April 15, 2004
Federal prosecutors have filed suit against the National Audit Defense Network (NADN), claiming it has fraudulently misled about 100,000 taxpayers into taking improper deductions and credits, costing the U.S. Treasury $324 million in lost tax revenue.
The government's suit charges NADN with selling phony home-based Internet businesses under the promise that taxpayers can use them to earn thousands of dollars in tax credits under the Americans with Disabilities Act.
The government said 10,000 people took the $5,000 disability credit and a $5,475 deduction for changes to the Web sites to comply with the disability law, even though only one Web site exists and its total sales commissions averaged $600 a year.
"The scale of this scheme is truly staggering," Internal Revenue Commissioner Mark W. Everson said. "As we've said time and time again, people shouldn't fall prey to schemes and scams. No matter how slick the sales pitch, taxpayers should be wary of anyone promising to eliminate their taxes. There is no secret way to escape paying taxes, either through a home-based business or any other scam."
The government charged that NADN has been cheating both its own customers and the IRS, saying that NADN and and related firms sold bogus Web sites, home-based businesses and incorporation packages that claimed they would save buyers thousands of dollars in taxes.
The lawsuit seeks to bar the companies and four individual defendants from preparing federal income tax returns, and asks the court to order the defendants to turn over their customer lists.
More than two years ago, the Federal Trade Commission brought a complaint against NADN for allegedly failing to honor its money-back guarantee. That case remains in litigation.
