Petition for Writ of Certiorari — Jason P. Stinson, Petitioner v. United States

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APPENDIX

TABLE OF CONTENTS

Appendix A Opinion in the United States Court of

Appeals for the Eleventh Circuit

(May 1, 2018). . . . . . . . . . . . . . . . . App. 1

Appendix B Judgment in a Civil Case in the

United States District Court Middle

District of Florida, Orlando Division

(March 7, 2017) . . . . . . . . . . . . . . App. 17

Appendix C Memorandum Opinion in the United

States District Court Middle District

of Florida, Orlando Division

(March 6, 2017) . . . . . . . . . . . . . . App. 19

Appendix D Order Denying Petition for Rehearing

and Petition for Rehearing En Banc in

the United States Court of Appeals for

the Eleventh Circuit

(February 22, 2019) . . . . . . . . . . App. 87

Appendix E Statutes

26 U.S.C. § 6694 . . . . . . . . . . . . . App. 89

26 U.S.C. § 6695 . . . . . . . . . . . . . App. 94

26 U.S.C. § 6701 . . . . . . . . . . . . . App. 97

26 U.S.C. § 7402 . . . . . . . . . . . . App. 100

26 U.S.C. § 7407 . . . . . . . . . . . . App. 102

26 U.S.C. § 7408 . . . . . . . . . . . . App. 103

App. 1

APPENDIX A

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 17-11412

D.C. Docket No. 6:14-cv-01534-ACC-TBS

[Filed May 1, 2018]

________________________________

UNITED STATES OF AMERICA, )

)

Plaintiff-Appellee,

)

versus

)

JASON P. STINSON,

)

Defendant-Appellant. )

________________________________ )

Appeal from the United States District Court

for the Middle District of Florida

________________________

(May 1, 2018)

Before ED CARNES, Chief Judge, and NEWSOM and

SILER,* Circuit Judges.

Honorable Eugene E. Siler, Jr., United States Circuit Judge for

the Sixth Circuit, sitting by designation.

App. 2

SILER, Circuit Judge:

Defendant Jason Stinson appeals the district court’s

judgment of a permanent injunction enjoining him from

preparing federal tax returns and a $949,952.47

disgorgement order. For the following reasons, we

AFFIRM.

FACTUAL BACKGROUND AND

PROCEDURAL HISTORY

Stinson began his tax preparation career in 2010 as

a manager for LBS Tax Services (“LBS”), a storefront

tax preparation business based in Orlando, Florida.

Without prior experience or training in tax return

preparation, in 2011 and 2012, he personally prepared

individual tax returns for hundreds of customers. By

2013, Stinson had become a franchise owner of ten LBS

stores with locations in Florida, Georgia, Alabama, and

North Carolina.1 Situated in low-income areas,

Stinson’s stores engaged in aggressive, “guerrilla

marketing” and directly targeted “underprivileged,

undereducated poor people.”

The practice at Stinson’s stores was to not charge an

upfront fee for each tax return prepared for a customer

but to extract the fee from the customers’ tax refunds.

He often charged in excess of $600 per return,

sometimes as much as $999, usually without informing

the taxpayer of the fee amount.2 The goal was to secure

Stinson subsequently renamed his business Nation Tax Services.

According to the Government, the national average fee for

preparing and filing a basic Form 1040 is $159.

App. 3

the maximum refund to satisfy the customer and

deduct a larger fee. To this end, Stinson and his tax

preparers3 would falsify customers’ information to

claim the maximum earned income tax credit (“EITC”)4

by: claiming fictitious dependents, fabricating

unreimbursed employee business expenses and

charitable contributions, and falsifying business

income or expenses.

The Government filed a complaint in 2014 seeking,

under §§ 7402, 7407, and 7408 of the Internal Revenue

Code (“I.R.C.”), to enjoin Stinson, “individually and

doing business as LBS Tax Services and Nation Tax

Services, LLC,” from “acting as a federal tax return

preparer or requesting, assisting in, or directing the

preparation or filing of federal tax returns, amended

returns, or other related documents or forms for any

person or entity other than himself.” Specifically, the

Government alleged that Stinson:

1. falsified deductions on Form 1040 Schedule A to

reduce customers’ taxable income by reporting

personal expenses as business expenses and

falsified unreimbursed employee expenses and

charitable contributions;

2. falsified Form 1040 Schedule C deductions by

fabricating businesses and reporting profits or

For simplicity, we will refer to Stinson and his tax preparers

collectively as “Stinson.”

The EITC is a refundable tax credit available to low-income

workers and depends upon a multitude of factors, such as income,

filing status, and number of dependents. See Sorenson v. Sec. of

Treasury of U.S., 475 U.S. 851, 864 (1986).

App. 4

losses from a false business or inflating profits

and losses from an actual business;

3. claimed false education credits;

4. falsified customers’ earned income tax credits;

5. failed to conduct proper due diligence; and

6. failed to disclose fees and provide customers

complete copies of their tax returns.

These practices allowed Stinson to manipulate a

customer’s income to ensure that it fell within the

“sweet spot” necessary to qualify for the EITC. The

Government proffered deposition testimony and

customer tax returns that exhibited fabricated

numbers. This evidence revealed that Stinson had

contrived expenses and falsely claimed other credits for

customers, such as Household Help Income and the

American Opportunity Education Credit. For example,

Stinson prepared a tax return claiming qualified

education expenses of $2,000 for a customer who never

graduated from high school. One taxpayer testified that

“I know I never claimed any charity on my income tax,

never,” yet his tax return prepared by Stinson’s firm

claimed $1,500 in charitable giving.

In 2015, the Government asked the district court to

preliminarily enjoin Stinson from employing his tax

return preparation business in order “[t]o prevent

Stinson’s continued and repeated fraud” during the

pending trial proceedings. The district court granted

this motion, and Stinson filed an interlocutory appeal.

In September 2016, we affirmed the preliminary

injunction. United States v. Stinson, 661 F. App’x 945,

946 (11th Cir. 2016).

App. 5

In 2016, the district court held a six-day bench trial

and heard testimony from dozens of taxpayer

witnesses—former clients of Stinson’s tax preparation

stores—all of whom testified that Stinson prepared

inaccurate tax returns. The evidence at trial fully

supported the Government’s allegations. The

Government proved that Stinson’s business model

involved falsifying his client’s tax returns by

fabricating expenses and deductions in order to

produce tax refunds from which he would first subtract

a hefty fee. Stinson failed to rebut the Government’s

evidence,5 and he now appeals the district court’s

permanent injunction and disgorgement order.

DISCUSSION

We review a judgment of a permanent injunction

and disgorgement for abuse of discretion. S.E.C. v.

Levin, 849 F.3d 995, 1001 (11th Cir. 2017); Garrido v.

Dudek, 731 F.3d 1152, 1158 (11th Cir. 2013). We also

review the denial of a motion for sanctions for abuse of

discretion. Eagle Hosp. Physicians, LLC v. SRG

Consulting, Inc., 561 F.3d 1298, 1303 (11th Cir. 2009).

At trial, Stinson did not call a taxpayer witness of his own or

present a single accurate tax return prepared by his stores.

Instead, he called his employees who admitted to the incorrect tax

returns but denied fault and blamed the customers for providing

false information.

Stinson argued that taxpayers were unreliable witnesses

because they would never admit to their own wrongdoing.

However, the district court found the taxpayers’ testimony was

credible because in many of Stinson’s cases the IRS had declined

to impose a penalty against the taxpayer, finding the individual

taxpayer showed no “intentional disregard” of tax laws.

App. 6

I. Injunctive Relief

The district court granted a permanent injunction

enjoining Stinson from his tax return preparation

activities pursuant to I.R.C. §§ 7407, 7408, and 7402.

For the following reasons, we hold that the district

court did not abuse its discretion in granting the

injunction.

Count I – Permanent Injunction Pursuant to

I.R.C. § 7407

Internal Revenue Code § 7407 reflects a

congressional intent to prevent abuses by tax preparers

in the reporting of client income tax liabilities. United

States v. Ernst & Whinney, 735 F.2d 1296, 1302 (11th

Cir. 1984).

[I]n order to issue an injunction pursuant to

§ 7407, three prerequisites must be met: first,

the defendant must be a tax preparer; second,

the conduct complained of must fall within one

of the four areas of proscribed conduct,

§ 7407(b)(1); and third, the court must find that

an injunction is “appropriate to prevent the

recurrence” of the proscribed conduct,

§ 7407(b)(2).

Id. at 1303. Here, the district court first determined

that Stinson was a tax preparer under I.R.C.

§ 7701(a)(36) because he owned and operated the tax

preparation stores, hired employees, trained

employees, and profited from the business.

Second, with respect to the “proscribed conduct,”

I.R.C. § 7407(b)(1) states that such conduct includes

App. 7

violating §§ 6694 or 6695 or engaging in fraudulent or

deceptive conduct that substantially interferes with the

administration of the internal revenue laws. Section

6694(a) is implicated where an individual negligently

understates tax liability. Judisch v. United States, 755

F.2d 823, 830 (11th Cir. 1985). By contrast, § 6694(b)

imposes penalties on tax preparers who prepare any

return or claim for refund in a manner that violates

§ 6694(a) and does so willfully or recklessly.

The district court found that “Stinson not only

claimed non-deductible expenses as deductible ones,

but the amounts claimed were largely inflated.

Stinson’s conduct was repeated, continuous, and

willful, occurring over multiple years and in multiple

stores.” Stinson targeted low-income taxpayers and

took advantage of their lack of tax knowledge and their

desire to obtain a high refund. As the district court

held, “Stinson caused great harm to his low-income

customers who have been audited and now owe

relatively significant sums to the IRS.”

The Government presented evidence showing that

Stinson inflated and falsified expenses and charitable

contributions on his clients’ Schedule A forms,

fabricated income, expenses, and entire businesses on

their Schedule C forms, and improperly claimed

deductions for expenses that were not deductible.

Stinson acted both willfully and recklessly by wholly

fabricating this information on his clients’ returns and

reporting amounts of income and expenses different

from those provided by the customer. Despite holding

himself out as a tax professional, Stinson made no

attempt to familiarize himself (or his staff) with federal

App. 8

tax law. Additionally, several customers testified that

they were never provided a copy of their tax return or

were not provided a complete copy. At the same time,

Stinson regularly created records showing he had

complied with EITC due diligence and had requested

the necessary documentation when, in fact, he had

never requested any such information. In other words,

Stinson’s entire business model was fraudulent and

deceitful, and he sought to “interfere[ ] with the proper

administration of the Internal Revenue laws.” I.R.C.

§ 7407(b)(1)(D).

Third, the Government was required to demonstrate

that “injunctive relief is appropriate to prevent the

recurrence of such conduct,” and that an injunction

prohibiting specific conduct would not be sufficient.

I.R.C. § 7407(b)(2); Ernst & Whinney, 735 F.2d at 1303.

In resolving this question, other courts have considered

the following factors:

(1) the gravity of the harm caused by the offense;

(2) the extent of the defendant’s participation;

(3) the defendant’s degree of scienter;

(4) the isolated or recurrent nature of the

infraction;

(5) the defendant’s recognition (or nonrecognition) of his own culpability; and

(6) the likelihood that the defendant’s occupation

would place him in a position where future

violations could be anticipated.

See United States v. Stover, 650 F.3d 1099, 1112 (8th

Cir. 2011); United States v. Gleason, 432 F.3d 678, 683

(6th Cir. 2005); United States v. Estate Pres. Servs., 202

F.3d 1093, 1105 (9th Cir. 2000). Here, the district court

App. 9

thoroughly examined all of these factors and found

each one in favor of the Government. Based on this

totality of the circumstances approach, the district

court concluded that an injunction under § 7407 was

“appropriate and necessary to prevent future

interference with the Internal Revenue laws.” Because

Stinson was responsible for the fraudulent conduct,

which was likely to recur, we affirm the district court’s

permanent injunction under § 7407.

Count II - Permanent Injunction Pursuant to

I.R.C. § 7408

Pursuant to I.R.C. § 7408, a court may enjoin an

individual from engaging in conduct subject to a

penalty under I.R.C. §§ 6700 or 6701, if the court

determines that the individual has engaged in the

proscribed conduct and “injunctive relief is appropriate

to prevent recurrence” of the conduct. Section 6701

imposes a penalty upon any person who (1) “aids or

assists in, procures, or advises with respect to, the

preparation . . . of any portion of a return” with (2) the

knowledge that the return “will be used in connection

with any material matter arising under the internal

revenue laws” and, if so used, (3) “would result in an

understatement of the liability for tax of another

person.”

The Government must prove a violation of § 6701 by

clear and convincing evidence of fraud.6 Carlson v.

Stinson argues that the government was also required to prove

fraud under §§ 7402(a) and 7407 because it “pleaded and

demanded relief” under those provisions based on allegations of

fraud and because the government failed to present expert

App. 10

United States, 754 F.3d 1223, 1226-27 (11th Cir. 2014).

In Carlson, we held that an inaccurate tax return,

standing alone, is insufficient circumstantial evidence

to prove fraud because a mere inaccuracy in a return

does not suggest the tax return preparer knew that the

returns understated the correct tax. Id. at 1230.

However, as the district court properly held, Stinson’s

case differed from Carlson in two significant ways:

First, this is not a case addressing tax preparer

penalties for a violation of § 6701. Rather, the

Government seeks injunctive relief, pursuant to

three separate provisions of the Internal

Revenue Code, each of which independently

provide[s] for injunctive relief. . . . Second, the

Government has not relied on inaccurate tax

returns standing alone, but has provided other

circumstantial evidence of Stinson’s wrongdoing.

Furthermore, in the first appeal we expressly rejected

this argument and held that “Stinson’s contention

misapprehends the holding in Carlson and its

application to the evidence in this case.” Stinson, 661 F.

App’x at 952.

Moreover, the district court held the “badges of

fraud” were abundant. During the course of the trial,

the Government presented significant circumstantial

evidence, beyond mere inaccuracies in tax returns,

sufficient to show that Stinson knowingly and

testimony establishing a lower, negligent standard of care. We

disagree. Neither section requires a showing of fraud. Even if it

did, the government presented overwhelming evidence that

Stinson acted fraudulently.

App. 11

deliberately stated inaccurate amounts on tax returns

in order to maximize customers’ tax refunds. The

evidence was overwhelming that Stinson knew he was

preparing and filing federal tax returns designed to

understate his customers’ tax liabilities. Tellingly, on

appeal Stinson did not challenge the “badges of fraud”

found by the district court but instead attacked the

admissibility of such evidence. Those attacks fail

because Stinson has not shown that the district court’s

evidentiary rulings amounted to a clear abuse of

discretion. See Tampa Bay Shipbuilding & Repair Co.

v. Cedar Shipping Co., Ltd., 320 F.3d 1213, 1216 (11th

Cir. 2003) (noting that we review evidentiary rulings

for abuse of discretion and that the “standard of

deference is even greater when the objected-to

evidentiary ruling is made during a bench trial because

it is presumed that the district judge will rely only

upon properly admitted and relevant evidence”).

Accordingly, we hold the district court did not abuse its

discretion in enjoining Stinson under I.R.C. § 7408.

Count III- Permanent Injunction Pursuant to

I.R.C. § 7402(a)

Lastly, I.R.C. § 7402(a) grants district courts broad

authority to issue injunctions “as may be necessary or

appropriate for the enforcement of the internal revenue

laws.” This authority is “in addition to and not

exclusive of any and all other remedies” available to

enforce the internal revenue laws. I.R.C. § 7402(a).

“[T]he decision to issue an injunction under

§ 7402(a) is governed by the traditional factors shaping

the district court’s use of the equitable remedy.” Ernst

& Whinney, 735 F.2d at 1301. The party seeking a

App. 12

permanent injunction must prove: (1) irreparable

harm; (2) inadequate remedies at law; (3) balancing

hardships between the plaintiff and the defendant to

show that a remedy in equity is warranted; and (4) the

public interest would not be disserved by a permanent

injunction. Angel Flight of Georgia, Inc. v. Angel Flight

Am., Inc., 522 F.3d 1200, 1208 (11th Cir. 2008).

1. Irreparable Harm

Stinson’s stores caused millions of dollars of harm

to the United States Treasury and to the taxpayer

victims. As the Government correctly observed:

Stinson preyed on individuals who knew little or

nothing about tax return preparation and who

needed assistance. He lured them into his stores

with the promise of high refunds and low fees.

He got them high refunds, but he did so by

preparing and filing false returns . . . [and

charging] the customers excessively high fees.

Notably, many of Stinson’s customers have been

audited by the IRS and, consequently, now owe money

on their modest incomes as a result. Through his

fraudulent actions, Stinson has undermined public

trust in the tax system. Additionally, absent an

injunction, the Government would be forced to continue

expending resources to monitor Stinson.

2. Inadequate Remedies at Law

Because § 7402(a) provides for remedies “in addition

to and not exclusive of any and all other remedies,” the

district court correctly held that the Government “need

not prove that there is an inadequate remedy at law” in

App. 13

order to qualify for injunctive relief. Nonetheless, the

Government satisfied this factor as, absent an

injunction, it had no civil means of stopping Stinson.

3. Balance of Hardships

The balance of hardships also tips in favor of the

Government. Although Stinson had to borrow money

and was forced to abandon his business, the greater

risk is to vulnerable taxpayers who would otherwise

continue to be harmed by Stinson’s fraudulent tax

preparation. Moreover, the injunction does not prohibit

Stinson from pursuing other ventures, such as his real

estate rental business.

4. The Public Interest

Finally, a permanent injunction would also advance

the public interest. As the district court held, “By

defrauding the IRS, a tax return preparer is in reality

defrauding every law-abiding American, who, at not

insubstantial effort, pays their due fund to the

programs of the nation.” Consequently, we hold that

the district court did not abuse its discretion by

entering a permanent injunction against Stinson under

I.R.C. § 7402.

II. Disgorgement

Stinson also challenges the district court’s order of

disgorgement in the amount of $949,952.47—a sum it

found “fairly encompasses the other proposed

categories of fees, without duplication, and represents

a reasonable approximation of Stinson’s ill-gotten

gains.” Stinson argues that disgorgement was improper

because he “never engaged in, assisted in, or

App. 14

encouraged fraud.” However, the district court held

that “[b]ecause § 7402(a) encompasses a broad range of

powers necessary to compel compliance with the tax

laws . . . disgorgement is an available remedy in this

case.”

“Disgorgement is an equitable remedy intended to

prevent unjust enrichment.” S.E.C. v. Levin, 849 F.3d

995, 1006 (11th Cir. 2017) (quoting S.E.C. v.

Monterosso, 756 F.3d 1326, 1337 (11th Cir. 2014)). To

be entitled to disgorgement, the Government need only

produce a reasonable approximation of the defendant’s

ill-gotten gains. See S.E.C. v. Calvo, 378 F.3d 1211,

1217 (11th Cir. 2004). “Exactitude is not a requirement;

so long as the measure of disgorgement is reasonable,

any risk of uncertainty should fall on the wrongdoer

whose illegal conduct created that uncertainty.” Id.

(quotation marks omitted and alterations adopted).

Nonetheless, a court’s power to order disgorgement

is not unlimited. It extends only to the amount the

defendant profited from his wrongdoing. S.E.C. v. ETS

Payphones, Inc., 408 F.3d 727, 735 (11th Cir. 2005). Yet

in cases involving the operation of a fraudulent

business, courts accept gross receipts obtained by the

defendant as a reasonable measure of disgorgement.

See, e.g., F.T.C. v. Direct Mktg. Concepts, 624 F.3d 1, 14

(1st Cir. 2010); F.T.C. v. Febre, 128 F.3d 530, 536 (7th

Cir. 1997). Disgorgement of gross revenues is

appropriate because wrongdoers are not entitled to

deduct costs associated with committing their illegal

acts. S.E.C. v. Cavanagh, 445 F.3d 105, 116-17 (2d Cir.

2006); see also S.E.C. v. JT Wallenbrock & Assocs., 440

F.3d 1109, 1114 (9th Cir. 2006). Additionally, once the

App. 15

plaintiff presents a reasonable approximation, the

burden shifts to the defendant—Stinson—to disprove

this amount. Calvo, 378 F.3d at 1217.

At trial, the Government sought disgorgement of

$1,584,481.79 against Stinson and submitted several

calculations to support its request. Ultimately, the

district court awarded $949,952.47. First, the court

accepted the Government’s (“Category (1)”) calculation

of $800,101.47 based on a showing that for tax years

2012-2014, “Stinson’s stores filed 1,965 tax returns

with a Form Schedule A, and 1,861 of those tax returns

. . . claim[ed] unreimbursed business expenses.”

Second, the court accepted the Government’s

(“Category (2)”) calculation of $149,851 based on

returns that Stinson himself prepared in 2011.

Category 2 encompassed “tax returns that identify

Stinson [individually] as the paid preparer and that

included a Schedule A, Schedule C, or reported

education credits” with no supporting documentation or

corroborating evidence. Because the district court’s

disgorgement calculation was reasonable and

supported by the record, we will not disturb it.

Similarly, we reject Stinson’s argument that the

Government was only entitled to fees from returns

specifically identified as falsely prepared returns.

Although this was a civil matter, in the analogous

criminal context, the U.S. Sentencing Guidelines “do

not require that the sentencing court calculate the

amount of loss with certainty or precision . . . [but only]

a reasonable estimate based on the available facts.”

United States v. Bryant, 128 F.3d 74, 75-76 (2d Cir.

1997). As we have held, a trial court may extrapolate

App. 16

from available evidence, and such extrapolation may

occur without interviewing every customer and

preparer for every allegedly false or fraudulent return.

See United States v. Barber, 591 F. App’x 809, 823-24

(11th Cir. 2014).

III. Sanctions

Lastly, Stinson argues that the district court

committed reversible error by refusing his request for

sanctions under Fed. R. Civ. P. 11 and 28 U.S.C.

§ 1927. In the final sentence of its opinion, the district

court “decline[d] to entertain Stinson’s absurd request

for sanctions against the Government.” We agree with

the district court. Sanctions are wholly inappropriate

in this case.7

AFFIRMED.

Stinson argues that the Government repeatedly made

“intentional misrepresentations of material fact and law.”

However, the Government’s allegations were based on wellestablished law and facts. Furthermore, we have held that

sanctions may not be imposed unless a particular allegation is

utterly lacking in support.

Rule 11 sanctions are proper: (1) when a party

files a pleading that has no reasonable factual

basis; (2) when the party files a pleading that is

based on a legal theory that has no reasonable

chance of success and that cannot be advanced as

a reasonable argument to change existing law; or

(3) when the party files a pleading in bad faith for

an improper purpose.

Lee v. Mid-State Land & Timber Co., 285 F. App’x 601, 608 (11th

Cir. 2008) (citing Worldwide Primates, Inc. v. McGreal, 87 F.3d

1252, 1254 (11th Cir. 1996)).

App. 17

APPENDIX B

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

ORLANDO DIVISION

Case No: 6:14-cv-1534-Orl-22TBS

[Filed March 7, 2017]

___________________________________

UNITED STATES OF AMERICA,

)

Plaintiff,

)

JASON P. STINSON, individually,

)

DBA LBS Tax Services, ,

)

DBA Nation Tax Services, LLC,

)

Defendant.

)

___________________________________ )

JUDGMENT IN A CIVIL CASE

Decision by Court. This action came before the Court

and a decision has been rendered.

IT IS ORDERED AND ADJUDGED that

Judgment is entered providing that the Plaintiff the

United States of America shall recover from the

Defendant Jason P. Stinson a judgment in the amount

of $949,952.47 as equitable monetary relief. The

App. 18

Plaintiff the United States of America shall recover

costs of this action, for which sum let execution issue.

Date: March 7, 2017

SHERYL L. LOESCH, CLERK

s/LC, Deputy Clerk

App. 19

APPENDIX C

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

ORLANDO DIVISION

Case No: 6:14-cv-1534-Orl-22TBS

[Filed March 6, 2017]

________________________________

UNITED STATES OF AMERICA, )

)

Plaintiff,

)

JASON P. STINSON,

)

Defendant.

)

________________________________ )

MEMORANDUM OPINION

Plaintiff the United States (the “Government”) filed

this action seeking injunctive relief and disgorgement

from Defendant Jason P. Stinson (“Stinson”) for alleged

violations of the Internal Revenue Code. (Doc. No. 1).

The Court held a preliminary injunction hearing in

January 2016. The Court then entered a preliminary

injunction against Stinson that enjoined him from

preparing tax returns or otherwise operating his tax

App. 20

preparation business.1 (Doc. 69). On October 17–21,

2016 and November 21, 2016, the Court held a six-day

bench trial. Having reviewed the evidence presented at

the preliminary injunction hearing and at trial, the

Court makes the following findings of fact and

conclusions of law. The Court will grant the requested

injunctive relief and will order the equitable remedy of

disgorgement in the amount outlined below.

I. FINDINGS OF FACT

A. Stinson’s Tax Preparation Business

Stinson began his tax preparation career in 2010 as

a manager for LBS Tax Services (“LBS”). (Doc. 10

¶ 12). In order for Stinson to become the manager of an

LBS store, Stinson paid the owner of the LBS

franchise, Walner Gachette $5,000. (Doc. 197 at 155).

Mr. Gachette covered the store’s expenses while

Stinson managed the store and received 25% of the

profits. (Id.) In 2011, at some time before the 2012 tax

filing season, Stinson became a franchise owner of one

LBS store located in Tampa, Florida. (Doc. 32-2 at 1).

In 2012, Stinson expanded his franchise to a total of

twelve LBS stores. (Id.) Stinson owned the LBS stores

by way of Jason Stinson LLC. (Doc. 55-4 at 13–15).

Stinson was the sole owner of Jason Stinson, LLC.

(Doc. 197 at 158). Stinson hired managers to run each

store, primarily individuals who were former tax

preparers for Stinson the year before. (Id. at 162–163).

Like Stinson had done, Stinson’s managers paid

Stinson filed an interlocutory appeal (Doc. 70), and an Eleventh

Circuit panel affirmed the grant of preliminary injunction (Doc.

163).

App. 21

Stinson a fee to become a manager, and in return,

Stinson paid the managers a salary that Stinson

determined. (Id. at 168).

In 2013, Stinson decided he did not want to do

business under the LBS name, so he downsized his

operations to ten store locations and started doing

business under the name Nation Tax Services (“Nation

Tax”). (Doc. 32-3 at 3). Stinson remained in the same

physical spaces as his former LBS stores, kept the

same employees, and continued to use the same

customer files. (Doc. 197 at 166). In 2015, Stinson

owned two stores in Tampa, Florida; one store in St.

Petersburg, Florida; one store in Birmingham,

Alabama; two stores in Raleigh, North Carolina; one

store in Greenville, North Carolina; one store in

Augusta, Georgia; one store in Fairfield, Alabama; and

one store in Albany, Georgia. (Doc. 32-2 at 6–7).

In 2012, Stinson personally prepared hundreds of

tax returns. (Doc. 197 at 160–161). However, by 2013,

Stinson stopped preparing tax returns and left the tax

preparation to his employees. (Id. at 163). Despite

ownership of more than ten tax preparation stores,

Stinson maintains that he does not believe he had

sufficient knowledge to prepare tax returns. (Id. at

164). In total, the Internal Revenue Service (“IRS”)

identified over 14,000 tax returns prepared by

Stinson’s stores. (Plaintiff’s Exhibit 765 (“Pl.’s Ex.”)).

At all relevant times, Stinson has been the sole

owner of the LLC that owns his tax preparation stores,

and Stinson determines how the LLC is operated. (Doc.

197 at 160). Even though Stinson changed his LLC

name from Jason Stinson LLC to Nation Tax Services

App. 22

LLC, he has owned his tax preparation stores through

the same LLC. (Doc. 197 at 159–160). Stinson is the

only individual with signature authority on all of

Nation Tax Services LLC’s bank accounts. (Id. at 239).

All tax preparation fees that were paid to Nation Tax

(or LBS when Stinson operated under that name) were

deposited into the LLC’s bank accounts. (Id. at

238–239). Although the bank accounts have been in the

LLC’s name, Stinson utilizes the accounts for personal

and business purposes. (Id. at 240). In addition to

owning tax preparation stores, Stinson also owns

rental real estate property. (Id. at 152).

According to Stinson, his tax preparation stores

target “underprivileged, undereducated poor people”

and earned income credit claims. (Doc. 57 at 17; Doc.

197 at 173). Stinson’s customers are “unsophisticated,”

according to him, and the customers come to Stinson’s

stores because they need assistance with their tax

returns. (Doc. 10 ¶ 70; Doc. 197 at 173:20–25).

Additionally, Stinson’s business emphasizes marketing

and advertising. (Doc. 197 at 175–176). LBS called its

advertising efforts “guerilla marketing,”—dropping

yard signs, going to residences, and shopping centers to

advertise. (Id. at 176). LBS advertised a specific refund

per child and a tax refund that taxpayers would receive

the same day. (Pl.’s Ex. 268). The practice at Stinson’s

tax preparation stores was to not charge a fee for each

tax return upfront, but rather extract the fee from the

taxpayer customers’ refund amount. Therefore, a larger

refund was better for the client and for Stinson.

Stinson often charged in excess of $600 per return,

sometimes as much as $999, oftentimes without

App. 23

informing the taxpayer of the fee amount.2 The goal

was to get the maximum refund to make the customer

happy and deduct a larger fee. (Doc. 201 at 181–182,

194–195; Doc. 55-9 at 53, 66).

B. Testimony of Stinson’s Taxpayer Customers:

Tax Returns That Are False and

Fraudulently Prepared

The Government claims that Stinson, by way of

LBS and Nation Tax, has repeatedly engaged in the

following fraudulent practices: (1) falsifying deductions

on Form 1040 Schedule A to reduce a customer’s

taxable income by reporting personal expenses as

business expenses and falsifying unreimbursed

employee expenses and charitable contributions;

(2) falsifying Form 1040 Schedule C deductions by

fabricating businesses and reporting profits or losses

from a false business or inflating profits3 and losses

from an actual business; (3) claiming false education

credits; (4) falsifying a customer’s earned income tax

credit; (5) failing to conduct proper due diligence; and

(6) failing to disclose fees and provide customers

complete copies of their tax returns. (Doc. 218 at 27).

To support its claims at trial, the Government

presented more than fifteen taxpayer witnesses who

testified that various amounts and claims on their tax

(Doc. 211-12 at 76–77 (discussing “$999 week” where Stinson

would charge $999 for preparing tax returns that week); Doc. 195

at 53, 125, 293; Doc. 196 at 98; Doc. 197 at 16–17; Doc. 55-9 at

40–41; Doc. 198 at 63; Doc. 211-34 at 48).

As is described infra, the goal was to reach an income falling in

a “magic range” that maximized the taxpayer’s refund.

App. 24

returns were false, and that they had not provided the

information that the tax return preparer put on the

return. Additionally, the Government submitted by

deposition the testimony of forty-one witnesses and

their corresponding tax returns, primarily taxpayer

customers, who also testified that they had not

provided the false amounts on their tax returns. (Doc.

211). Many of Stinson’s customers have been audited.

Additionally, pursuant to Rule 65 of the Federal Rules

of Civil Procedure, evidence that was received with the

motion for preliminary injunction, that is otherwise

admissible, became part of the evidence at trial. (Doc.

195 at 35).

Stinson targeted underprivileged individuals and

earned income credit claims (Doc. 57 at 17; Doc. 197 at

173). The Earned Income Tax Credit (“EITC”) “was

enacted to provide relief for low-income families hurt

by rising food and energy prices.” United States v.

Baxter, 372 F. Supp. 2d 1326, 1328 (M.D. Ala. 2005)

(citing Sorenson v. Sec. of Treasury of U.S., 475 U.S.

851, 864, 106 S. Ct. 1600, 1609, 89 L. Ed. 2d 855

(1986)). The EITC is a refundable tax credit available

to low-income workers and depends upon a multitude

of factors, such as income, filing status, and number of

dependents. (Doc. 69 at 2, n.2). For example, in tax

year 2012, customers with earned income between

$13,050 and $17,100 were eligible for the maximum

EITC. Stinson would falsify information to claim the

maximum EITC in a number of ways, or in a

combination of these ways: claiming bogus

App. 25

dependents,4 fabricating unreimbursed employee

business expenses and charitable contributions, and

fabricating business income or expenses.

1. False Deductions on Form Schedule A

A Form Schedule A (Form 1040) (“Schedule A”) is

used for itemizing various deductions. (Doc. 198 at 2).

Common deductions include home mortgage interest,

property taxes, charitable contributions, and

unreimbursed employee business expenses. (Doc. 198

at 62). Unreimbursed employee business expenses “are

expenses that aren’t covered by your employer that are

required as part of your job.” (Id.) Many of Stinson’s

customers’ tax returns reported large employee

business expenses with jobs that do not typically have

such expenses. (Id.) For example, a bus driver would

not have significant unreimbursed mileage expenses

because a bus driver rarely, if ever, drives a private

car. (Id.) Many tax returns prepared by Stinson or his

employees claimed deductions for business mileage

that were actually (and obviously) non-deductible

commuting miles.5 Oftentimes, the amounts claimed on

(Doc. 195 at 55; Doc. 200 at 21; Doc. 197 at 54; Doc. 211-19 at 3537; Doc. 211-11 at 14-17, 22-23; Doc. 211-20 at 33 & Pl.’s Ex. 96).

(Doc. 195 at 45–50, 58–60, 91–95 & Pl.’s Exs. 204 & 205

(improperly claiming business miles and vehicle expenses for both

husband and wife); Doc. 195 at 241, 243–244 & Pl.’s Ex. 424

(same); Doc. 195 at 289–291, 297, 307, & Pl.’s Exs. 417, 418, & 419

(three years of claiming improper unreimbursed expenses and

vehicle expenses); Doc. 200 at 8–10, & Pl.’s Ex. 522; Doc. 196 at

87–88 & Pl.’s Ex. 400 (preparer told him commuter miles could be

deducted & the tax return listed as mileage almost 3 times what

he would have told the preparer); Doc. 196 at 208–210 & Pl.’s Ex.

App. 26

the tax returns included tens of thousands of miles

more than the customers actually drove for work.6 Even

after a hired consultant, Hermen Cruz (“Mr. Cruz”), see

infra, instructed Stinson’s employees that taxpayers

could not claim commuter miles as business mileage,

Stinson’s preparers continued to do so.7

Additionally, many of the tax returns prepared by

Stinson or his employees contained business expenses

for meals, entertainment, and uniforms—expenses and

amounts that the taxpayers testified were false and

that they had not provided to the tax return preparer.8

Other tax returns claimed personal cell phone expenses

as unreimbursed business expenses even though these

were clearly not a business expense.9 In many

instances, the individuals’ unreimbursed business

366; Doc. 196 at 231 & Pl.’s Ex. 249; Doc. 197 at 63–64; Doc. 211-3

at 30–32, 45–46 & Pl.’s Exs. 67 & 70; Doc. 211-41 at 24–25 & Pl.’s

Ex. 17).

(Id.)

(Doc. 197 at 19–21 & Pl.’s Ex. 189; Doc. 55-11 at 13–15 & Doc. 5512; Doc. 55-17 at 17–22 & Doc. 55-18; Doc. 55-30 at 20–21 & Doc.

55-31; Doc. 55-32 at 18–22 & Doc. 55-33; Doc. 55-34 at 15–18 &

Doc. 55-35; Doc. 55-8 at 134).

(Doc. 195 at 50, 59 & Pl.’s Exs. 204 & 205 (reporting over $2,000

for meals and entertainment for work when taxpayer testified she

had no such expenses); Doc. 196 at 205–206 & Pl.’s Ex. 249 (false

expenses for cell phone and uniforms); Doc. 211-23 at 19 & Pl.’s Ex.

21 at 9; Doc. 211-41 at 25–26 & Pl.’s Ex. 17)).

(Doc. 211-13 at 20 & Pl.’s Ex. 22; Doc. 211-41 at 29–30, 39 & Pl.’s

Exs. 17 & 19; Doc. 197 at 178–179, 285–286; Doc. 196 at 205–206

& Pl.’s Ex. 249).

App. 27

expenses made up a large portion, sometimes more

than half, of the income they had earned that year.10

For example, it is illogical for an individual making

around $35,000 a year to spend as much as half of their

yearly income, around $16,000, on unreimbursed

business expenses. (Doc. 55-34 at 22–23 & Doc. 55-36).

One of the tax returns claimed employee business

expenses of $6,000 more than the taxpayer’s income for

that year. (Doc. 211-36 at 32 & Pl.’s Ex. 26). Many of

the tax returns contained false charitable contributions

in amounts that the taxpayers testified were not

accurate, and that they had not, and would not have,

provided to the tax return preparer.11 On another tax

(Doc. 195 at 305–307 & Pl.’s Ex. 419 (reporting employee

business expenses in an amount 64% of total wages that year); Pl.’s

Ex. 366 (reporting employee business expenses of over $41,000

when total income that year was only $57,358); Doc. 211-41 at

38–39 & Pl.’s Ex. 19 (reporting unreimbursed employee business

expenses as $34,493.00 when taxpayer’s total income was

$41,000.00); Doc. 55-32 at 29 & Doc. 55-33 (reporting employee

expenses as 65% of income); Doc. 55-34 at 22–23 & Doc. 55-36

(reporting $15,923 in employee business expenses when taxpayer

made a total of $34,666 in income that year); Doc. 200 at 17; Doc.

197 at 62 & Pl.’s Ex. 376).

(Doc. 200 at 17 & Pl.’s Ex. 519; Doc. 195 at 305; Doc. 211-36 at

16, 26 & Pl.’s Ex. 25; Doc. 195 at 169–172 (taxpayer testified she

gave minimal amounts to her church but tax return stated that

she gave over $5,000 to charity); Doc. 195 at 305, 311–312 & Pl.’s

Exs. 419, 420 (two separate years where tax return stated

charitable contributions that taxpayer denies and denies providing

that information to preparer); Doc. 196 at 79–81, 93 & Pl.’s Exs.

400, 401 (multiple years reporting charitable contributions that

taxpayer denies providing and testifies are false); Doc. 197 at 61 &

Pl.’s Ex. 367; Doc. 200 at 16–17 & Pl.’s Ex. 519 (“I know I never

App. 28

return, Stinson’s employee wrongfully listed taxpayers

as having dependents.12 On another return, the

reported mortgage interest paid that year exceeded the

mortgage statement.13

A number of the tax returns prepared by Stinson or

his preparers falsely claimed what is called household

help income (“HSH”).14 HSH is “a very unusual income

because it’s reserved for people who work in someone’s

home: domestic workers, people who work as maids or

nannies.” (Doc. 198 at 59). In tax returns prepared at

Stinson’s stores, HSH “was used quite a few times with

types of employment you would not expect to see

generate the household income. For example, a hair

dresser. A hair dresser would not be [HSH].” (Id.)

Notably, it is rather uncommon to have HSH income.

United States v. Barber, 591 F. App’x 809, 813 (11th

Cir. 2014)15.

Unreimbursed employee business expenses are

generally reported in specific line-item detail on an IRS

Form 2106, and the total amount of employee business

expenses is reported on the “unreimbursed employee

claimed any charity on my income tax, never.” Yet, tax return

claims $1,500 in donations to charity).

(Doc. 211-14 at 14–15; Doc. 200 at 51).

(Doc. 211-23 at 16–18 & Pl.’s Ex. 22).

(Doc. 211-32 at 30–31 & Pl.’s Ex. 134; Doc. 211-28 at 31 & Pl.’s

Ex. 11; Doc. 211-30 at 23 & Pl.’s Ex. 129).

In the Eleventh Circuit, unpublished decisions may be cited as

persuasive, but not binding, authority.

App. 29

expenses” line on the Schedule A. (Doc. 218 at ¶ 108).

Many 2014 tax returns prepared in 2015, after Mr.

Cruz provided training, claimed unreimbursed

employee business expenses on Schedule A but did not

have a supporting Form 2106 explaining the basis of

the claim.16

2. Educational Credits

Another area replete with falsified amounts was

education credits.17 On some tax returns, qualified

education expenses were claimed on the tax return, yet

the taxpayer testified that he or she did not attend

school that year and did not tell the tax preparer

otherwise.18 On other tax returns, the taxpayer had

attended school but the amount of qualified education

expenses claimed were greater than the taxpayers’ out16

(Doc. 55-8 at 134–135; Doc. 211-3 at 19–21; Doc. 201 at 268–269,

272; Doc. 90; Doc. 103; Doc. 55-12).

A taxpayer may claim the American Opportunity Credit for

qualified education expenses incurred by the taxpayer, the

taxpayer’s spouse, or the taxpayer’s dependents, including college

or postsecondary tuition. United States v. Lawrence, No. 15-62233CIV, 2016 WL 5390569, at *3 (S.D. Fla. Sept. 27, 2016)

(Doc. 195 at 46–47 & 51 Pl.’s Ex. 204; Doc. 195 at 291–292 & Pl.’s

Ex. 417 (taxpayer testified he did not go to school that year, and

did not tell the preparer that he did, but tax return claims $1,000

in education expenses); Doc. 196 at 205 & Pl.’s Ex. 249; Doc. 196 at

130, 134–135 & Pl.’s Ex. 399 (claiming qualified education

expenses of almost $2,000 for taxpayer who did not graduate high

school); Doc. 55-11 at 47–49 & Pl.’s Ex. 115; Doc. 195 at 236–238

& Pl.’s Ex. 424 (did not attend school but tax return lists qualified

education expenses); Doc. 197 at 54–55 & Pl.’s Ex. 371; Doc. 196 at

204–205 & Pl.’s Ex. 249 at 17).

App. 30

of-pocket expenses.19 Other times, the amount of

qualified education expenses claimed on a tax return

did not match the official documents that taxpayer

customers had provided the preparer.20 (Doc. 197 at

259, 268–269). Stinson received these documents

because he kept them in his customer files. (Id.)

3. Fabricated Business Income and Expenses

on Form Schedule C

A Form Schedule C (Form 1040) (“Schedule C”)

itemizes various business expenses and is used to list

income and expenses related to self-employment,

primarily the business losses and gains of a sole

proprietor.21 (Doc. 198 at 60). Reporting income from a

business on a Schedule C is one way to increase total

income on a tax return. (Id. at 61). A number of the tax

returns admitted into evidence listed a “fake business”

on a Schedule C form. In other words, the tax return

reported losses and profits from a business that the

taxpayer testified he or she did not have. (See Doc. 2114 at 15–16; Pl.’s Ex. 61) (reporting a “private care”

(Doc. 196 at 40–43 & Pl.’s Ex. 347; Pl.’s Ex. 784 (scholarship

award exceeds education expenses)).

(Doc. 211-18 at 30–33 & Pl.’s Ex. 2 (qualified education amount

on 1098T does not match tax return)).

If there is an employee-employer relationship and the employee

has unreimbursed expenses arising out of the employment, those

expenses are to be reported under a Schedule A. See Butts v.

C.I.R., 49 F.3d 713, 714 (11th Cir. 1995). In contrast, if a sole

proprietor, self-employed individual, or a general contractor has

expenses or business losses, those expenses are to be reported

under a Schedule C. Id.

App. 31

business that the taxpayer did not have and did not

report that she had). In addition to tax returns that

reported fake businesses, other returns overstated

business profits. (Doc. 211-10 at 25–31; Pl.’s Ex. 136)

(reporting incorrect profit from cleaning business).

For example, Georgia Gordon’s 2011 and 2012 tax

returns reported that she had a business in “home

health services,” but Ms. Gordon testified that she did

not have a business. (Doc. 195 at 117–118, 122–123;

Pl.’s Exs. 379 & 380). Alberto Bermudez’s tax return

reported that he had a personal security business;

however, Mr. Bermudez testified that, while he was

employed as a security guard, he did not have a

security business and did not know it was on his tax

return. (Doc. 195 at 285–287; Pl.’s Ex. 417). One of

Stinson’s preparers reported that a taxpayer, Latrecia

Burkes, had a hair business; however, Ms. Burkes

testified that she never told the preparer that she had

a hair business, did not know this was on her tax

return, and would not have permitted it on her return

had she known. (Doc. 196 at 138–139, 143–146; Pl.’s

Exs. 398 & 399). In contrast, Ms. Burkes testified that

the tax preparer asked her who does her daughter’s

hair, but that was the extent of their conversation. (Id.)

Stinson’s name appeared on a tax return that

falsely reported that Tywana Williamson had a home

cleaning service business with a profit of $5,000. (Doc.

197 at 55–57; Pl.’s Ex. 371). Ms. Williamson testified

that both the business and the profit reported were

false, and that she would not have told the preparer to

report a business she did not have. (Id.) Additionally,

Stinson’s tax preparer reported a cleaning service

App. 32

business on Arquetta Montgomery’s tax return. (Doc.

211-27 at 15; Pl.’s Ex. 44). Ms. Montgomery, however,

testified that she did not have a cleaning services

business and never did, and that the tax preparer did

not ask her if she had one. (Id.) In other instances, the

taxpayer had a business, but the profit reported was

incorrect. (Doc. 196 at 175) (“I didn’t give them that

6,291. So I mean, it went into my income, I guess, as

far as for the business to generate a larger tax

return.”).

Additionally, Stinson and his preparers would

combine improper Schedule C losses with false

deductions listed on a customer’s Schedule A in order

to fraudulently lower a customer’s taxable income.

(Doc. 218 at 72, ¶ 262). For example, on David Hunter’s

2013 tax return, one of Stinson’s tax preparers reported

a non-existent business with more than $12,000 in

false losses on the Schedule C and also reported more

than $30,000 in false deductions on Schedule A. (Doc.

211-16 at 17 & Pl.’s Ex. 64) (tax return falsely stated

that taxpayer had a moving business). Similarly, on

Ms. Montgomery’s 2013 tax return, a Stinson preparer

claimed a false business loss of $9,050 on the Schedule

C, while also claiming false unreimbursed employee

business expenses of $17,873 and improper charitable

contributions in the amount of $2,679. (Doc. 211-27 at

15, 24, 25 & Pl’s Ex. 45).

4. Due Diligence Violations

A tax return preparer must make reasonable

inquiries to ensure the customer is legitimately entitled

to the EITC, document compliance with the due

diligence requirements, and keep that documentation

App. 33

for three years. 26 C.F.R. § 1.6995-2. This includes

completing the “Paid Preparer’s Earned Income Credit

Checklist” (“Form 8867”). (Doc. 218 at 31). The

Government presented evidence of a number of due

diligence violations.

Stinson’s preparers would check boxes on Form

8867 without actually receiving documentation from

customers. (See e.g., Doc. 211-10 at 33 (no medical

records) & Ex. 136 (checking box for medical records);

Doc. 55-11 at 41; Doc. 55-14 at 11). For example,

Stinson’s preparers checked on the Form 8867 that the

taxpayers provided medical and school records for their

children when they had not.22 For tax returns claiming

Schedule C business profits or losses, Stinson or one of

his preparers would check that the taxpayer had

provided “receipts or receipt books” on the due diligence

Form 8867 when such information had not been

provided.23

Despite the fact that taxpayers are supposed to

receive a complete copy of their tax returns pursuant to

26 U.S.C. §§ 6107 and 6695(a), a number of taxpayer

witnesses testified that they did not receive a copy of

(Doc. 196 at 96 & Pl.’s Ex. 401; Doc. 197 at 65–66 & Pl.’s Ex. 367;

Doc. 211-10 at 33 & Pl.’s Ex. 136 at 9; Doc. 55-11 at 41 & Doc. 5514; Doc. 211-38 at 25 & Pl.’s Ex. 127; Doc. 196 at 174 & Pl.’s Ex.

385; Doc. 211-18 at 29–30 & Pl.’s Ex. 1 at 11: Doc. 211-30 at 38 &

Pl.’s Ex. 130; Doc. 211-14 at 24; Doc. 211-5 at 30–31 & Pl.’s Ex.

137).

(Doc. 195 at 121 & Pl.’s Ex. 381; Doc. 196 at 173 & Pl.’s Ex. 385;

Doc. 196 at 137 & Pl.’s Ex. 399 (see page 23 of the tax return); Doc.

197 at 58 & Pl.’s Ex. 369).

App. 34

their tax returns.24 In other instances, the taxpayer

received a copy of their tax return but it was missing

pages or forms.25 One taxpayer had received documents

with completely different amounts than were on his

actual tax return. (Doc. 211-24 at 37–39). Alarmingly,

some taxpayers testified that they signed blank forms

or that they were not shown the page with the amounts

written on it. (Doc. 211-30 at 43–46; Doc. 211-39 at

48–49). Stinson’s managers denied that they had

provided blank forms. (Doc. 208 at 43–44).

At trial, Stinson called several of his store managers

as witnesses. While some of Stinson’s employee

witnesses admitted that tax returns were incorrect or

did not contain supporting documentation, they denied

fault and blamed the taxpayers for providing false

information. (Doc. 201 at 262–267, 271–272; Doc. 208

at 103, 112). Stinson did not call a taxpayer witness of

his own or present a single accurate tax return

prepared by his stores. According to Stinson, the

taxpayers are not credible or reliable because their tax

returns were prepared years ago, and the taxpayers

would not admit to their wrongdoing.26 (Doc. 219 at

(Doc. 196 at 75–76; Doc. 211-3 at 21–22; Doc. 211-14 at 38; Doc.

211-17 at 11–12; Doc. 211-18 at 25; Doc. 211-21 at 11–12; Doc. 21123 at 23; Doc. 211-31 at 13; Doc. 211-33 at 44; Doc. 211-28 at 39).

(Doc. 211-9 at 32 (taxpayer did not receive Form 2106 that

contained the fabricated business expenses); Doc. 211-41 at 18, 41

(taxpayer did not receive the Schedule A itemized deductions)).

Even if the taxpayers were negligent in not reviewing their

return, this is not the issue before the Court in this lawsuit against

App. 35

63–66, 85, 112). Stinson made a similar argument in

opposing the preliminary injunction that the Court

rejected because there was “no persuasive reason to

discount the sworn testimony of over twenty customers

. . . , [and] the same argument could be made about the

reliability of the testimony of Stinson’s tax return

preparers.” (Doc. 69 at 5).

The Court finds that the taxpayers’ testimony is

credible. First, many of the audits submitted into

evidence stated that the Tax Compliance Officer

(“TCO”) did not recommend a penalty against the

taxpayer because the taxpayer did not show

“intentional disregard” for the tax laws.27 (Pl.’s Exs.

Stinson. The Court does not believe it absolves Stinson of liability

for acting as a tax preparer.

Stinson contests the admissibility of all of the audits admitted

into evidence at trial. (Doc. 219 at 152–173). The Court has

addressed the admissibility of audit files multiple times. First, the

Magistrate Judge addressed the issue in the context of Stinson’s

motion to compel the deposition of the IRS investigator Ricky Poole

or Stinson’s alternative motion to strike Mr. Poole’s declaration.

(Doc. 117 at 7) (stating that “the Court fails to understand how it

can be said that the audits were not made in the ordinary course

of the IRS’s business”). This decision was appealed to the

undersigned Judge, and the decision was affirmed. (Doc. 143 at

16–18) (finding that the audit files were made in the ordinary

course of business and that Stinson had not demonstrated that the

audit files were not trustworthy). Stinson raised the issue again at

trial, and the Court permitted briefing during trial. (Doc. 184 at 2).

The Court overruled Stinson’s objection because Stinson failed to

cite a single case in support of his argument, and the Court did not

find that Stinson had provided a persuasive reason to depart from

its prior ruling. (Doc. 204 at 15–17). Despite this, Stinson

dedicated over twenty-five pages of his post-trial brief to the

App. 36

284, 355, 356, 368, 399). Though Stinson points to a

number of audits that did not recommend preparer

penalties, there were many audits that did recommend

considering a penalty against the preparer.28 Many of

the taxpayers testified that they did not know anything

about tax preparation and trusted Stinson’s stores to

prepare their tax returns properly.29 Stinson’s own

witness testified that Stinson’s stores targeted lower

income areas where the taxpayers were not aware of

admissibility of audit files. (Doc. 219 at 152–172, 206–211). Stinson

did not file a motion for reconsideration of any prior order on the

issue. More importantly, Stinson has not met the standard for

reconsideration: “(1) an intervening change in controlling law;

(2) the availability of new evidence; and (3) the need to correct

clear error or manifest injustice.” McGuire v. Ryland Grp., Inc.,

497 F. Supp. 2d 1356, 1358 (M.D. Fla. 2007) (citation omitted). The

moving party must meet a very high standard, presenting “facts or

law of a strongly convincing nature to induce the court to reverse

its prior decision.” Id. Notably, “[a] party who fails to present its

strongest case in the first instance generally has no right to raise

new theories or arguments in a motion for reconsideration.” Id.

Stinson had a full and fair opportunity to brief the issue, and

Stinson has failed to convince the Court that reconsideration is

appropriate.

(See e.g., Pl’s Exs. 368, 399, 607, 609, 611, 613, 615, 616–618,

628) (not an exhaustive list)). Stinson argues that over fifty of the

two-hundred audits found no preparer misconduct or did not

recommend a penalty. However, the Court does not find that this

precludes a finding of fraud. Stinson attached an exhibit to his

post-trial brief that was not admitted into evidence at trial (one of

eight “new” exhibits). The Court does not consider this exhibit, or

any of the other exhibits, that Stinson attached to his trial brief

that were not admitted at trial.

(See Doc. 195 at 80, 158, 315; Doc. 196 at 88, 243; Doc. 197 at 41,

163; Doc. 200 at 13–14).

App. 37

what credits are available, yet Stinson argues that

these same taxpayers were knowledgeable enough to

know how to falsify amounts to increase their tax

refund amount. (Doc. 208 at 138). Furthermore,

Stinson has not presented evidence showing that the

taxpayers knew the amounts were wrong, or that they

knew they were submitting tax returns with improper

claims. In contrast, the taxpayers testified that they

were not aware the amounts were on their returns and

did not review them. (See e.g., Doc. 211-3 at 20, 67).

Notably, some of Stinson’s preparers made false claims

while preparing their own individual tax returns. (Doc.

208 at 62–64 (claiming employee expenses in an

amount that was more than half total income); Doc. 5537 at 141–143; Pl.’s Ex. 192; Doc. 55-38). The Court

finds that the taxpayer testimony is probative of fraud

on the part of Stinson and his employees.

Due to the filing of improper claims on an

immeasurable amount of tax returns, Stinson’s tax

preparation stores have caused harm to the United

States Treasury and to the taxpayer victims. Notably,

many of Stinson’s customers have been audited by the

IRS and, consequently, owe money on their modest

incomes as a result.30

(Doc. 195 at 61–62 (owing $14,000 to the IRS), 99, 127, 132,

214–215, 260; Pl.’s Ex. 383; Pl.’s Ex. 249; Pl.’s Ex. 399; Doc. 196 at

99–100 (owing a little more than $15,000 to the IRS); Doc. 197 at

69; Doc. 211-41 at 42–43; Doc. 211-20 at 19). The following tax

returns were audited by the IRS: Pl.’s Exs. 399, 429, 586–740.

App. 38

C. How Stinson’s Tax Preparers Were Trained

At trial, Stinson did not admit culpability or show

remorse for the harm he has caused his customers.

Stinson took the position that, because he provided

some training to remedy some of the issues with tax

preparation, he should not be held liable. The Court

finds it relevant to discuss the training provided by Mr.

Gachette to employees of LBS, including Stinson’s

employees, and the training that Stinson provided to

employees at Nation Tax after he changed the name of

his stores. Notably, Stinson owned his tax preparation

stores through the same LLC, it just changed names

from LBS to Nation Tax. After the name change,

Stinson operated stores at the same physical addresses

and used the same customer files. Stinson has not

shown a material difference in their operations aside

from the superficial name of the stores.

Stinson and many of his managers and preparers

had no experience preparing tax returns prior to their

involvement with LBS and Nation Tax. (Doc. 197 at

153; Doc. 211-6 at 9–10; Doc. 55-40 at 24). At LBS,

training was focused on policies, managing employees,

and marketing potential customers.31 (Doc. 10 ¶ 27;

Doc. 197 at 154). LBS employees were given scripts to

memorize when interviewing customers. (Id.; Pl.’s Ex.

186). At LBS, employees, including Stinson, were

trained to report commuting miles as business miles, to

report money spent on food as deductible meal

expenses, and to report cell phone bills as

Training was 70% marketing and 30% related to the software

program. (Doc. 197 at 155).

App. 39

unreimbursed employee business expenses regardless

of whether the phone was used for personal or business

purposes—all of which are improper. (Doc. 55-2 at 64,

66–67; Doc. 197 at 178–79). From 2010 to 2013, while

Stinson was operating under the LBS name, Stinson

and his employees attended various trainings. (Doc. 322 at 1). This included an instruction sheet that shows

pre-determined responses for questions on the tax

return without regard to the individual taxpayer’s

response or supporting documentation. (Pl.’s Ex. 186).

At one of LBS’s trainings, Stinson met Marlene

Guzman (“Ms. Guzman”), who also worked as an LBS

tax preparer and manager from 2009–2013. (Doc. 21112 at 8; Doc. 211-12 at 6–8, 12, 68, 69). While Ms.

Guzman did not work at any of Stinson’s stores, she

knew Stinson, attended training with Stinson, and

communicated with Stinson’s managers. (Id. at 14, 15,

17, 18, 20, 21, 92, 136).

Ms. Guzman’s deposition was admitted at trial.

(Doc. 211-12). Ms. Guzman testified as to the training

she received from LBS. Specifically, that LBS

employees were trained to figure out how to decrease or

increase a customer’s taxable income to get the

taxpayer “more income to get to the amount that you’re

needing.” (Id. at 30). LBS called this “maximizing the

refund” which meant to “basically let [the customer]

know that we’re going to look for more forms to get you

more money.” (Doc. 211-12 at 41). LBS also used the

term “magic numbers” at one of LBS’s trainings and in

a document provided to the tax preparers. (Doc. 211-12

at 41). One of LBS’s documents provides that “magic

numbers” is an income range from $16,000 to $18,000,

presumably, where the taxpayer would get the largest

App. 40

refund. (Pl.’s Ex. 456; Doc. 211-12 at 43). The document

states that “anything lower than this you try to add

income,” and instructs that if anything higher, “to try

to take away income.” (Pl.’s Ex. 456). At the first year

of training, LBS employees were instructed to “[j]ust

add income.” (Doc. 211-12 at 44) (Q: “Just make up a

number?” A: “That’s it.”). By the second year,

employees were told to “lure [the customer] in to

basically state that they make extra income.” (Id.)

Additionally, LBS employees were trained to ask

questions to take away income to hit the “magic range”

or get the “perfect number” to make the customer

happy. (Doc. 211-12 at 49, 53; Doc. 55-9 at 36; Doc. 21134 at 81–82). If a customer’s income was lower than

$10,000, the goal was to increase their income so they

could get more money by adding additional forms, such

as a Schedule C. (Id.) The document provided at

training even states “input an income of 10000 on sch

c,” and LBS employees were trained to input a specific

Schedule C income depending on the number of

children the taxpayer had. (Pl.’s Ex. 456; Doc. 211-12 at

51). LBS employees also determined what to put on the

customer’s tax return for business mileage. (Doc. 21112 at 55; Doc. 55-9 at 117 (“I was taught to play with

those business mileage numbers to get to a number

that would help increase his refund.”)). Ms. Guzman

did not know at the time that she was being instructed

to provide a false number on the return, but looking

back with her present knowledge of the tax laws, she

believes that LBS trained her to prepare tax returns in

a manner that resulted in false information inputted on

those returns. (Id. at 163).

App. 41

Stinson asserts that he spent a lot of money on

training his employees. (Doc. 197 at 171). This training

did not occur until after Stinson was notified that he

was under IRS investigation, and he had met with IRS

Agent Ricky Poole. (Id. at 206–208). At that time

Stinson contacted Latino Tax to provide a two-day

training session for his managers, although Stinson did

not attend the entire training nor did he complete any

tutorials because, according to him, “I didn’t do taxes.

I didn’t need to.” (Id. at 298, 210, 212:21–22; Pl.’s Ex.

210A). Not until the summer of 2014, after this lawsuit

was filed, did Stinson hire Mr. Cruz to provide

additional training. (Id. at 213). Mr. Cruz works at H

& R Block and is knowledgeable with regard to tax

preparation—he has been preparing taxes for over

twenty-five years. (Id. at 213–214). Stinson’s managers,

but not Stinson or the tax return preparers, attended

Mr. Cruz’s training. (Id. at 220). Mr. Cruz developed a

training program based on his review of tax returns

prepared at Stinson’s stores. (Doc. 208 at 151–152,

165). Notably, Mr. Cruz did not provide training

related to business expenses, Schedule A, Schedule C,

or the EITC—the areas where Stinson’s customers’ tax

returns display a pattern of false claims. (Id. at

154–155). Mr. Cruz believed that Stinson’s employees’

knowledge of preparing tax returns was poor, and they

did not understand what qualifies as a business mile

for purposes of reporting a business mile deduction. (Id.

at 47; Doc. 55-8 at 47). Mr. Cruz did not provide

oversight review of any tax returns prepared by

Stinson’s employees. (Doc. 197 at 225). Mr. Cruz did

inform Stinson’s managers that they cannot claim

commuter miles as unreimbursed employment

expenses (Doc. 55-8 at 51:3–53:10); however, the

App. 42

Government admitted into evidence tax returns

prepared after this training still claiming improper

business mileage.32 Mr. Cruz has not been completely

reimbursed for his services. (Doc. 208 at 155).

In December 2014, Stinson had a CPA, Howard

McKnight, speak with his managers about not taking

every customer that comes in the door. (Doc. 201 at

211). Mr. McKnight made clear that he had not

provided any substantive training or reviewed any tax

returns. (Id. at 212, 217, 225–226). Stinson also asked

his managers to attend an IRS tax forum that covers

changes in the tax laws from year-to-year. (Doc. 208 at

218). At least by 2013, Stinson required his employees

to sign a “due diligence handbook.” (Doc. 208 at 91–91;

Defendant’s Exhibit 24A (“Def.’s Ex.”)). Lastly, Drake

Software, the tax preparation software that Stinson

used at LBS, provided training on the use of their

software but did not otherwise provide substantive

training. (Doc. 197 at 107, 110–112).

Although Stinson provided some unstructured

training to his managers, which occurred after the IRS

investigation commenced, the Court does not find that

this training is sufficient to prevent recurrence of

Stinson’s conduct. First, a number of improper

practices continued after the training.33 Second, the

(Doc. 197 at 19–21 & Pl.’s Ex. 189; Doc. 211-38 at 13, 22; Doc. 5511 at 13–15 & Doc. 55-12; Doc. 55-17 at 17–22 & Doc. 55-18; Doc.

55-30 at 20–21 & Doc. 55-31; Doc. 55-32 at 18–22 & Doc. 55-33;

Doc. 55-34 at 15–18 & Doc. 55-35; Doc. 55-8 at 134).

(Doc. 211-18 & Pl.’s Ex. 6 (claiming improper education credit);

Doc. 197 at 22 & Pl.’s Ex. 189 (claiming improper status of single);

App. 43

training did not cover the areas, discussed above,

where there is a pattern of improper claims—Schedule

As, Schedule Cs, the EITC, and due diligence. Third,

only a small subset of Stinson’s employees actually

received the training—the managers. Fourth, Stinson

has not shown remorse or accepted responsibility for

the improper preparation of his customers’ tax returns.

At trial, Stinson maintained that he does not need to

know how to prepare tax returns despite ownership of

a tax preparation business.

Doc. 211-3 at 24 – 25 & Pl.’s Ex. 65 (improper due diligence

checklist); Doc. 211-28 at & Pl’s Ex. 13 (did not give copy of tax

return to taxpayer); Doc. 211-9 at 40–45 & Pl.’s Ex. 40 (tax return

that claims improper Schedule C business expenses and incorrect

business mileage); Doc. 211-11 at 22, 34–37 & Pl.’s Exs. 35 & 36

(tax return claims improper filing status & claiming commuter

miles as business miles); Doc. 211-14 at 24 & Pl.’s Exs. 29, 30

(improper due diligence checklist); Doc. 197 at 19–21 & Pl.’s Ex.

189; Doc. 211-38 at 13, 22; Doc. 211-25 at 15–19 & Pl.’s Ex. 54 (tax

return claims improper charitable donation and unreimbursed

employee expenses); Doc. 211-4 at 15 & Pl.’s Ex. 61 (tax return

listing a fake business); Doc. 211-26 at 41–42 & Pl.’s Ex. 53

(reporting false profits from a business); Doc. 55-11 at 13–15 &

Doc. 55-12; Doc. 55-17 at 17–22 & Doc. 55-18; Doc. 55-30 at 20–21

& Doc. 55-31; Doc. 55-32 at 18–22 & Doc. 55-33; Doc. 55-34 at

15–18 & Doc. 55-35; Doc. 55-8 at 134); Doc. 55-34 & Doc. 55-36;

Doc. 211-33 at 46–49 & Pl.’s Ex. 43). The following are 2014 tax

returns admitted as exhibits at trial, that were prepared in 2015,

after this lawsuit had commenced and required adjustments: Pl.’s

Exs 5, 6, 9, 13, 15, 29, 30, 35, 36, 40, 43, 47, 49, 53, 53, 58, 61, 65,

66, 90, 94, 102, 103 117, 122, 123, 126, 132, 133, 136, 155, 156, 158,

163, 165, 189, 260, 291.

App. 44

D. IRS Investigation of Stinson

The IRS began investigating Stinson in March 2013.

(Doc. 200 at 112). The IRS employee assigned to

investigate Stinson was Mr. Poole. (Id. at 104). Mr.

Poole has twenty-six years of experience working for

the IRS and currently investigates tax return preparers

and promoters of tax schemes. (Id.) Mr. Poole’s

investigations consist of interviewing the target of the

investigation and reviewing relevant documents. (Id. at

108–113). Mr. Poole’s investigative duties also include

determining whether or not to assess civil penalties or

to refer the case to IRS counsel to determine whether

to send a request to the Department of Justice to file a

lawsuit. (Id. at 111–112). At the end of each

investigation, it is Mr. Poole’s job to determine whether

penalties will be assessed.34 (Id. at 112, 124–125).

In the course of his investigation, Mr. Poole

interviewed Stinson and two of his store managers.35

Mr. Poole testified that penalties had not been assessed in this

case, but that he usually waits until the end to make an ultimate

decision regarding penalties. (Doc. 200 at 125). Right now, this

case has not concluded, and the current status is that it is in

litigation. (Id.) Mr. Poole testified that he will be assessing

penalties at the end. (Id. at 126).

In Stinson’s post-trial brief, he argues that Mr. Poole’s testimony

is not admissible, that he cannot render opinions, and that he

cannot testify regarding the audit files. (Doc. 219 at 141–146,

152–163). Stinson has made this argument multiple times. The

Court addressed Stinson’s objection to Poole’s declaration and

testimony regarding IRS audit files in its Order denying Stinson’s

motion for summary judgment. (Doc. 143 at 14–18). Thereafter,

Stinson objected to Mr. Poole’s testimony at trial, and the Court

App. 45

(Id. at 114–117). Mr. Poole selected a sample of twenty

tax returns from tax year 2012, prepared in 2013, that

contained a Schedule A and a Schedule C.36 (Id. at

120–121). An IRS list keeper selected additional tax

returns and sent the matters out to TCOs to conduct

audits. (Id. at 122–123). Thereafter, Mr. Poole compiled

a summary spreadsheet of the audits performed on tax

returns prepared by Stinson and his stores, a total of

two-hundred audits (154 of them from tax year 2012),37

and Mr. Poole included in the spreadsheet the total tax

deficiencies. (Doc. 201 at 32, 152; Pl.’s Ex. 773).

According to those audits, adjustments were made in

the following areas: Schedule A unreimbursed

requested briefing on the admissibility of Mr. Poole’s testimony

(Doc. 184 at 2 ¶ 4). The Court overruled Stinson’s objection to Mr.

Poole’s testimony because Stinson did not cite case law, and the

Court found that Mr. Poole’s testimony was permissible under

Federal Rule of Civil Procedure 803(6). (Doc. 204 at 15–17).

Despite that the Court requested briefing on this matter during

trial, and has already ruled on it, Stinson reargues the matter in

his post-trial brief. Notably, Stinson did not file a motion for

reconsideration, and the Court finds that he does not meet the

standard for the Court to reconsider the matter. See Carroll v.

TheStreet.com, Inc., No. 11-cv-81173, 2014 WL 5474048, at *5 (S.D.

Fla. Apr. 10, 2014) (“a motion for reconsideration is not a vehicle

for relitigating old issues”).

Stinson’s stores prepared the following tax returns: (1) in 2013,

4,631 returns of which 4,599 claimed a refund, (2) in 2014, 5,089

returns of which 5,037 claimed a refund, (3) in 2015, 4,564 returns

of which 4,498 claimed a refund. (Doc. 200 at 119–120, Pl.’s Ex.

765). On average, 98-99% of the returns claimed a refund. (Id.)

The TCOs were auditing the year 2012, however, they look at

other years, in addition to 2012, for similar issues with the tax

returns occurring in other years. (Doc. 200 at 123).

App. 46

employee business expenses, Schedule A charitable

contributions, Schedule C business income or expenses,

and the EITC. (Doc. 200 at 151–152). Mr. Poole also

reviewed additional audits of tax returns prepared in

2010 and 2011 by Stinson’s tax preparation stores.38

These audits were not commissioned by Mr. Poole, but

were tax returns randomly audited by the IRS. (Id. at

134). Mr. Poole found that 95% of these tax returns

required an adjustment. (Id. at 134). Stinson also

identified seventeen audit files—audits also not

commissioned by Mr. Poole—that did not include a

finding of fraud or recommend tax preparer penalties,

but many of these audits still required an adjustment.39

(Doc. 219 at 62). Mr. Poole testified that he saw the

“same pattern of abuse” among the tax returns he

reviewed. (Id. at 128).

Stinson contends that in ninety of these audit files, the taxpayer

did not sign agreeing to the IRS auditor’s estimated tax deficiency.

(Doc. 219 at 61, n.188) (citing Government’s exhibit numbers). Mr.

Poole testified that these audit files were randomly-picked audits

that were sent to him, but that he had not been involved in these

audits and they were separate from his investigation. (Doc. 200 at

134–35). Mr. Poole testified that Stinson himself prepared at least

thirty of the tax returns that were the subject of these audits. (Id.

at 134). While the taxpayers whose tax returns were the subject of

these audits may not have signed expressly agreeing with the IRS

deficiency determinations, 95% of these tax returns required an

adjustment after auditing. (Id.)

See Pl.’s Exs. 375, 499, 408, 586–590, 592–595, 597–599, 601,

602, 606, & 657 (though no penalty was assessed for 657, the audit

says that the preparer did not advise properly). Stinson cites

eighteen exhibits but states that only seventeen do not contain a

recommendation of preparer misconduct. (See Doc. 219 at 62,

n.191).

App. 47

For tax years 2012–2014, Nation Tax filed 1,965 tax

returns containing a Form Schedule A. (Doc. 200 at

170). Of these tax returns, 1,861 reported (the unusual

claim for) unreimbursed employee business expenses.

(Id.) The average wages reported was $35,040, and the

average amount of unreimbursed employee business

income was $15,450—that is, the average percentage of

customers’ wages reported as an unreimbursed

business expense was 44% of their income. (Id.)

Additionally, Mr. Poole summarized tax returns filed

by Nation Tax in 2012–2014 containing a Schedule C.

(Id. at 171–174). During this period, Nation Tax

Services filed 5,501 tax returns with a Schedule C

attached, and only 137 of these returns claimed a loss,

(Id. at 171–173), while 5,364 claimed a profit, (Id.; Pl.’s

Ex. 769).

In February 2016, IRS Agent Holly Shields (“Ms.

Shields”), an IRS employee assigned to a group that

investigates potentially abusive tax practices,

coordinated interviews of a randomly selected sample

of Nation Tax customers located in St. Petersburg,

Florida and Tampa, Florida for the 2013 tax year.40

In his post-trial brief, Stinson objects to Ms. Shields’s testimony

arguing that: (1) it is hearsay because it was prepared in

anticipation of litigation; (2) it is an improper expert opinion; and

(3) the sample is not random. (Doc. 219 at 163–173). Ms. Shields’s

testimony was another issue on which the Court permitted briefing

during trial. (Doc. 184). The Court overruled Stinson’s objection to

Ms. Shields’s testimony because Stinson did not provide a

memorandum of law or articulate a legal basis for excluding her

testimony. (Doc. 204 at 17). Despite this, Stinson raises the issue

again in his post-trial brief. (Doc. 219 at 163–173). The Court

declines to consider Stinson’s re-arguing of the matter. While the

App. 48

(Doc. 198 at 36–39). Ms. Shields oversaw four IRS

revenue agents, including herself, that conducted

interviews of twenty-seven randomly selected

customers in Tampa, and thirteen customers in St.

Petersburg. (Id. at 38–43). These revenue agents

performed face-to-face and telephone interviews with

the customers. (Id. at 44–45). The interviews were not

audits and were strictly voluntary. (Id. at 46, 66).

During the interview, the taxpayer customers were

asked whether the information on their tax returns

was correct. (Id. at 45, 79-80). At the end of the

interviews, the taxpayer customers were asked to sign

a declaration stating that the information they had

provided was accurate. (Id. at 47). If, based on the

interview, the revenue agents determined that the tax

return contained a deficiency, Ms. Shields would use an

IRS Form 454941 to report and identify the tax

deficiency amount. (Id. at 47–48). Of the twenty-seven

randomly selected tax returns in Tampa, twenty-one of

Court has the discretionary power to revisit prior decisions of its

own, this is often by way of a motion for reconsideration, which

was not filed in this case, and is rarely granted. Carroll, 2014 WL

5474048, at *5. In any event, a motion for reconsideration is not a

vehicle for relitigating old issues, as Stinson is seeking to do here.

Id. Nonetheless, even had the Court excluded Ms. Shields’s

testimony, the Court ultimately finds that an injunction is

warranted for the reasons discussed infra.

A Form 4549 is typically used in an audit to determine a

taxpayer’s deficiency or the refund due to the taxpayer. (Doc. 109

at 48). Forms 4549 can be used to conclude whether a tax return

contains errors, whether an overstated income amount resulted in

an EITC or whether there was a deficiency causing harm to the

Government. (Id. at 49). Forms 4549 are completed in the normal

course of business for the IRS to estimate tax harm. (Id. at 107).

App. 49

them, or 77.7%, underreported taxes resulting in a tax

deficiency of $49,363. (Id. at 55–57; Pl.’s Ex. 478). Of

the thirteen tax returns in St. Petersburg, nine of

them, or 69.2%, underreported the customers’ tax

liability causing a total tax deficiency of $36,573.56.

(Doc. 198 at 57; Pl.’s Ex. 555). In reviewing the sample,

Ms. Shields saw improper claims of Schedule C

business loss,42 EITC due diligence violations,43 and

improper claims of Schedule A losses.44 (Doc. 198 at

59–63).

E. Stinson’s Unjust Enrichment

Stinson contracted with two third-parties to process

the tax refunds of his customers—EPS Financial (for

2012–2014) and Refundo (for 2015). EPS Financial and

Refundo received the customers’ tax refunds from the

IRS, subtracted a processing fee, and then transferred

Stinson’s tax preparation fees to a bank account that

See, e.g., Testimony of Gordon Jones, (Doc. 200 at 72–73, 77–79)

(improper claim of Schedule C business).

See e.g., Rickey Hailey’s testimony, (Doc. 200 at 27–28) (Form

8867 stating that taxpayer had provided school records and

medical records when taxpayer testified he did not).

See e.g., Rickey Hailey’s testimony, (Doc. 200 at 4, 6–12; Pl.’s Ex.

522) (improper claiming of business miles, vehicle expenses, and

mortgage interest on 2011 return), (Doc. 200 at 15–23, Pl.’s Ex.

519) (improper claiming of charitable contributions, mortgage

interest, goddaughter as dependent, and employee business

expenses on 2012 return), (Doc. 200 at 26–29, Pl.’s Ex. 516) (same);

Testimony of Gordon Jones (Doc. 200 at 75–79) (improper claiming

of business mileage and business expenses), (Doc. 200 at 54–59,

67–68) (improper claim of charitable contribution and education

credit).

App. 50

Stinson controlled. (Doc. 197 at 239–240, 297; Doc. 198

at 10–13). The tax preparer had determined the

amount of fees that would be deducted from each tax

refund, but the fees could not exceed $999 at EPS

Financial, and at Refundo, any fees greater than $1,100

would be flagged. (Doc. 197 at 297; Doc. 198 at 13). The

fee amounts deposited into Stinson’s account were

tracked through a fee detail report. (Doc. 197 at

299–300; Doc. 198 at 19–20; Pl.’s Exs. 462 & 463). The

gross fees deposited to Stinson’s account from EPS

Financial and Refundo are as follows: $483,117 in

2012; $2,432,201 in 2013; $2,375,501 in 2014; and

$2,044,311.25 in 2015.45 (Pl.’s Exs. 462 & 463).

For tax years 2012, 2013, and 2014 (tax returns

filed and prepared in 2013, 2014, and 2015

respectively), Stinson’s stores filed 1,965 tax returns

with a Schedule A; 1,861 of these returns had a

Schedule A that claimed unreimbursed employee

business expenses. (Pl.’s Ex. 767). Stinson received at

least $800,101.47 in fees for preparation of these

returns. (Pl.’s Ex. 768). Additionally, for tax year 2011,

Stinson was identified as the tax return preparer on

tax returns including a Schedule A, Schedule C, or that

reported education credits where (1) no Form 1098-T

was issued by an educational institution for the

taxpayer, or taxpayer’s dependent, claiming the

education credit, or (2) a Form 1098-T was issued but

the grants or scholarships exceeded the qualifying

education expenses reported on the Form 1098-T such

that the taxpayer or their dependent claimed an

Stinson has not disputed that his LLC received these amounts

in fees.

App. 51

education credit when he or she had no out-of-pocket

education expenses (Pl.’s Ex. 204; Doc. 196 at 204–206

& Pl.’s Ex. 249; Pl’s Ex. 346; Pl’s Ex. 371; Pl.’s Ex. 399;

Doc. 195 at 236 & Pl.’s Ex. 424). The evidence showed

that Stinson and his employees fabricated education

expenses on his customers’ tax returns, claimed

personal expenses as business expenses on Schedule A

and Schedule C, fabricated businesses, fabricated

charitable donations, and improperly conducted due

diligence. (See id.; see also Doc. 197 at 251–255,

262–263, 282–288; see supra). Stinson received at least

$149,851 in fees for the preparation of these tax

returns.46 (Pl.’s Ex. 771). Combining the tax

preparation fees received for tax returns claiming

unreimbursed employee expenses from tax years 2012,

2013, and 2014 ($800,101.47), with the tax returns that

Stinson himself prepared in 2011 containing those

forms ($149,851), the Court finds that Stinson has been

unjustly enriched in the amount of $949,952.47.47

There were 349 total tax returns prepared by Stinson himself in

the tax year 2011. (Doc. 201 at 162). The fee amount was pulled

from the e-collect tax preparation page, and the information was

contained in the customer file. (Id. at 163).

Due to an inexcusable delay on the part of Stinson’s counsel, the

Court denied Stinson’s late motion (made during trial) to withdraw

his deemed admissions. (Doc. 204). It is relevant to note that the

Court does not rely on Stinson’s deemed admissions for the above

findings of fact, although it could have.

App. 52

II. CONCLUSIONS OF LAW

A. Preliminary Legal Issues

As an initial matter, the Court rejects Stinson’s

argument that the Government is required to prove

fraud in order to prevail.48 The Government brought

three claims against Stinson, under three separate

provisions of the Internal Revenue Code: 26 U.S.C.

§ 7407, 26 U.S.C. § 7408, and 26 U.S.C. § 7402, only

one of which requires proof of fraud. (Doc. 1). The Court

has previously held that the Government is not

required to prove fraud and may prevail under any of

the three provisions under which it brought its

claims.49 (Doc. 143 at 7).

Additionally, Stinson has repeatedly taken the

position that the Government cannot prevail because it

has not presented a random sample. The Court rejected

Additionally, to the extent Stinson argues that the Government

is required to prove fraud based on the doctrine of judicial

admission (Doc. 219 at 190–192), the Court rejects this argument.

Stinson’s argument consists of a string cite of a number of cases

addressing the doctrine of judicial admission. (Id.) In that section,

Stinson does not identify the judicial admissions to which he is

referring. (Id.) The Court assumes this relates to Plaintiff’s

argument in the facts section that the Government must prove

fraud because it is bound by judicial admissions in the Complaint.

(Id. at 13–32). Though the Government used the word “fraud” in

its complaint, it brought three claims under different provisions of

the Internal Revenue Code, only one of which requires proof of

fraud. Whether the Government is required to prove fraud is a

legal question, not a factual one.

This ruling was affirmed by an Eleventh Circuit panel. (Doc. 163

at 15).

App. 53

this argument in granting the preliminary injunction,

and so did the Eleventh Circuit. (Doc. 69; Doc. 163 at

15–16). Stinson has yet to cite case law that requires

the Government to submit evidence of a random

sample in order to prevail.50 Last, Stinson maintains

that expert testimony is required. Not surprisingly, the

Court has already considered and rejected this

argument (Doc. 143 at 10, n.6) because Stinson cites no

legal authority requiring an expert witness. (See also

the Eleventh Circuit’s Opinion on Stinson’s

Interlocutory Appeal (Doc. 163 at 16) (“Stinson has

failed to provide any authority for his argument that

the United States should have presented an expert

witness or submitted only tax returns that had been

Stinson cites the following cases in his post-trial brief, all of

which are inapposite to the present case: United States v. Rosin,

263 F. App’x 16, 34 (11th Cir. 2008) (a health care fraud criminal

action where the Eleventh Circuit found there was nothing

improper about the use of a sample); U.S. ex rel. Ruckh v. Genoa

Healthcare, LLC, No. 8:11-cv-1303-T-23TBM, 2015 WL 1926417,

at *3 (M.D. Fla. Apr. 28, 2015) (addresses statistical sampling in

a qui tam action in the Daubert context); United States v. Aegis

Therapies, Inc., No. cv-210-072, 2015 WL 1541491, at *10 (S.D. Ga.

Mar. 31, 2015) (in a False Claims Act action, the court denied

plaintiffs’ request to supplement expert disclosures after statistics

expert repeatedly testified that she “is not a statistician”); In re

Horizon Organic Milk Plus DHA Omega-3 Mktg. & Sales Practice

Litig., No. 12-MD-02324, 2014 WL 1669930, at *13 (S.D. Fla. Apr.

28, 2014) (order granting a Daubert motion and addressing

whether expert’s cherry-picking of five out of 1,375 scientific

articles is reliable and can be extrapolated to “all healthy people”);

Smith v. Wal-Mart Stores, Inc., 537 F. Supp. 2d 1302, 1321 (N.D.

Ga. 2008) (considering admissibility of survey for determining

likelihood of confusion in a Lanham Act case). Stinson has failed

to explain how these cases relate to the present action brought

under the Internal Revenue Code.

App. 54

audited by the IRS to support its claims of Stinson’s

improper practices.”).

To the extent Stinson seeks to re-argue issues on

which the Court requested briefing during trial (issues

that the Court ruled on one day following the close of

trial), including objections to admissibility of evidence

and witnesses during trial, his objection to audit files

as business records, Rule 26 disclosure violations, and

Rule 37 sanctions, the Court will not revisit these

issues at this juncture.51 (See Docs. 184, 193, 203, 204).

Stinson had a full and fair opportunity to brief the

issues and did not file a motion for reconsideration.

Even had Stinson filed such a motion, he has not met

the high standard warranting reconsideration. See

McGuire v. Ryland Grp., Inc., 497 F. Supp. 2d 1356,

1358 (M.D. Fla. 2007) (“[a] party who fails to present

its strongest case in the first instance generally has no

right to raise new theories or arguments in a motion for

reconsideration.”).

B. Count I- Permanent Injunction Pursuant to

26 U.S.C. § 7407

Section 7407, enacted as part of the Tax Reform Act

of 1976, reflects a congressional intent to prevent

abuses by tax preparers in the reporting of client’s

The Court requested briefing because Stinson waited until trial

to raise a number of objections to evidence based on discovery

violations. These issues could have been addressed months, if not

more than a year, prior to trial. Stinson’s repeated failure to

promptly raise such issues falls far below the level of practice

expected in federal court. The Court declines to consider Stinson’s

re-argument of issues the Court ruled on in advance of post-trial

briefing in an attempt to streamline the issues in this case.

App. 55

income tax liabilities. United States v. Ernst &

Whinney, 735 F.2d 1296, 1302 (11th Cir. 1984). “In

order to issue an injunction pursuant to § 7407, three

prerequisites must be met: first, the defendant must be

a tax preparer; second, the conduct complained of must

fall within one of the four areas of proscribed conduct,

§ 7407(b)(1); and third, the court must find that an

injunction is ‘appropriate to prevent the recurrence’ of

the proscribed conduct, § 7407(b)(2).” Id. at 1303.

Stinson contends that he is not a tax return preparer.52

(Doc. 219 at 193–198). This Court has already

determined that Stinson is a tax return preparer under

26 U.S.C. § 7701(a)(36). (Doc. No. 143 at 10)

(“Stinson—by virtue of his ownership and operation of

tax return preparation stores and his employment of

individuals to assist in tax preparation—is a tax return

preparer. Stinson owned and operated the tax

preparation stores, hired employees, trained

employees, and profited from his tax preparation

business.”); see also United States v. Mesadieu, 180 F.

Supp. 3d 1113, 1120 (M.D. Fla. 2016) (Conway, J.). The

statutory definition of tax return preparer is broadly

Stinson does not cite case law. Stinson cites the regulations that

provide when a tax return preparer may be subject to penalty

under §§ 6694 and 6695. This is not a case assessing preparer

penalties, but rather a case addressing an injunction pursuant to

§ 7407. Furthermore, a number of cases refer only to 26 U.S.C.

§ 7701(a)(36) when defining tax return preparer for purposes of a

§ 7407 injunction. See United States v. Elsass, 978 F. Supp. 2d 901,

918 (S.D. Ohio 2013); United States v. Pugh, 717 F. Supp. 2d 271,

297 (E.D.N.Y. 2010); United States v. Baxter, 372 F. Supp. 2d 1326,

1328 (M.D. Ala. 2005); United States v. Ratfield, No. 01-8816-Civ,

2004 WL 3174420, at *23 (S.D. Fla. Nov. 30, 2004); United States

v. Franchi, 756 F. Supp. 889 (W.D. Pa. 1991).

App. 56

written to include those who “employ” others to prepare

tax returns. Notably, the extent of Stinson’s violations

of the tax laws are even more serious because the way

his business operation is structured causes more

violations than an individual tax return preparer is

capable of. Therefore, the tax laws permit the Court to

hold Stinson accountable as a tax return preparer.

Section 7407(b) lists the proscribed conduct to be

enjoined.53 If a tax preparer has engaged in the

following activities, in relevant part, then injunctive

relief may be appropriate:

(A) engaged in any conduct subject to penalty

under section 6694 or 6695, or subject to any

criminal penalty provided by this title, . . .

...

the allowance of any tax credit; or

...

(D) engaged in any other fraudulent or deceptive

conduct which substantially interferes with the

proper administration of the Internal Revenue

laws.

Case law indicates that an analysis of the traditional equitable

factors for injunctive relief is not necessary to enter an injunction

pursuant to §§ 7407 and 7408. See Ernst & Whinney, 735 F.2d at

1302; Trailer Train Co. v. State Bd. of Equalization, 697 F.2d 860,

869 (9th Cir. 1983) (“The standard requirements for equitable

relief need not be satisfied when an injunction is sought to prevent

the violation of a federal statute which specifically provides for

injunctive relief.”). To the extent the factors are relevant to the

§§ 7407 and 7408 analysis, the Court analyzes the factors in its

discussion regarding issuance of an injunction pursuant to

§ 7402(a).

App. 57

26 U.S.C. § 7407(b). The Government need only

establish by a preponderance of the evidence that

Stinson engaged in conduct subject to penalty under

§§ 6694 or 6695. United States v. Ratfield, No. 01-8816Civ, 2004 WL 3174420, at *23 (S.D. Fla. Nov. 30, 2004).

Pursuant to § 6694, a tax preparer violates the

Internal Revenue laws where (1) the return contains an

understatement of liability; (2) the understatement is

“due to a position for which there was not a realistic

possibility of being sustained on its merits”; and (3) the

preparer knew or reasonably should have known that

the position was either frivolous or not disclosed. 26

U.S.C. § 6694(a). Section 6694(a) is implicated where

an individual negligently understates tax liability.

Judisch v. United States, 755 F.2d 823, 830 (11th Cir.

1985) (stating that § 6694 addresses negligent

understatement of tax liability). In contrast, § 6694(b)

imposes penalties on tax preparers who prepare any

return or claim for refund in a manner that violates

§ 6694(a) and does so willfully or recklessly. 26 U.S.C.

§ 6694(b). “[W]illfulness does not require fraudulent

intent or an evil motive; it merely requires a conscious

act or omission made in the knowledge that a duty is

therefore not being met.” United States v. Bailey, 789

F. Supp. 788, 813 (N.D. Tex. 1992) (citing Pickering v.

United States, 691 F.2d 853, 855 (8th Cir. 1982)).

A tax return preparer acts willfully “if the preparer

disregards, in an attempt wrongfully to reduce the tax

liability of the taxpayer, information furnished by the

taxpayer or other persons.” United States v. Elsass, 978

F. Supp. 2d 901, 918 (S.D. Ohio 2013), aff’d 769 F.3d

390, 398 (6th Cir. 2014)). A tax return preparer

App. 58

“recklessly or intentionally” disregards an IRS rule or

regulation “if the preparer takes a position on the

return or claim for refund that is contrary to a rule or

regulation . . . and the preparer knows of, or is reckless

in not knowing of, the rule or regulation in question.”

Id. A tax return preparer is reckless in not knowing a

rule or regulation “if the preparer makes little or no

effort to determine whether a rule or regulation exists,

under circumstances which demonstrate a substantial

deviation from the standard of conduct that a

reasonable preparer would observe.” Id.

The Court finds that Stinson has violated both

§ 6694(a) & (b) because he has both negligently and

willfully prepared tax returns with the same types of

false and improper claims that served to wrongfully

reduce the taxpayer’s liability. Notably, aside from

arguing that he is not a tax return preparer, Stinson

does not even address § 6694 in his brief. The

Government has presented evidence of numerous tax

returns containing an understatement of liability due

to completely fabricated expenses, wrongfully claimed

dependents or head of household, wrongfully claimed

charitable contributions, and fabricated businesses. See

United States v. Burgess, No. CV 16-4011, 2017 WL

373493, at *3 (D.N.J. Jan. 24, 2017) (holding § 6694

violated by preparation of tax returns understating

customers’ correct tax liabilities by fabricating

dependents, Schedule C businesses, expenses, tax

credits, and charitable contributions). Falsifying an

amount on a tax return is not only “unreasonable,” it is

willful conduct. United States v. Franchi, 756 F. Supp.

889, 893 (W.D. Pa. 1991). It is also a willful violation

for Stinson to report amounts on tax returns that are

App. 59

different from the amounts provided by the taxpayer.

Elsass, 978 F. Supp. 2d at 918. Many taxpayers

testified that they had not provided the amounts used

by the tax preparer, or that they had provided a

different amount.

Stinson took “unreasonable” or “reckless” positions

in the sense that he would report personal expenses as

business expenses, or commuting miles as deductible

business miles. It is common knowledge that

commuting miles may not be deducted as a business

expense. See Steinhort v. C.I.R., 335 F.2d 496, 503 (5th

Cir. 1964). Stinson not only claimed non-deductible

expenses as deductible ones, but the amounts claimed

were largely inflated. Stinson’s conduct was repeated,

continuous, and willful, occurring over multiple years

and in multiple stores. Stinson knew or should have

known that fabricating an amount on a tax return is

unreasonable. The pattern of improper claims on tax

returns prepared at Stinson’s stores goes far beyond

mere mistakes—the “mistakes” were “unvaryingly in

the taxpayers’ favor” and the exact same abusive

claims were repeated among taxpayer customers.

United States v. Bailey, 789 F. Supp. 788, 818 (N.D.

Tex. 1992). Though the Court finds that Stinson’s

conduct was willful, at the very least, it constituted an

“unrealistic position” in violation of § 6694.

Section 6695 of the Internal Revenue Code

penalizes a tax preparer who fails to: furnish a copy of

the tax return to the taxpayer; to sign a tax return; to

furnish an identifying number that would secure the

tax preparer’s proper identification; to retain a copy or

list of the tax return pursuant to § 6107(b); or claim the

App. 60

EITC without complying with the statutory due

diligence requirements. 26 U.S.C. § 6695(a)–(d), (g).

Notably, in holding himself out as an experienced tax

preparer, Stinson is presumed to be familiar with the

Internal Revenue laws, regulations, and case law.

United States v. Venie, 691 F. Supp. 834, 839 (M.D. Pa.

1988).

Although he was aware of the Government’s claims,

Stinson failed to address § 6695. (Doc. 219 at 193–198).

To prevail under § 7407, it is sufficient that the

Government demonstrate conduct referred to in I.R.C.

§ 7407(b). The Government has proffered numerous

examples of due diligence violations by Stinson and his

employees. First, it is inherently impossible to conduct

proper due diligence while fabricating claims and

amounts on a tax return. Due diligence requires the tax

return preparer to make “reasonable inquiries” to

ensure a taxpayer’s entitlement to the EITC. 26 C.F.R.

§ 1.6995-2. Putting a fake amount on a taxpayer’s tax

return is not due diligence. Additionally, Stinson

improperly completed the due diligence checklist, Form

8867, by checking boxes that the taxpayer had provided

supporting documentation when the taxpayers had not

provided such documentation. In addition, many

taxpayers did not receive complete copies of their tax

returns, making it less likely that the taxpayer would

have any idea that the false amounts appeared on the

tax return.

The Court also finds that Stinson engaged in “other

fraudulent or deceptive conduct” because the goal of his

business model was to essentially take advantage of

low-income taxpayers. Stinson lured customers into his

App. 61

store with the promise of maximum refunds,

and—contrived—maximum refunds he delivered. Many

of his taxpayer customers received large refunds, which

enabled him to deduct a higher fee. Stinson’s customers

testified that they trusted him to prepare their taxes

correctly, and that they sought his services because

they did not know how to prepare taxes. Stinson took

advantage of his customers’ general lack of any tax law

knowledge, and their deference to his superior abilities

such that they chose not to read through their tax

returns. Stinson relied on his customers practice to

simply sign their tax returns without reading them.

Once the Government establishes any of the

violations enumerated in § 7407, it need only

demonstrate that “injunctive relief is appropriate to

prevent recurrence of such conduct.” § 7407(b)(2);

United States v. Stinson, 661 F. App’x 945, 949 (11th

Cir. 2016). Notably, if the court finds that a tax

preparer “continually or repeatedly” engaged in any of

the abovementioned conduct and that a narrower

injunction would not be sufficient to prevent future

interference with the Internal Revenue laws, the court

may enjoin that person from acting as an income tax

return preparer. Ernst & Whinney, 735 F.2d at

1302–03.

The Court may consider the following factors for

determining whether a defendant is likely to violate

the law again:

(1) the gravity of the harm caused by the offense;

(2) the extent of the defendant’s participation;

(3) the defendant’s degree of scienter; (4) the

isolated or recurrent nature of the infraction;

App. 62

(5) the defendant’s recognition (or nonrecognition) of his own culpability; and (6) the

likelihood that defendant’s occupation would

place him in a position where future violations

could be anticipated

United States v. Estate Pres. Servs., 202 F.3d 1093,

1105 (9th Cir. 2000); United States v. Kaun, 827 F.2d

1144, 1149–50 (7th Cir. 1987) (considering the factors

for entry of an injunction pursuant to §§ 7402(a) and

7408); United States v. Miner, No. 6:10-cv-1873-Orl41DAB, 2014 WL 7361829, at *8 (M.D. Fla. Nov. 19,

2014) (citing factors that are almost identical to the

Seventh Circuit factors in determining the

appropriateness of a permanent injunction under

§§ 7402 & 7408); United States v. Bosset, No. 8:01-cv2154-T-17TBM, 2003 WL 1735481, at *3 (M.D. Fla.

Feb. 27, 2003) (granting permanent injunction for

violations of I.R.C. §§ 6700, 6701, 6694, 6695). Stinson

has not discussed these factors in his brief and none of

the factors fall in his favor.

1. Gravity of Harm

This factor strongly favors the Government.

Stinson’s conduct spanned multiple years and occurred

at multiple store locations. The sheer number of tax

returns prepared by Stinson’s stores—over 14,000—is

cause for concern. More importantly, Stinson targeted

low-income taxpayers and took advantage of their lack

of tax knowledge and the attractiveness of getting a

high tax refund. Stinson caused great harm to his lowincome customers who have been audited and now owe

relatively significant sums to the IRS. Stinson’s

conduct also drains administrative resources as the

App. 63

Government has needed to audit many tax returns and

investigate Stinson’s stores. United States v. Preiss, No.

1:07-cv-00589, 2008 WL 2413895, at *5 (M.D.N.C June

11, 2008). Stinson’s scheme additionally caused

significant harm to the United States Treasury and the

public by interfering with the proper administration of

the Internal Revenue laws.

2. Extent of Stinson’s Participation and

Stinson’s Degree of Scienter

These factors also favor the Government. Stinson

was the sole owner of the LLC that owned and operated

multiple tax preparation stores which were improperly

preparing tax returns in a manner that is striking—an

obvious and continuous pattern of reporting improper

amounts for the same types of claims. Stinson either

knew or should have known that his employees were

improperly preparing tax returns given the pattern of

false claims made on numerous tax returns. Stinson

utilized scripts with predetermined responses and

there is evidence that LBS instructed its employees to

reach a “magic number.” Ultimately, as the owner of

the stores, Stinson is responsible. If he did not instruct

his preparers to wrongfully claim these amounts on

their customers’ returns, he played an integral role by

failing to oversee his own employees and correcting this

practice.

App. 64

3. The Isolated or Recurrent Nature of the

Infraction, Stinson’s Recognition (or NonRecognition) of His Own Culpability, and

Likelihood of Future Violations

These factors also favor the Government. Based on

the duration of the scheme and the large number of

returns that Stinson has prepared, this is not an

isolated event. But more telling is that Stinson has not

recognized his own culpability nor provided sincere

assurances that such conduct will not persist. At trial,

Stinson showed remorse only that his operation had

been halted, he had lost a lot of friends, had been called

a crook and a fraud, and had been forced to borrow

money from his family. (Doc. 208 at 207–208). Not once

has Stinson recognized the harm he caused his

customers.

Based on the totality of the circumstances, and

considering that all of these factors favor the

Government, the Court determines that an injunction

under § 7407 preventing Stinson from acting as an

income tax return preparer is appropriate and

necessary to prevent future interference with the

Internal Revenue laws. See United States v. Hall, No.

12-893-cv-W-GAF, 2013 WL 6989540, at *8 (W.D. Mo.

Sept. 24, 2013) (stating that because defendant’s

conduct “encompassed a broad range of false claims

and deductions—such as, false charitable deductions,

Schedule C’s and unreimbursed business expenses—a

narrow injunction would not appropriately deter”).

App. 65

C. Count II- Permanent Injunction Pursuant to

26 U.S.C. § 7408

Pursuant to § 7408, a court may enjoin an

individual from engaging in conduct subject to a

penalty under 26 U.S.C. §§ 6700 or 6701, if a court

determines that the individual has engaged in the

proscribed conduct and “injunctive relief is appropriate

to prevent recurrence” of the conduct. The Government

contends that Stinson is subject to penalty under

§ 6701. (Doc. No. 1 ¶¶ 147–151). Section 6701 imposes

a penalty upon any person who:

(1) aids or assists in, procures, or advises with

respect to, the preparation . . . of any portion of

a return . . . ,

(2) . . . knows (or has reason to believe) that such

portion will be used in connection with any

material matter arising under the internal

revenue laws, and

(3) . . . knows that such portion (if so used)

would result in an understatement of liability

for tax of another person.

26 U.S.C. § 6701.

The term “procures” as used in § 6701 includes

“ordering (or otherwise causing) a subordinate to do an

act,” as well as “knowing of, and not attempting to

prevent, participation by a subordinate in an act.” Id.

“If a particular statement has a substantial impact on

the decision-making process or produces a substantial

tax benefit to a taxpayer, the matter is properly

regarded as ‘material.’” United States v. Schiff, 269 F.

App. 66

Supp. 2d 1262, 1271 (D. Nev. 2003), order clarified, No.

cv-S-03-0281-LDG(RJJ), 2003 WL 25780163 (D. Nev.

June 20, 2003), and aff’d, 379 F.3d 621 (9th Cir. 2004).

Similar to § 7407, in addition to meeting the

requirements of a violation of § 6701, the Government

must establish that an injunction is necessary to

prevent the recurrence of the conduct. United States v.

Pugh, 717 F. Supp. 2d 271, 297 (E.D.N.Y. 2010).

In United States v. Carlson, the Eleventh Circuit

Court of Appeals held that § 6701 requires proof of

fraud, and that the Government must prove a violation

of § 6701 by clear and convincing evidence. 754 F.3d

1223, 1226–27 (11th Cir. 2014). The Court further

reasoned that an inaccurate tax return standing alone

is not sufficient circumstantial evidence to prove fraud

because a mere inaccuracy in a return does not suggest

that the tax return preparer knew that the returns

understated the correct tax. Id. at 1230.

Stinson contends that the Government’s evidence is

insufficient to prevail under § 6701. (Doc. 219 at 180).

This is not the first time this Court has heard this

argument. In denying Stinson’s motion for summary

judgment, pursuant to Carlson, the Court held:

The present case differs from Carlson in two

important respects. First, this is not a case

addressing tax preparer penalties for a violation

of § 6701. Rather, the Government seeks

injunctive relief, pursuant to three separate

provisions of the Internal Revenue Code, each of

which independently provide for injunctive relief

. . . Second, the Government has not relied on

inaccurate tax returns standing alone, but has

App. 67

provided other circumstantial evidence of

Stinson’s wrongdoing.

(Doc. 143 at 8).

In considering Stinson’s interlocutory appeal, an

Eleventh Circuit panel also rejected Stinson’s

argument. (Doc. 163 at 14) (stating that “Stinson’s

contention misapprehends the holding in Carlson and

its application to the evidence in this case.”). The

Government’s evidence in this case, including taxpayer

and preparer testimony, is more compelling than the

evidence presented in Carlson. (Id.) The Government

has presented circumstantial evidence, beyond mere

inaccuracies in tax returns, sufficient to show that

Stinson and his tax return preparers knowingly and

deliberately stated inaccurate amounts on tax returns

in order to maximize his customers’ tax refunds.

Stinson violated § 6701 by filing tax returns on

behalf of taxpayer customers that claimed improper

Schedule A deductions (including improper

unreimbursed employee expenses and fake charitable

contributions), inflated and sometimes completely

fabricated Schedule C business expenses, and

inaccurately calculated eligibility for the EITC.

“Badges of fraud” are abundant: the “mistakes” or

improper claims occur repeatedly in the same

categories spanning multiple years and multiple states;

the mistakes were almost always in the taxpayers’

favor; the IRS determined adjustments were required

in those same categories; only 137 of the Schedule C

businesses reported on returns prepared at Stinson’s

store reported a loss while 5,364 claimed a profit; many

of Stinson’s customers reported unreimbursed

App. 68

employee business expenses amounting to almost half

of their annual income; there is a pattern of due

diligence violations; many of the claims on tax returns

contradicted documents or information provided by the

taxpayer; and the taxpayers had no idea these claims

were on their return.

Stinson’s taxpayer customers received substantial

refunds arising from these improper deductions. These

false deductions relate to a “material matter” because

the taxpayers’ tax liability was “directly affected,” and

their tax refunds substantially increased, by claiming

these deductions. See Elsass, 978 F. Supp. 2d at 937.

“Statements regarding the availability of credits,

deductions, or other means for reducing tax liability

are material.” United States v. Hansen, No. 05-cv-0921L (CAB), 2006 WL 4075446, at *10 (C.D. Cal. Dec. 13,

2006). Stinson has not provided evidence or authority

suggesting that these amounts are not material.

It is well-established that commuter business miles

are a non-deductible expense; that personal expenses,

such as a personal cell-phone, are a non-deductible

expense; and that fabricating a business and its

corresponding income and expenses is improper. The

tax return preparers at Stinson’s stores received at

least a basic level of training and Stinson asserts that

he provided this basic training to his employees.

Moreover, a tax return preparer, like Stinson, is

presumed to be familiar with the internal revenue

laws. Therefore, the Court concludes that Stinson knew

that the improper deductions claimed on tax returns

prepared by his stores understated the tax liability of

App. 69

his customers and were wholly improper under the

Internal Revenue Code. Venie, 691 F. Supp. at 839.

All of the taxpayers testified that they had not

provided the preparer with the false amounts and did

not know the amounts were on their tax returns. Many

of the taxpayers were shocked that the claims were on

their tax returns. The Court is not persuaded by

Stinson’s contention that “each of these citizens chose

to subvert the Internal Revenue laws on their own

without the knowledge, acquiescence, and assistance”

of Stinson. Franchi, 756 F. Supp. at 893. Whether

Stinson personally or directly engaged in this conduct

does not matter under § 6701 because liability may also

be imposed on one who “aids or assists in, procures or

advises.” 26 U.S.C. § 6701. Stinson, as the company

owner, certainly aided and assisted this conduct. The

Government has presented sufficient circumstantial

evidence to infer that Stinson knew that the claims he

was making were not only improper, but completely

fabricated. Therefore, the Court concludes that Stinson

violated § 6701. Baxter, 372 F. Supp. 2d at 1329. The

Government has proven by clear and convincing

evidence that Stinson engaged in fraudulent conduct by

making improper, inflated, and false claims on tax

returns that concerned a “material matter” and

resulted in an understatement of liability.

Under § 7408, it is also proper for the Court to

consider whether Stinson’s conduct is likely to recur,

and the Court may consider the same factors to predict

the likelihood of future violations. U.S. v. ITS Fin.,

LLC, 592 F. App’x 387, 400 (6th Cir. 2014). Because the

analysis is the same as outlined above in the discussion

App. 70

of a § 7407 injunction, the Court need not repeat it

here. For the same reasons as outlined above, the

Court finds that Stinson’s conduct is likely to be

repeated in the future and that an injunction under

§ 7408 is warranted.

D. Count III- Permanent Injunction Pursuant

to 26 U.S.C. § 7402(a)

“In addition to IRC § 7408, IRC § 7402(a) gives the

district courts power to issue injunctions as may be

necessary or appropriate for the enforcement of the

internal revenue laws.” Ratfield, 2004 WL 3174420, at

*22. The traditional factors for entry of a permanent

injunction must be satisfied to issue an injunction

pursuant to § 7402(a). Ernst & Whinney, 735 F.2d at

1300. “The language of § 7402(a) encompasses a broad

range of powers necessary to compel compliance with

the tax laws.” Id. Furthermore, “there need not be a

showing that a party has violated a particular Internal

Revenue Code section in order for an injunction to

issue.” Id. “Even if [the defendant’s] business structure

somehow left [him] outside the legal definition of tax

return preparer[], broad relief would still be

appropriate, as § 7402(a) is undoubtedly designed to

prevent individuals from undermining the Nation’s tax

laws through exploiting loopholes in the I.R.C.’s overall

regulatory scheme.” Elsass, 978 F. Supp. 2d at 941. “It

is sufficient under § 7402 for the Government to prove

a pattern of gross negligence or recklessness, so long as

injunctive relief is ‘necessary or appropriate for the

enforcement of the internal revenue laws.’” § 7402(a).

United States v. Stinson, 661 F. App’x 945, 952 (11th

Cir. 2016). The Court has already found that Stinson’s

App. 71

conduct interferes with the administration of the

internal revenue laws. An injunction is appropriate

because the Court determines that the traditional

equitable principles warrant it.

Under traditional equitable principles, the

Government seeking a permanent injunction must

demonstrate: (1) it has suffered an irreparable injury;

(2) remedies available at law, such as monetary

damages, are inadequate to compensate for that injury;

(3) considering the balance of hardships between the

Government and Stinson, a remedy in equity is

warranted; and (4) the public interest would not be

disserved by a permanent injunction. eBay Inc. v.

MercExchange, L.L.C., 547 U.S. 388, 391 (2006).

Stinson has not addressed these factors. After

considering these factors in light of the evidence

presented at trial, the Court finds that all four factors

favor an injunction.

1. Irreparable Injury

The Government has suffered irreparable harm,

including loss of millions of dollars to the United States

Treasury. The Government’s customers have suffered

irreparable harm because they now owe additional

taxes and penalties that they may not be able to afford.

Stinson’s fraudulent scheme has undermined the public

trust in the tax laws. Furthermore, the Government

has had to expend administrative resources

investigating Stinson and conducting audits. Last,

absent an injunction, the Government would be forced

to continue to use resources monitoring Stinson. For

these reasons, and because Stinson has not provided

App. 72

argument to the contrary, the Court finds that the

irreparable injury would result without an injunction.

2. Inadequate Remedies at Law

Though the Government need not prove that there

is an inadequate remedy at law under § 7402(a), United

States v. Molen, No. CIVS-03-1531 DFL GGH, 2003 WL

23190606, at *3 (E.D. Cal. Dec. 12, 2003), the Court

finds that there is no adequate remedy at law because

Stinson’s continued operation causes irreparable harm

to his customers and the public at large and there is no

way of stopping him from fraudulently preparing taxes

absent an injunction. “Other remedies available to the

Government involve actions against each individual

taxpayer who follows [the tax return preparer’s]

advice” an endeavor that requires “the expenditure of

substantial amounts of the limited resources of the IRS

and necessarily would not be as effective as enjoining

[the tax return preparer].” Ratfield, 2004 WL 3174420,

at *22.

3. Balance of Hardships

The Government has demonstrated that the balance

of hardships tips in its favor. At trial, Stinson

expressed that he has lost some friends and has been

called a crook and a thief. Additionally, Stinson has

had to borrow money from his family. In contrast, if an

injunction is not granted, enormous administrative

resources will be required to monitor him. The United

States Treasury is at risk of being wrongfully depleted

of funds. Continued operation of a fraudulent tax

business undermines the tax laws. Additionally, the

hardship the Court is most concerned about is Stinson’s

App. 73

vulnerable customers, who will be harmed by his

fraudulent tax preparation business and who face

financial hardships as a result of Stinson making false

claims on their tax returns. The Court is cognizant

that, if an injunction is granted, Stinson will be

prohibited from operating his tax preparation business.

However, Stinson also owns rental real estate property

and an injunction does not prevent him from making a

living in any manner aside from tax preparation.

Therefore, the Court finds that the balance of

hardships favors the Government.

4. Public Interest

The public interest factor also favors the

Government. “By defrauding the IRS, [a tax return

preparer] is in reality defrauding every law-abiding

American, who, at not insubstantial effort, pays their

due fund to the programs of the nation.” Preiss, 2008

WL 2413895, at *11. “[T]he public has a strong interest

in minimizing the number of false claims for refunds

that are made and in ensuring that tax preparers

follow the law.” Id. Furthermore, as outlined above,

Stinson harms his customers who are relying on his

business to properly handle their taxes. In return,

Stinson’s business exposes these primarily low-income

customers to individual tax liability, added interest,

and potential penalties.

The Court has determined that Stinson’s conduct

interferes with the proper administration of the

internal revenue laws and that an injunction is

appropriate and necessary to prevent future harm. The

Court has also considered the traditional equitable

factors and concluded that each factor favors the

App. 74

imposition of an injunction. Therefore, the Court finds

an injunction pursuant to § 7402(a) is warranted.

E. Disgorgement Pursuant to 26 U.S.C. § 7402(a)

Because “§ 7402(a) encompasses a broad range of

powers necessary to compel compliance with the tax

laws,” the Court has determined that disgorgement is

an available remedy in this case. See Mesadieu, 180 F.

Supp. 3d at 1118 (quoting Ernst & Whinney, 735 F.2d

at 1300). Disgorgement in the amount of a defendant’s

“ill-gotten gains” constitutes a “fair and equitable”

remedy as it reminds the defendant of its legal

obligations, serves to deter future violations of the

Internal Revenue Code, and promotes successful

administration of the tax laws. Id.

As a tax return preparer, Stinson is subject to the

remedy of disgorgement. (Doc. No. 143 at 10). Stinson

should not be permitted to insulate himself from

liability because he delegates responsibility for

preparing tax returns. See ITS Fin., LLC, 592 F. App’x

at 397. Stinson argues, without citation to authority,

that he cannot be held individually liable for

disgorgement because his LLC, and not he, received the

tax preparation fees. (Doc. 219 at 188). The Court is not

persuaded. First, the Government presented evidence

that Stinson commingled personal and business funds

in his LLC’s bank accounts, and that Stinson had

signature authority on those accounts. Second,

disgorgement is an equitable remedy the purpose of

which is to divest Stinson of funds he received from his

fraudulent conduct. See United States v. Lawrence, No.

15-62233-CIV, 2016 WL 5390569, at *6 (S.D. Fla. Sept.

27, 2016). Because Stinson’s unjust enrichment was

App. 75

directly derived from utilizing his LLC as “a conduit for

improper and fraudulent tax return preparation,”

Stinson may be ordered to disgorge those ill-gotten

gains. Id. Third, Stinson is responsible for the tortious

acts he has committed. See L.C.L Theatres, Inc. v.

Columbia Pictures Indus., Inc. 619, F.2d 455, 457 (5th

Cir. 1980)54 (holding that it is unnecessary to pierce the

corporate veil because “[a]n officer or any other agent

of a corporation may be personally as responsible as

the corporation itself for tortious acts when

participating in the wrongdoing.”); see also Buckner v.

Luther Campbell, No. 09-22815-CIV, 2010 WL

5058314, at *2 (S.D. Fla. Dec. 6, 2010) (“[I]f an officer,

director, or agent commits or participates in a tort,

whether or not his actions are by authority of the

corporation or in furtherance of the corporate business,

that individual will be liable to third persons injured by

his actions, regardless of whether liability attaches to

the corporation for the tort.”); Special Purpose Accounts

Receivable Co-op Corp. v. Prime One Capital Co.,

L.L.C., 125 F. Supp. 2d 1093, 1104 (S.D. Fla. 2000)

(“While it is true that a director or an officer is not

personally liable for any act or failure to act regarding

corporate management or policy, it does not follow that

the officer or individual is shielded from accountability

for tortious conduct.”).

To be entitled to disgorgement, the plaintiff need

only produce a reasonable approximation of the

In Bonner v. City of Prichard, Ala., 661 F.2d 1206, 1207 (11th

Cir. 1981), the Eleventh Circuit held that the decisions of the

Former Fifth Circuit handed down before September 30, 1981 shall

be binding as precedent in the Eleventh Circuit.

App. 76

defendant’s ill-gotten gains. See S.E.C. v. Calvo, 378

F.3d 1211, 1217 (11th Cir. 2004). “Exactitude is not a

requirement; so long as the measure of disgorgement is

reasonable, any risk of uncertainty should fall on the

wrongdoer whose illegal conduct created that

uncertainty.” Id. Once a plaintiff presents its estimate,

the burden shifts to the defendant to show that the

plaintiff’s estimate was not a reasonable

approximation. S.E.C. v. Lauer, 478 F. App’x 550, 557

(11th Cir. 2012). If “a defendant’s record-keeping or

lack thereof has so obscured matters that calculating

the exact amount of illicit gains cannot be accomplished

without incurring inordinate expense, a court may set

disgorgement at the more readily measurable proceeds

received from the unlawful transactions.” Id. There

must be a “relationship between the amount of

disgorgement and the amount of ill-gotten gain,” and a

district court may not order disgorgement of an amount

obtained without wrongdoing or obtained during a

period where there is no record evidence of fraud.

C.F.T.C. v. Sidoti, 178 F.3d 1132, 1138 (11th Cir. 1999).

Therefore, a court’s power to order disgorgement is not

unlimited. It extends only to the amount the defendant

profited from his wrongdoing. S.E.C. v. ETS

Payphones, Inc., 408 F.3d 727, 735 (11th Cir. 2005).

Any additional sum is impermissible as it would

constitute a penalty. Id.

The Government has requested $1,584,481.79 as a

disgorgement award. (Doc. 218 at 99). The Government

breaks this request into the following categories (See

Doc. 218 at 97–99):

App. 77

Amount

Tax Years

Explanation

(not year of

filing)

Category

2012, 2013, In these years, Stinson’s

(1):

2014

stores filed 1,965 tax

returns with a Form

$800,101.47

Schedule A, and 1,861 of

those tax returns had a

Form Schedule A claiming

unreimbursed employee

business expenses. The

amount here is the total

fees Stinson collected from

those 1,861 tax returns.

(Pl.’s Ex. 768).

Category

2011

This fee amount is derived

(2):

only from tax returns that

identify Stinson as the paid

$149,851.00

preparer and that included

a Schedule A, Schedule C,

or reported education

credits where (1) no Form

1098-T was issued by an

education institution for

the taxpayer or a

dependent; or (2) the grants

or scholarships reported on

the Form 1098-T exceeded

qualifying education

expenses. Because Stinson

was shown to have

fabricated education

expenses and claimed

App. 78

personal expenses as

business expenses, the

Government contends that

fees from these tax returns

are appropriate for

disgorgement. (Pl’s Ex.

771).

Category

2011, 2012, This amount represents

(3):

2013

fees Stinson received for

tax returns that the IRS

$155,344.50

audited during Mr. Poole’s

investigation of Stinson and

that were found to

underreport tax. (Pl.’s Ex.

774).

Category

2012, 2103, This amounts represents

2014

fees Stinson received for

(4):

the preparation of tax

$32,185.00

returns for customers

residing outside of Florida

whose deposition testimony

was introduced at trial.

(Pl.’s Ex. 772).

Category

2011, 2014 This amount represents

(5):

fees Stinson received from

customers who testified at

$29,775.00

trial that there were

fabricated amounts on their

tax returns, including

customers within the

Middle District of Florida

($15,141 in fees), five

customers

whose

App. 79

Category

(6):

2013

$440,995.82

TOTAL

depositions were stipulated

to ($8,630 in fees), and

other depositions admitted

at the preliminary

injunction hearing ($6,004

in fees). (Pl.’s Exs. 462 &

463).

This amount is derived

from Ms. Shields’s 2016

sampling. Ms. Shields

found a 75% error rate. The

fees collected from the

Tampa sample totaled

$376,833.93 (Pl.’s Ex. 777),

75% of that is $282,625.45.

The fees from the St.

Petersburg sample totaled

$211,160.49, 75% of that is

$158,370.37 (Pl.’s Ex. 777).

This amount represents the

total of 75% of the fees from

the St. Petersburg sample

and the Tampa Sample.

$1,608,252.

7955

The Government’s request for total fees from all of

these categories is not a reasonable approximation

because the Court cannot discern whether fees from

In the Government’s brief, it asks for $1,584,481.79 (Doc. 218 at

99). The Court is unable to calculate this total from the amounts

given by the Government, as outlined in this chart.

App. 80

categories (1) and (2), which includes years 2011–2014,

are duplicated in categories (3), (4), (5), and (6) because

those categories include fees from the same years. It is

not a reasonable approximation to seek disgorgement

from Stinson for twice the amount of fees for the same

tax returns. For this reason, the Court will not order a

disgorgement award for the fee amounts in categories

(3)–(6). The Government has not shown that fees in

those categories are distinct fees from those already

included in categories (1) and (2).

The Court finds that the amount of fees in category

(1) represents a reasonable approximation of Stinson’s

“ill-gotten gain” because this amount encompasses all

the years that the Government presented evidence of

fraudulent tax practices and also focuses on the

categories where the Court has found a pattern of

abusive claims (Form Schedule As reporting

unreimbursed employee business expenses).

Furthermore, the Court finds that the fees from

category (2) are also reasonable because they are fees

derived from tax returns that Stinson himself

prepared, they also consist of categories where fraud

was prominent, and the fees are derived from a tax

year that was not included in category (1). Because the

Government presented evidence of fabricated amounts

on Schedule As, Schedule Cs, and with regard to

education credits and other deductions, on “return after

return,” the Court finds it reasonable to use tax returns

containing these types of claims to approximate

Stinson’s unjust enrichment. Barber, 591 F. App’x at

813. The Court finds that the total fees from categories

(1) and (2)—$949,952.47—fairly encompasses the other

proposed categories of fees, without duplication, and

App. 81

represents a reasonable approximation of Stinson’s illgotten gains. The burden then shifts to Stinson to

demonstrate that the Government has not presented a

reasonable approximation.

Out of Stinson’s two-hundred plus pages of posttrial briefing, he dedicated approximately two pages to

the issue of disgorgement, no part of which argues that

the Government’s calculations are not reasonable. (Doc.

219 at 211–212). Stinson’s argument appears to be that

it is not his burden to come forward with a reasonable

approximation and that the Government has not

identified fraudulent returns nor provided “upper and

lower bounds” of “confidence intervals” or a statistically

random sample. (Id. at 211). Stinson is incorrect—the

burden shifted to him once the Government presented

a reasonable approximation of his ill-gotten gains.

Lauer, 478 F. App’x at 557. Because at least part of the

Government’s disgorgement amount represents a

reasonable approximation of Stinson’s unjust

enrichment, and Stinson has not shown that this

amount is unreasonable, the Court will order

disgorgement in the amount of $949,952.47. The Court

declines to entertain Stinson’s absurd request for

sanctions against the Government.

F. ORDER OF PERMANENT INJUNCTION

Based on the foregoing, the Court finds in favor of

the Plaintiff, United States of America, and the Court

enters the following ORDER of permanent injunction

against Defendant, Jason P. Stinson:

A. Jason Stinson, and all those in active concert or

participation with him, is permanently enjoined from:

App. 82

(1)

acting as a federal tax return preparer or

requesting, assisting in, or directing the preparation

or filing of federal tax returns, amended returns, or

other related documents or forms for any person or

entity other than himself;

(2)

preparing or assisting in preparing federal

tax returns that he knows or reasonably should

have known would result in an understatement of

tax liability or the overstatement of federal tax

refund(s) as penalized by I.R.C. § 6694;

(3)

owning, operating, managing, working in,

controlling, licensing, consulting with, or

franchising a tax return preparation business;

(4)

training, instructing, teaching, and creating

or providing cheat sheets, memoranda, directions,

instructions, or manuals, pertaining to the

preparation of federal tax returns;

(5)

engaging in any other activity subject to

penalty under I.R.C. §§ 6694, 6695, 6701, or any

other penalty provision in the I.R.C.;

(6)

maintaining, assigning, holding, using, or

obtaining a Preparer Tax Identification Number

(PTIN) or an Electronic Filing Identification

Number (EFIN); and

(7)

engaging in any conduct that substantially

interferes with the proper administration and

enforcement of the internal revenue laws.

B. Jason Stinson shall immediately and

permanently close all tax return preparation stores

App. 83

that he owns directly or through Nation Tax Services,

LLC, or any other entity, and whether those stores do

business as LBS Tax Services, Nation Tax Services, or

under any other name.

C. Jason Stinson is prohibited, either directly or

through Nation Tax Services, LLC or any other entity,

from assigning, transferring, or selling any franchise

agreement, independent contractor agreement, or

employment contract related to LBS Tax Services,

Nation Tax Services, or any other tax return

preparation business to which he or any entity under

his control is a party.

D. Jason Stinson is barred from: (1) selling to any

individual or entity a list of customers, or any other

customer information, for whom Jason Stinson, LBS

Tax Services, Nation Tax Services, and any other

business or name through which Stinson or those

acting at his direction have at any time since 2010

prepared a tax return; (2) assigning, disseminating,

providing, or giving to any current or former

franchisee, General Sales Manager, District Sales

Manager, other manager, tax return preparer,

employee, or independent contractor of Stinson, LBS

Tax Services, Nation Tax Services, or any other

business through which Stinson prepares tax returns

or owns or franchises a tax return preparation

business, a list of customers or any other customer

information for customers for whom Jason Stinson,

LBS Tax Services, Nation Tax Services, and any other

business or name through which Stinson or those

acting at his direction have at any time since 2010

prepared a tax return; and (3) selling to any individual

App. 84

or entity any proprietary information pertaining to

LBS Tax Services, Nation Tax Services, and any other

business or name through which Stinson or those

acting at his direction have at any time since 2010

prepared a tax return.

E. Jason Stinson shall contact, within 30 days of

this Order, by United States mail and, if an e-mail

address is known, by e-mail, all persons for whom

Jason Stinson, LBS Tax Services stores owned or

managed by Stinson, and Nation Tax Services prepared

federal tax returns or claims for a refund for tax years

2010 through the present to inform them of the

permanent injunction entered against him, including

sending a copy of this Order but not enclosing any

other documents or enclosures unless agreed to by

counsel for the United States or approved by the Court.

F. Jason Stinson shall produce to counsel for the

United States, within 30 days of this Order, a list that

identifies by name, social security number, address, email address, and telephone number and tax period(s)

all persons for whom Jason Stinson, LBS Tax Services

stores owned or managed by Stinson, and Nation Tax

Services prepared federal tax returns or claims for a

refund for tax years beginning in 2010 and continuing

through this litigation.

G. Jason Stinson shall produce to counsel for the

United States, within 30 days of this Order, a list that

identifies by name, address, e-mail address, and

telephone number all principals, officers, managers,

franchisees, employees, and independent contractors of

Stinson, LBS Tax Services stores owned or managed by

App. 85

Stinson, and Nation Tax Services, LLC, from 2010 to

the present.

H. Jason Stinson shall provide a copy of this Order

to all principals, officers, managers, franchisees,

employees, and independent contractors of Stinson and

Nation Tax Services, LLC, within 15 days of this Order,

and provide to counsel for the United States within 30

days a signed and dated acknowledgment of receipt of

this Order for each person whom Jason Stinson

provided a copy of this Order.

I. The Court retains jurisdiction over Jason

Stinson and over this action to enforce this permanent

injunction entered against him.

J. The United States is permitted to conduct

discovery to monitor Jason Stinson’s compliance with

the terms of this permanent injunction entered against

him.

G. CONCLUSION

The Court has determined that Stinson shall be

enjoined under 26 U.S.C. §§ 7402(a), 7407, 7408. The

Court further determined that a disgorgement remedy

is appropriate. Based on the foregoing, it is

ORDERED as follows:

1. The Clerk is DIRECTED to enter judgment

providing that the Plaintiff the United States of

America shall recover from the Defendant Jason

P. Stinson a judgment in the amount of

$949,952.47 as equitable monetary relief. The

Plaintiff the United States of America shall

recover costs of this action.

App. 86

2. Further, the Court orders that the Defendant

Jason P. Stinson shall be permanently enjoined

as provided in § F. (p. 45–48) above.

3. The clerk is DIRECTED to close this case.

DONE and ORDERED in Chambers, in Orlando,

Florida on March 6, 2017.

/s/Anne C. Conway

ANNE C. CONWAY

United States District Judge

Copies furnished to:

Counsel of Record

App. 87

APPENDIX D

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 17-11412-JJ

[Filed February 22, 2019]

________________________________

UNITED STATES OF AMERICA, )

)

Plaintiff - Appellee,

)

versus

)

JASON P. STINSON,

)

individually,

)

d.b.a. LBS Tax Services,

)

d.b.a. Nation Tax Services, LLC, )

)

Defendant - Appellant. )

________________________________ )

Appeal from the United States District Court

for the Middle District of Florida

________________________

ON PETITION(S) FOR REHEARING AND

PETITION(S) FOR REHEARING EN BANC

App. 88

BEFORE: ED CARNES, Chief Judge, and NEWSOM

and SILER*, Circuit Judges.

PER CURIAM:

The Petition(s) for Rehearing are DENIED and no

Judge in regular active service on the Court having

requested that the Court be polled on rehearing en

banc (Rule 35, Federal Rules of Appellate Procedure),

the Petition(s) for Rehearing En Banc are DENIED.

ENTERED FOR THE COURT:

/s/

CHIEF JUDGE

ORD-42

Honorable Eugene E. Siler, Jr., United States Circuit Judge for

the Sixth Circuit, sitting by designation.

App. 89

APPENDIX E

STATUTES

26 U.S.C. § 6694. Understatement of taxpayer’s

liability by tax return preparer

(a)

UNDERSTATEMENT

DUE

UNREASONABLE

POSITIONS

(1) IN GENERAL If a tax return preparer—

(A) prepares any return or claim of refund with

respect to which any part of an understatement

of liability is due to a position described in

paragraph (2), and

(B) knew (or reasonably should have known) of

the position, such tax return preparer shall pay

a penalty with respect to each such return or

claim in an amount equal to the greater of

$1,000 or 50 percent of the income derived (or to

be derived) by the tax return preparer with

respect to the return or claim.

(2) UNREASONABLE POSITION

(A) In general

Except as otherwise provided in this paragraph,

a position is described in this paragraph unless

there is or was substantial authority for the

position.

App. 90

(B) Disclosed positions

If the position was disclosed as provided in

section 6662(d)(2)(B)(ii)(I) and is not a position

to which subparagraph (C) applies, the position

is described in this paragraph unless there is a

reasonable basis for the position.

transactions

and

reportable

If the position is with respect to a tax shelter (as

defined in section 6662(d)(2)(C)(ii)) or a

reportable transaction to which section 6662A

applies, the position is described in this

paragraph unless it is reasonable to believe that

the position would more likely than not be

sustained on its merits.

(3) REASONABLE CAUSE EXCEPTION

No penalty shall be imposed under this subsection

if it is shown that there is reasonable cause for the

understatement and the tax return preparer acted

in good faith.

(b) UNDERSTATEMENT DUE TO WILLFUL OR RECKLESS

CONDUCT

(1) IN GENERAL Any tax return preparer who

prepares any return or claim for refund with respect

to which any part of an understatement of liability

is due to a conduct described in paragraph (2) shall

pay a penalty with respect to each such return or

claim in an amount equal to the greater of—

(A) $5,000, or

App. 91

(B) 75 percent of the income derived (or to be

derived) by the tax return preparer with respect

to the return or claim.

(2) WILLFUL OR RECKLESS CONDUCT Conduct

described in this paragraph is conduct by the tax

return preparer which is—

(A) a willful attempt in any manner to

understate the liability for tax on the return or

claim, or

(B) a reckless or intentional disregard of rules or

regulations.

(3) REDUCTION IN PENALTY

The amount of any penalty payable by any person

by reason of this subsection for any return or claim

for refund shall be reduced by the amount of the

penalty paid by such person by reason of subsection

(a).

PREPARER PAYS 15 PERCENT OF PENALTY

(1) IN GENERAL

If, within 30 days after the day on which notice and

demand of any penalty under subsection (a) or (b) is

made against any person who is a tax return

preparer, such person pays an amount which is not

less than 15 percent of the amount of such penalty

and files a claim for refund of the amount so paid,

no levy or proceeding in court for the collection of

the remainder of such penalty shall be made, begun,

or prosecuted until the final resolution of a

App. 92

proceeding begun as provided in paragraph (2).

Notwithstanding the provisions of section 7421(a),

the beginning of such proceeding or levy during the

time such prohibition is in force may be enjoined by

a proceeding in the proper court. Nothing in this

paragraph shall be construed to prohibit any

counterclaim for the remainder of such penalty in a

proceeding begun as provided in paragraph (2).

(2) PREPARER MUST BRING SUIT IN DISTRICT

COURT TO DETERMINE HIS LIABILITY FOR PENALTY

If, within 30 days after the day on which his claim

for refund of any partial payment of any penalty

under subsection (a) or (b) is denied (or, if earlier,

within 30 days after the expiration of 6 months

after the day on which he filed the claim for refund),

the tax return preparer fails to begin a proceeding

in the appropriate United States district court for

the determination of his liability for such penalty,

paragraph (1) shall cease to apply with respect to

such penalty, effective on the day following the close

of the applicable 30-day period referred to in this

paragraph.

(3) SUSPENSION OF RUNNING OF PERIOD OF

LIMITATIONS ON COLLECTION

The running of the period of limitations provided in

section 6502 on the collection by levy or by a

proceeding in court in respect of any penalty

described in paragraph (1) shall be suspended for

the period during which the Secretary is prohibited

from collecting by levy or a proceeding in court.

App. 93

(d) ABATEMENT OF PENALTY WHERE TAXPAYER’S

LIABILITY NOT UNDERSTATED

If at any time there is a final administrative

determination or a final judicial decision that there was

no understatement of liability in the case of any return

or claim for refund with respect to which a penalty

under subsection (a) or (b) has been assessed, such

assessment shall be abated, and if any portion of such

penalty has been paid the amount so paid shall be

refunded to the person who made such payment as an

overpayment of tax without regard to any period of

limitations which, but for this subsection, would apply

to the making of such refund.

(e) UNDERSTATEMENT OF LIABILITY DEFINED

For purposes of this section, the term “understatement

of liability” means any understatement of the net

amount payable with respect to any tax imposed by

this title or any overstatement of the net amount

creditable or refundable with respect to any such tax.

Except as otherwise provided in subsection (d), the

determination of whether or not there is an

understatement of liability shall be made without

regard to any administrative or judicial action

involving the taxpayer.

(f) CROSS REFERENCE

For definition of tax return preparer, see section

7701(a)(36).

App. 94

26 U.S.C. § 6695. Other assessable penalties with

respect to the preparation of tax returns for

other persons

(a) FAILURE TO FURNISH COPY TO TAXPAYER

Any person who is a tax return preparer with respect

to any return or claim for refund who fails to comply

with section 6107(a) with respect to such return or

claim shall pay a penalty of $50 for such failure, unless

it is shown that such failure is due to reasonable cause

and not due to willful neglect. The maximum penalty

imposed under this subsection on any person with

respect to documents filed during any calendar year

shall not exceed $25,000.

(b) FAILURE TO SIGN RETURN

Any person who is a tax return preparer with respect

to any return or claim for refund, who is required by

regulations prescribed by the Secretary to sign such

return or claim, and who fails to comply with such

regulations with respect to such return or claim shall

pay a penalty of $50 for such failure, unless it is shown

that such failure is due to reasonable cause and not due

to willful neglect. The maximum penalty imposed

under this subsection on any person with respect to

documents filed during any calendar year shall not

exceed $25,000.

Any person who is a tax return preparer with respect

to any return or claim for refund and who fails to

comply with section 6109(a)(4) with respect to such

return or claim shall pay a penalty of $50 for such

App. 95

failure, unless it is shown that such failure is due to

reasonable cause and not due to willful neglect. The

maximum penalty imposed under this subsection on

any person with respect to documents filed during any

calendar year shall not exceed $25,000.

(d) FAILURE TO RETAIN COPY OR LIST

Any person who is a tax return preparer with respect

to any return or claim for refund who fails to comply

with section 6107(b) with respect to such return or

claim shall pay a penalty of $50 for each such failure,

unless it is shown that such failure is due to reasonable

cause and not due to willful neglect. The maximum

penalty imposed under this subsection on any person

with respect to any return period shall not exceed

$25,000.

(e) FAILURE TO FILE CORRECT INFORMATION RETURNS

Any person required to make a return under section

6060 who fails to comply with the requirements of such

section shall pay a penalty of $50 for—

(1) each failure to file a return as required under

such section, and

(2) each failure to set forth an item in the return as

required under section, unless it is shown that such

failure is due to reasonable cause and not due to

willful neglect. The maximum penalty imposed

under this subsection on any person with respect to

any return period shall not exceed $25,000.

App. 96

(f) NEGOTIATION OF CHECK

Any person who is a tax return preparer who endorses

or otherwise negotiates (directly or through an agent)

any check made in respect of the taxes imposed by this

title which is issued to a taxpayer (other than the tax

return preparer) shall pay a penalty of $500 with

respect to each such check. The preceding sentence

shall not apply with respect to the deposit by a bank

(within the meaning of section 581) of the full amount

of the check in the taxpayer’s account in such bank for

the benefit of the taxpayer.

(g) FAILURE TO BE DILIGENT IN DETERMINING

ELIGIBILITY FOR CERTAIN TAX BENEFITS Any person

who is a tax return preparer with respect to any return

or claim for refund who fails to comply with due

diligence requirements imposed by the Secretary by

regulations with respect to determining—

(1) eligibility to file as a head of household (as

defined in section 2(b)) on the return, or

(2) eligibility for, or the amount of, the credit

allowable by section 24, 25A(a)(1), or 32, shall pay

a penalty of $500 for each such failure.

(h) ADJUSTMENT FOR INFLATION

(1) IN GENERAL

In the case of any failure relating to a return or

claim for refund filed in a calendar year beginning

after 2014, each of the dollar amounts under

subsections (a), (b), (c), (d), (e), (f), and (g) shall be

increased by an amount equal to such dollar

App. 97

amount multiplied by the cost-of-living adjustment

determined under section 1(f)(3) for the calendar

year determined by substituting “calendar year

2013” for “calendar year 2016” in subparagraph

(A)(ii) thereof.

(2) ROUNDING If any amount adjusted under

paragraph (1)—

(A) is not less than $5,000 and is not a multiple

of $500, such amount shall be rounded to the

next lowest multiple of $500, and

(B) is not described in subparagraph (A) and is

not a multiple of $5, such amount shall be

rounded to the next lowest multiple of $5.

26 U.S.C. § 6701. Penalties for aiding and abetting

understatement of tax liability

(a) IMPOSITION OF PENALTY Any person—

(1) who aids or assists in, procures, or advises with

respect to, the preparation or presentation of any

portion of a return, affidavit, claim, or other

document,

(2) who knows (or has reason to believe) that such

portion will be used in connection with any material

matter arising under the internal revenue laws, and

(3) who knows that such portion (if so used) would

result in an understatement of the liability for tax

of another person, shall pay a penalty with respect

to each such document in the amount determined

under subsection (b).

App. 98

(b) AMOUNT OF PENALTY

(1) IN GENERAL

Except as provided in paragraph (2), the amount of

the penalty imposed by subsection (a) shall be

$1,000.

(2) CORPORATIONS

If the return, affidavit, claim, or other document

relates to the tax liability of a corporation, the

amount of the penalty imposed by subsection (a)

shall be $10,000.

(3) ONLY 1 PENALTY PER PERSON PER PERIOD

If any person is subject to a penalty under

subsection (a) with respect to any document relating

to any taxpayer for any taxable period (or where

there is no taxable period, any taxable event), such

person shall not be subject to a penalty under

subsection (a) with respect to any other document

relating to such taxpayer for such taxable period (or

event).

(1) IN GENERAL For purposes of subsection (a), the

term “procures” includes—

(A) ordering (or otherwise

subordinate to do an act, and

causing)

(B) knowing of, and not attempting to prevent,

participation by a subordinate in an act.

App. 99

(2) SUBORDINATE

For purposes of paragraph (1), the term

“subordinate” means any other person (whether or

not a director, officer, employee, or agent of the

taxpayer involved) over whose activities the person

has direction, supervision, or control.

(d) TAXPAYER NOT REQUIRED TO HAVE KNOWLEDGE

Subsection (a) shall apply whether or not the

understatement is with the knowledge or consent of the

persons authorized or required to present the return,

affidavit, claim, or other document.

(e) CERTAIN ACTIONS NOT TREATED AS AID OR

ASSISTANCE

For purposes of subsection (a)(1), a person furnishing

typing, reproducing, or other mechanical assistance

with respect to a document shall not be treated as

having aided or assisted in the preparation of such

document by reason of such assistance.

(f) PENALTY IN ADDITION TO OTHER PENALTIES

(1) IN GENERAL

Except as provided by paragraphs (2) and (3), the

penalty imposed by this section shall be in addition

to any other penalty provided by law.

(2) COORDINATION

WITH

RETURN

PREPARER

PENALTIES

No penalty shall be assessed under subsection (a) or

(b) of section 6694 on any person with respect to any

App. 100

document for which a penalty is assessed on such

person under subsection (a).

(3) COORDINATION WITH SECTION 6700

No penalty shall be assessed under section 6700 on

any person with respect to any document for which

a penalty is assessed on such person under

subsection (a).

26 U.S.C. § 7402. Jurisdiction of district courts

(a) TO ISSUE ORDERS, PROCESSES, AND JUDGMENTS

The district courts of the United States at the instance

of the United States shall have such jurisdiction to

make and issue in civil actions, writs and orders of

injunction, and of ne exeat republica, orders appointing

receivers, and such other orders and processes, and to

render such judgments and decrees as may be

necessary or appropriate for the enforcement of the

internal revenue laws. The remedies hereby provided

are in addition to and not exclusive of any and all other

remedies of the United States in such courts or

otherwise to enforce such laws.

(b) TO ENFORCE SUMMONS

If any person is summoned under the internal revenue

laws to appear, to testify, or to produce books, papers,

or other data, the district court of the United States for

the district in which such person resides or may be

found shall have jurisdiction by appropriate process to

compel such attendance, testimony, or production of

books, papers, or other data.

App. 101

EMPLOYEES

Any officer or employee of the United States acting

under authority of this title, or any person acting under

or by authority of any such officer or employee,

receiving any injury to his person or property in the

discharge of his duty shall be entitled to maintain an

action for damages therefor, in the district court of the

United States, in the district wherein the party doing

the injury may reside or shall be found.

[(d) REPEALED. Pub. L. 92–310, title II, § 230(D),

June 6, 1972, 86 STAT. 209]

(e) TO QUIET TITLE

The United States district courts shall have jurisdiction

of any action brought by the United States to quiet title

to property if the title claimed by the United States to

such property was derived from enforcement of a lien

under this title.

(f) GENERAL JURISDICTION

For general jurisdiction of the district courts of the

United States in civil actions involving internal

revenue, see section 1340 of title 28 of the United

States Code.

App. 102

26 U.S. Code § 7407. Action to enjoin tax return

preparers

(a) AUTHORITY TO SEEK INJUNCTION

A civil action in the name of the United States to enjoin

any person who is a tax return preparer from further

engaging in any conduct described in subsection (b) or

from further acting as a tax return preparer may be

commenced at the request of the Secretary. Any action

under this section shall be brought in the District

Court of the United States for the district in which the

tax return preparer resides or has his principal place of

business or in which the taxpayer with respect to

whose tax return the action is brought resides. The

court may exercise its jurisdiction over such action (as

provided in section 7402(a)) separate and apart from

any other action brought by the United States against

such tax return preparer or any taxpayer.

(b) ADJUDICATION AND DECREES In any action under

subsection (a), if the court finds—

(1) that a tax return preparer has—

(A) engaged in any conduct subject to penalty

under section 6694 or 6695, or subject to any

criminal penalty provided by this title,

(B) misrepresented his eligibility to practice

before the Internal Revenue Service, or

otherwise misrepresented his experience or

education as a tax return preparer,

the allowance of any tax credit, or

App. 103

(D) engaged in any other fraudulent or deceptive

conduct which substantially interferes with the

proper administration of the Internal Revenue

laws, and

(2) that injunctive relief is appropriate to prevent

the recurrence of such conduct, the court may enjoin

such person from further engaging in such conduct.

If the court finds that a tax return preparer has

continually or repeatedly engaged in any conduct

described in subparagraphs (A) through (D) of this

subsection and that an injunction prohibiting such

conduct would not be sufficient to prevent such

person’s interference with the proper

administration of this title, the court may enjoin

such person from acting as a tax return preparer.

26 U.S.C. § 7408. Actions to enjoin specified

conduct related to tax shelters and reportable

transactions

(a) AUTHORITY TO SEEK INJUNCTION

A civil action in the name of the United States to enjoin

any person from further engaging in specified conduct

may be commenced at the request of the Secretary. Any

action under this section shall be brought in the district

court of the United States for the district in which such

person resides, has his principal place of business, or

has engaged in specified conduct. The court may

exercise its jurisdiction over such action (as provided in

section 7402(a)) separate and apart from any other

action brought by the United States against such

person.

App. 104

(b) ADJUDICATION AND DECREE In any action under

subsection (a), if the court finds—

(1) that the person has engaged in any specified

conduct, and

(2) that injunctive relief is appropriate to prevent

recurrence of such conduct, the court may enjoin

such person from engaging in such conduct or in

any other activity subject to penalty under this title.

the term “specified conduct” means any action, or

failure to take action, which is—

(1) subject to penalty under section 6700, 6701,

6707, or 6708, or

(2) in violation of any requirement under

regulations issued under section 330 of title 31,

United States Code.

(d) CITIZENS AND RESIDENTS OUTSIDE THE UNITED

STATES

If any citizen or resident of the United States does not

reside in, and does not have his principal place of

business in, any United States judicial district, such

citizen or resident shall be treated for purposes of this

section as residing in the District of Columbia.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.