Preparer understating liabilities — complaint

A Kahului man has been accused of defrauding the federal government of up to $31 million in income taxes from 2007 to 2012 as part of a civil complaint filed by the U.S. Department of Justice, according to a department news release Thursday.

The complaint filed Wednesday in federal court in Honolulu alleges that James A. Ericson “frequently prepares returns for individuals claiming refunds from the federal government that are not deserved,” the department said. Ericson allegedly prepares more than 1,000 tax returns per year for Maui residents.

Attempts to reach Ericson by phone were unsuccessful.

“Ericson improperly understates his customers’ federal tax liabilities by creating phony businesses and then listing those fake businesses on returns and fabricating expenses and losses for them, claiming false or inflated credits and deducting personal expenses of his customers, such as costs associated with customers’ hobbies, which are not legally deductible,” the complaint says.

The Justice Department also said that many of Ericson’s customers “may owe additional tax, interest and penalties because of the improperly prepared returns.”

The department has asked the court to prohibit Ericson and his associates from preparing, directing and filing tax returns. The complaint also seeks to require Ericson to contact individuals for whom he prepared federal tax returns since Jan. 1, 2008, within 30 days of entry of an injunction and to provide a list of the individuals he prepared returns for to allow the department to monitor his compliance.

The Internal Revenue Service has listed return preparer fraud as one of its “Dirty Dozen Tax Scams for 2013” and reminds taxpayers that they are “legally responsible for their tax return even if it is prepared by someone else.” The IRS provides tips on choosing a preparer, spotting red flags and how and when to make a complaint at