- The Washington Times - Friday, March 15, 2002

The Justice Department yesterday filed suit to stop a Florida man from promoting a tax-refund scheme that was used to under-report tens of millions of dollars in income for nearly 200 clients in 32 states, including actor Wesley Snipes.
The civil suit, filed in the U.S. District Court in Tampa, charges that all the bogus refund claims prepared by Douglas P. Rosile Sr. were based on an erroneous assertion that only income from foreign sources is subject to U.S. income tax.
According to the complaint, the "foreign sources" argument Mr. Rosile used is based on a misreading of the Internal Revenue Code and that a federal appellate court recently upheld a $25,000 penalty against a taxpayer who made the same argument before the U.S. Tax Court.
"The argument that only foreign sources of income are subject to income tax has been rejected out of hand by every judge who has examined it," said Assistant Attorney General Eileen J. O'Connor, who heads the Justice Department's tax division. "Taxpayers who participate in this and other patently frivolous schemes risk substantial civil and criminal penalties.
"The Justice Department is committed to stopping abusive promoters who seek to bilk the U.S. Treasury," she said.
The largest Rosile-prepared bogus refund claim that the IRS detected was an amended income-tax return prepared for Mr. Snipes, whose address was listed on the amended return as "C/O Starr & Co., New York, N.Y."
Mr. Snipes' amended return, signed by Mr. Rosile as the preparer and dated April 14, 2001, requested a $7,360,755 refund of 1997 income taxes paid, based on reducing Mr. Snipes' adjusted gross income to zero.
The complaint said that attached to the Snipes return was a document stating "amounts previously reported not from a taxable source," based on the foreign-source claim used by Mr. Rosile.
The IRS detected Mr. Snipes' claim as bogus and did not pay it.
According to the complaint, Mr. Rosile promoted a tax-refund scheme based on an "absurd misinterpretation" of the tax laws. It said he and other advocates of the foreign-source argument claimed that U.S. citizens and residents were not subject to federal income tax on their wages and other income earned or derived within the United States.
The complaint called Mr. Rosile's position "frivolous" and said if he was not stopped, "his continuing actions may result in his clients incurring frivolous return penalties and other possible civil and criminal sanctions."
Justice Department spokeswoman Gina Talamona said the government complaint charges that Mr. Rosile's bogus claims, had the Internal Revenue Service not detected them, would have resulted in a loss of more than $36 million to the U.S. Treasury.
She said the government has asked the court to order Mr. Rosile to turn over his clients' identities and all related records.


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