11th Circuit Case: Tax Preparer Escapes IRS Death Penalty

11th Circuit Case: Tax Preparer Escapes IRS Death Penalty

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I hope you’re paying attention Mr. Laskey.

John Pacenti of Law.com reports:

The 11th U.S. Circuit Court of Appeals, with retired U.S. Supreme Court Justice Sandra Day O’Connor writing for a three-judge panel, upheld a district court order that the IRS was not entitled to shut down [Abelardo Ernest] Cruz’s tax preparation company, Nations Business Center, nor its affiliates, including Nations Tax Services.

The appeal was a matter of pride, Cruz’s attorney said. The Justice Department sued in civil court on behalf of the IRS, seeking an injunction to shut down the company. U.S. District Judge William Zloch denied the motion, finding the company had submitted bad returns for customers but was mending its ways.

Zloch found the “death penalty” would be extreme and instead barred the company from engaging in deceptive practices and mandated IRS monitoring for compliance.

“Up until then, the IRS had won every case it ever brought in which it sought an injunction or the ‘death penalty,’ ” said Miami attorney David Garvin, who represented Cruz. “Up until now, the ball was rolling downhill like an avalanche.”

The IRS investigation was launched because Cruz’s clients were receiving refunds and claiming earned-income tax credits at rates far exceeding the national average, the 11th Circuit said. An audit found “numerous and repeated understatements of tax liability.”

But Cruz changed preparing procedures and continuing education policies after learning of the IRS investigation.

About Peter Pappas

Peter is a tax attorney and certified public acccountant with over 20 years experience helping taxpayers resolve their IRS and state tax problems.

He has represented thousands of taxpayers who have been experiencing difficulty dealing with the Internal Revenue Service or State tax officials.

He is a member of the American Association of Attorney-Certified Public Accountants, the Florida Bar Association and The Florida Institute of Certified Public Accountants and is admitted to practice before the United States Tax Court, the United States Supreme Court, U.S. District Courts - Middle District of Florida


  1. Tom Stava says:

    Well, Mr. Cruz better watch out – IRS without any doubt can withhold the issuance of a PTIN or EFIN prior to 1/1/11 for virtually any reason they can concoct, and either or both of those administrative decisions would have the same effect as their objective in this lawsuit.

    They can administer this “death penalty” pretty much on a whim the way they’re presently interpreting their regulatory mandate. So although they claim the only reason they’ll deny issuance of such required identities is for non-compliance of the preparer or some sort of financial felony – there is nothing in their proposed regulation to restrain them from a denial on the basis of the color of an unenrolled practitioners shirt on the day they apply.

    I’m surprised the IRS even resorted to the justice department route, and didn’t simply administratively chain the doors, seize the assets, and send Mr. Cruz to the hoosegaw without trial.

    They’re probably monitoring this – but IMHO those particular inmates pretty much think they’re running the asylum already.

    Not that I think practitioners like Mr. Cruz ought to be without oversight – but who is going to be watching the watchers! (in this case, thank God the 11th Circuit and not the 9th heard the case. If it had been the 9th Mr. Cruz would have to flee to Belize just ahead of the Marshals).


    Tom Stava
    Las Vegas, Nevada


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