BOISE, Idaho — A federal court has barred a Shelley, Idaho, woman from ever preparing federal tax returns for others after finding that she filed fraudulent tax refunds worth more than $168 million.
The Department of Justice says Penny Lea Jones, formerly known as Penny Wardrop, filed false IRS forms under a so-called "redemption" theory scheme. Proponents of the scheme claim taxpayers can use secret Treasury accounts to satisfy their tax liabilities.
Jones declined to file a formal response to the complaint brought against her in federal court; instead, she filed what she called a "truth affidavit" denying the claims, according to the court records.
The federal government filed the civil complaint against Jones in 2009, saying Jones filed false Internal Revenue Service forms on behalf of her clients, requesting hefty refunds based on phony claims of large income tax withholding amounts.
In her truth affidavit, Jones contended in part that neither she nor her clients were liable for income taxes and that the court did not have jurisdiction to enforce income tax laws. But U.S. District Judge Edward Lodge rejected that argument, pointing out that Jones lives in Idaho, operated her tax return business in Idaho, and that the federal courts have jurisdiction over civil matters brought by the U.S. government and concerning federal revenue laws.
"Although the IRS notified her of the frivolousness of her scheme, Ms. Jones continued to prepare tax returns based on such theories," Lodge wrote in his ruling. "In her 'Truth Affidavit,' Ms. Jones argues that 'no "Act of Congress" makes anyone "liable" for income taxes' ... These arguments have long been repeatedly rejected by courts."
Calls made by The Associated Press to a phone number believed to be Jones' were not answered.
Lodge said the government has identified more than 400 tax returns prepared by Jones, claiming more than $168 million in erroneous refunds. Of that amount, some $7 million has actually been paid out to Jones' clients, according to court documents. The judge ordered Jones to provide the government with a list identifying everyone for whom she prepared tax returns in the past three years, and to notify all her customers who had refunds filed under the scheme that she's been permanently barred from preparing tax returns for others.