal clothes. Musin and Schwartz-Musin falsely claim that because many of their customers sell cosmetics, they are “selling an image” and that, consequently, they may deduct “amounts spent to maintain a professional image” as valid business deductions. To the contrary, personal expenses such as hair care, nail care, and clothing are not deductible for a cosmetics salesperson just as they are not deductible for anyone else.

It's an interesting concept. For most tax people to maintain the image customers expect, we should be able to deduct beer, cheeseburgers, Doritos and things that stain our ties and shirts, but that doesn't sound wise.

A federal injunction action is not exactly what a tax preparer wants to see as tax season starts to really heat up. The firm's clients have apparently already recieved extra unhappy attention from the IRS.

Additional coverage already at the Des Moines Register.

Tags: preparer penalties.