Did you use Archie’s Tax and Accounting Service in Jamaica (Queens), New York? If you did, you’re likely to be getting a call from the IRS soon. The proprietors of Archie’s, Archie and Theodore Pugh, have been permanently barred from preparing tax returns.
What did the Pughs do? They used the “Claim of Right” doctrine to zero out taxpayers’ wages. The Claim of Right doctrine is an actual deduction. It occurs when you have income in one year and then find out that you must repay the income in a later year. In that case, you can deduct the income in that later year.
Of course, you’re likely a couple of steps ahead of me. The Claim of Right doctrine only is applicable if you have to repay income. If you don’t have to repay income then it doesn’t apply. (Personally, I’ve never seen this situation.) The Pughs used the doctrine on most of the returns they prepared, costing the government over $2 million.
Yes, it sounds too good to be true, and it is. If you’re ever told of a method to deduct all of your income, check with a reputable tax professional. You’ll likely find it’s as phony as a $3 bill. Another good resource is the Tax Protester FAQ, which does include the Claim or Right doctrine.
In any case, if you happened to use the Pughs, you will likely have the IRS examine your return to see if it is correct or not. The IRS doesn’t know if the Pugh’s clients knew of the fraud. Just remember, if it sounds too good to be true it probably is.
Tags: BozoTaxPreparer