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Government says Instant Tax Service franchisees filed fraudulent returns

The United States has filed lawsuits in five cities, including Las Vegas, that seek injunctions against the company that operates Instant Tax Service and against five franchise owners.

According to the complaints, the franchising company ITS Financial LLC, based in Dayton, Ohio, operates what it claims is the nation’s fourth-largest tax preparation business.

The Justice Department complaints accuse ITS Financial and its owner, Fesum Ogbazion, of deliberately ignoring systemic and pervasive fraud by ITS franchisees.

The complaints allege that ITS franchisees across the country intentionally prepare and file fraudulent tax returns to maximize their customers’ refunds. They do so, according to the complaints, so that ITS Financial and its franchisees can extract large fees directly from their customers’ refund checks.

“The government claims these fees are outrageously high — for example, up to $1,000 for preparing tax returns in as little as 15 minutes — and are often not disclosed to customers,” according to a statement released Wednesday by the Justice Department.

The complaint against ITS Financial said that the estimated tax losses from fraudulent return preparation in 2011 at ITS locations in St. Louis; Kansas City, Kan., Chicago, Indianapolis and Las Vegas exceed $16 million.

According to the government complaints, the defendants in the lawsuits lure their mostly low-income customers by offering loans that are false and deceptive. The government alleges that ITS franchisees and return preparers routinely file tax returns without the customers’ authorization.

The Las Vegas lawsuit was filed Wednesday in U.S. District Court against Benyam Tewolde, Yordanos Kidane and Koraggio LLC, which does business as Instant Tax Service.

According to the complaint, Tewolde and Kidane are the husband-and-wife owners of Koraggio, which owns multiple stores that prepared more than 5,000 tax returns in 2011.

When reached by telephone Wednesday, Tewolde denied he is an owner of the tax preparation business. He said he is a pharmacist.

“My wife owns the business,” he said. “I happen to be married to her.”

Tewolde said he was not aware of the lawsuit and wouldn’t comment on it.

When Kidane was later reached by telephone, she said she was in a meeting and could not talk.

The complaint seeks an injunction that would bar the defendants “from further acting as federal tax return preparers and from engaging in tax fraud.”

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