Somalis stung by tax scheme
BY RICK LINSK, TONI COLEMAN and LESLIE BROOKS SUZUKAMO
Pioneer Press
Thousands of Somali-born taxpayers in the Twin Cities are under government scrutiny and may have to give back tax refunds because of suspicious returns filled out by a handful of unlicensed tax preparers, state and federal officials said Friday.
Eleven tax preparers are suspected of attempting to increase their clients' refunds, state officials said, including a husband and wife whose homes and office were raided by federal agents in April.
Shock waves have rippled through the Somali community since investigators notified community leaders about the case at a meeting last month.
"It is a betrayal of their own community," Jerry McClure, director of individual income taxes for the Minnesota Revenue Department, said of the tax preparers under suspicion. "They're really harming their own community."
State and federal officials said some of the tax-reducing methods that the preparers used began raising red flags in February. McClure said the state caught about 3,500 questionable returns and stopped payment on about $3 million in unwarranted refunds. But many more — possibly thousands — may have slipped through the system.
At a news conference Friday, Omar Jamal, executive director of the Somali Justice Advocacy Center, issued a public plea to Somali immigrants not to panic and not to spend their tax refunds until they check with state and federal authorities.
At least one preparer is the subject of a federal criminal investigation. Yahya Muhumed Shakal, a Hennepin County employee, worked on the side as a tax preparer while on medical leave in early 2003 and 2004.
According to an affidavit filed in federal court by a special agent for the Internal Revenue Service, Shakal listed dependents who were not children or even related to the taxpayers; said taxpayers had business income that did not exist; and claimed a credit for business-related fuel purchases for taxpayers who did not own businesses.
Shakal improperly claimed an earned income tax credit for about two-thirds of the nearly 1,200 tax returns he prepared during the last two years, according to the affidavit. He also claimed the business fuel tax credit for 41 percent of the returns prepared last year and 99 percent of those he filed this year, officials said.
Shakal is a welfare worker for Hennepin County. The affidavit said he used the welfare office and his government e-mail account in connection with his tax-preparation business. His wife, Sado Muhumed Ibrahim, also was part of the venture, officials said.
In April, investigators searched Shakal's Salama Tax Return office, located in the Karmel Square Somali Mall on Pillsbury Avenue in Minneapolis, and removed tax returns, computer disks, customer lists, money-wiring documents, a locked safe and more. They also removed records from Shakal's home and car in St. Louis Park.
Shakal, who has not been charged with a crime, could not be reached for comment.
Authorities say the investigation is not targeting individual taxpayers, who apparently were unaware of the alleged scheme.
But many of those taxpayers, such as Abdulkadir Mohamed, 54, and his wife, Jamad Nur, 40, of Minneapolis, still worry what impact the probe might have on them.
On the advice of a tax preparer they found in one of the several bazaarlike malls filled with small Somali businesses, the couple filed separate tax returns, but both claimed head-of-household status even though they live together with their six children.
Mohamed, who works weekdays at a day care center and drives a cab on weekends, said he didn't realize anything was wrong until his promised tax refund never arrived. Then came a letter from the Revenue Department telling him his refund was frozen and he had been audited.
Still, the couple was more puzzled than frightened by the audit notice.
"If you have an idea of what is the rule and what happened, you can be scared," said Nur, her folded arms hidden under an emerald-green hijab and robe. "But we don't know what is the rule, so we were not scared."
Mohamed Farah, a Revenue Department outreach worker and fellow Somali who is helping the couple refile their tax return, said they'll still get a refund, but not as much as their first preparer promised. "They had no idea of the tax system in this country."
The couple declined to identify the person who prepared their taxes. But they said most preparers had offices in Somali business strips and solicited customers by handing out business cards.
Authorities say abuses by tax preparers are nothing new. But the Minnesota investigation could be one of the biggest in recent memory.
Earlier this month, a Detroit woman was sentenced to 27 months in prison for loading numerous tax returns with false charitable contributions. In April, a Washington woman received an 18-month prison term for filing hundreds of false returns containing bogus dependency exemptions. A California man in April was sentenced to five years in prison for creating bogus business losses on his clients' returns.
"We say in general that with tax preparers, you want to be as careful picking them as you would with a doctor or lawyer, because they're going to have a lot of personal information about you, and so that you yourself don't get in trouble with the IRS," said Janet Shoup, a special agent with the St. Paul office of the IRS.
Tax preparers in Minnesota need not be licensed. Certified public accountants, licensed accountants and a third category of professionals known as enrolled agents all must meet certain standards. But anyone can call himself a tax preparer.
"This is what happens when you don't license people," McClure said. "Almost anyone can do it, and that contributes to this problem."
Immigrants are especially vulnerable to abuses. The Revenue Department has had outreach workers involved with Hmong, Hispanic and Vietnamese communities for some time, but Farah was only recently hired to educate Somalis on tax issues.
John P. James, a tax lawyer and former state revenue commissioner in Gov. Rudy Perpich's administration, said Friday he doubts there was much, if any, criminal intent on the part of the tax preparers.
Some may have lacked training and made mistakes, said James, who represents some of the preparers and their clients. Preparers also may have promised better refunds than their competitors as a means of attracting more clients.
"People were going to the tax preparers and asking, 'How much can you get me?' If that is the basis on what you're competing on, you're headed for disaster," James said. "This is a massive screw-up, but I don't think there was criminal intent."
