Legal Environment of Business Help?

Ray Moon is a CPA, certified public accountant and is properly licensed in Ohio. For the past 15 years he has been self-employed as a tax preparer doing business as Ray Moon, C.PA. a sole proprietorship. Ray had an office in the Corryville neighborhood of Cincinnati and another office in the Hyde Park neighborhood of Cincinnati. Clients paid Ray to prepare their income tax returns. Ray offered clients instant tax refunds by way of Refund Anticipation Loans (RAL). The RAL process which allows a taxpayer to receive an anticipated refund more quickly than if the refund was issued directly to the taxpayer by the IRS. The RAL transactions entered into by Ray and his customers were facilitated by Hour PayDay Loans of Cincinnati (HPDL).

The RAL process works as follows: (1) the client signed an RAL form which Ray submitted to HPDL for approval; (2) if approved, HPDL pays the customer an amount equal to the anticipated refund, less the amount of HPDL’s fees and Ray’s fees; (3) after the IRS processes the return, the refund amount is paid to HPDL; (4) HPDL retains the fund as repayment for the loan; and (5) Ray then receives his fees from HPDL.

Ray has prepared about 1500 returns. Almost all of the clients were to receive refunds. An examination of about 100 of the returns show that 90 had discrepancies on their Schedule-A, Itemized Deductions, and/or Schedule-C, Profit or Loss From Business, of their returns and had false entries. Those clients ended up owing a substantial amount to the IRS, after admitting that the entries were different than the actual deductions, etc. The clients showed the information that they had submitted to Ray for preparation of their tax returns. Ray had told them that there were IRS regulations that allowed the differing amounts to be reported on their tax returns.

Ray received $ 124,833 in tax preparation payments from his clients in 2012, that were not listed on a Schedule C, Profit or Loss for Business for Ray – Ray did not file a Schedule C when he filed his own tax returns in February 2013. Ray did not have separate bank accounts for his tax preparation business from his personal bank activities. Fees of $101, 833 were paid out to Ray from RAL transactions, according to HPDL’s records. An audit of HPDL’s activities disclosed the deposits which had not been accounted for by Ray.

QUESTIONS: Number your answers to correspond with the question you are answering. Use the appropriate legal terminology and give complete answers.

1. Explain in detail any legal claims anyone has and against whom and why.

2. Explain who should win and why. Also explain what remedy should be awarded.

4 Answers

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