IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF INDIANA 

UNITED STATES OF AMERICA, ) 

 ) 

 Plaintiff, ) 

 ) 

v. ) Case No. 

 ) 

DARREN A. DUNHAM, ) 

 ) 

 Defendant. ) 

 ) 

COMPLAINT FOR PERMANENT INJUNCTION 

The United States brings this action to enjoin Darren A. Dunham, any entity through 

which he conducts business, and all persons and entities in active concert or participation with 

him, from 

(a) Preparing, filing, or assisting in the preparation or filing of any federal tax 

return, amended return, or other related document or form for any other 

person or entity; 

(b) Providing any tax advice or services for compensation, including preparing or 

filing returns, representing or appearing on behalf of any person, other than 

himself, before the Internal Revenue Service; 

(c) Guaranteeing any person the payment of a federal tax refund or the allowance 

of any tax credit, or engaging in conduct subject to penalty under 26 U.S.C. 

§ 6695, i.e., failing to exercise due diligence in determining eligibility for the 

Earned Income Tax Credit (“EITC”), or endorsing or otherwise negotiating, 

directly or through an agent, any check issued to a taxpayer and made in 

respect of taxes; and 

(d) Engaging in any other conduct that substantially interferes with the proper 

administration and enforcement of the internal revenue laws through the 

preparation or filing of tax returns. 

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Jurisdiction and Venue 

1. This action has been requested by the Chief Counsel of the Internal Revenue Service, a 

delegate of the Secretary of Treasury, and commenced at the direction of a delegate of the 

Attorney General under §§ 7402 and 7407 of the Internal Revenue Code, 26 U.S.C. (the 

“Code”). 

2. Jurisdiction is conferred on this Court by 28 U.S.C. §§ 1340 and 1345 and Code 

§ 7402(a). 

3. Venue is proper in this Court under 28 U.S.C. § 1391(b) because a substantial part of 

the actions giving rise to this suit took place in this district. 

Defendant and his Improper Activities 

4. Darren A. Dunham is currently incarcerated in Terre Haute, Indiana at the Terre Haute 

Federal Correctional Institution. 

5. Dunham is a tax return preparer as defined by Code § 7701(a) (36). He prepared other 

persons’ federal tax returns for compensation during at least 2010 and 2011. 

6. In 2010, Dunham began conducting a tax return preparation business named D.A.D’s. 

Income Tax Service, a sole proprietorship he operated out of Lafayette Indiana, Chicago Illinois, 

Kokomo, Indiana, and Indianapolis, Indiana. 

7. Prior to running his own tax preparation business, Dunham was the Director of Home 

with Hope (“HWH”), a drug rehabilitation center in Lafayette, Indiana. Dunham solicited 

customers for his tax preparation business by recruiting rehabilitation patients of HWH, 

knocking on doors in low-income apartment complexes, and through word-of-mouth. 

8. During at least 2010 and 2011, Dunham knowingly prepared false federal income tax 

returns for customers by reporting fictitious income he claimed his customers earned from 

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babysitting or housekeeping. Dunham fabricated that income in order to fraudulently claim 

earned income tax credits for his customers that resulted in them wrongly receiving tax refunds. 

9. On January 17, 2012, Dunham pled guilty in this Court in Case No. 2:11 CR 99 to five 

counts of aiding and assisting in the preparation of materially false federal income tax returns in 

violation of Code § 7206(2). This criminal conduct occurred in Lafayette, Indiana. Dunham 

also admitted to assisting in filing false returns in the Southern District of Indiana. 

10. Dunham admitted in his plea agreement that his improper return practice resulted in a 

tax loss between $400,000 and $1 million. 

11. Due to Dunham’s fraudulent conduct, his customers are liable for the erroneous 

refunds that were issued to them and may be liable for penalties and interest as a result. 

12. Without an injunction, Dunham is likely to continue preparing false or fraudulent tax 

returns causing harm to his customers, the government, and the general public. An injunction 

will serve the public interest. 

13. Pursuant to Dunham’s plea agreement, he consented to being permanently enjoined 

under §§ 7402 and 7407 from preparing or filing federal tax returns for anyone other than 

himself. 

14. After pleading guilty to assisting in the preparation of false returns and subsequently 

being released on bond, Dunham’s bond was revoked and he was detained because he continued 

his criminal behavior—filing false tax returns for others. Dunham was subsequently sentenced 

to 120 months in prison and one year of supervised release for his criminal activity of assisting 

others in filing false tax returns. He is scheduled to be released from prison on December 27, 

2020. 

15. The IRS has listed “return preparer fraud” on its annual “dirty dozen” tax scams to 

avoid: http://www.irs.gov/uac/Newsroom/IRS-Releases-the-Dirty-Dozen-Tax-Scams-for-2013. 

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Count I – Injunction under Code § 7407

16. The United States incorporates by reference the allegations contained in paragraphs 1 

through 15. 

17. Code § 7407 authorizes a court to enjoin a tax return preparer if, inter alia, the court 

finds that the return preparer has: (1) guaranteed the payment of any tax refund or the allowance 

of any tax credit or (2) engaged in conduct subject to penalty under Code § 6695 and that 

injunctive relief is appropriate to prevent the recurrence of the conduct. 

18. In Dunham’s plea agreement, he admitted that he convinced many of his customers 

to file federal tax returns by “promising that they would receive a refund.” Dunham’s promise or 

guarantee of tax refunds to his customers constitutes prohibited conduct under § 7407. 

19. Code § 6695(f) imposes a penalty on a return preparer who endorses or otherwise 

negotiates, directly or through an agent, any check issued to a taxpayer and made in respect of 

taxes. 

20. The tax refunds of Dunham’s customers, issued by the IRS as a result of the returns 

falsely prepared by Dunham, were deposited in a bank account controlled by Dunham. After 

those funds were deposited, Dunham gave his customers a portion of the money and kept the 

remainder. This conduct by Dunham violates § 6695(f). 

21. Code § 6695(g) penalizes return preparers who fail to exercise due diligence in 

determining eligibility for the EITC. 

22. Dunham manipulated the EITC, which is for the benefit of working people who have 

low to moderate income. He repeatedly prepared returns knowingly using fabricated figures in 

order to take advantage of the EITC and ultimately result in erroneous tax refunds. Dunham’s 

actions violate § 6695(g). 

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23. After pleading guilty to assisting in preparing false returns, Dunham continued to 

engage in that criminal conduct. 

24. Injunctive relief is appropriate to prevent this misconduct because, absent an 

injunction, Dunham is likely to continue preparing false federal income tax returns while 

incarcerated and/or after his release from prison. Given that Dunham engaged in criminal 

conduct even after his plea, the continual repeated nature of his conduct, and the fact that he 

preyed on customers, an injunction backed by the court’s contempt powers is necessary and 

appropriate to ensure Dunham obeys the law and the United States has a remedy if he violates it. 

25. Dunham will likely continue to interfere with the proper administration of the tax 

laws even if the particular behavior described in this Complaint is enjoined. Accordingly, 

Dunham should be permanently enjoined under Code § 7407 from acting as a tax return preparer. 

Count II - Injunction under Code § 7402 

26. The United States incorporates by reference the allegations contained in paragraphs 1 

through 25. 

27. Code § 7402(a) authorizes courts to issue injunctions as may be necessary or 

appropriate to enforce the internal revenue laws. 

28. Dunham, through the actions described above, has engaged in conduct that 

substantially interferes with the administration and enforcement of the internal revenue laws, and 

is likely to continue to engage in such conduct unless enjoined by this Court. His conduct is 

causing irreparable injury to the United States and an injunction under Code § 7402(a) is 

necessary and appropriate. 

29. The Court should order injunctive relief under Code § 7402(a). 

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 WHEREFORE, the United States requests the following relief: 

A. The Court find that Dunham has guaranteed the payment of federal tax refunds and 

that injunctive relief is appropriate under Code § 7407 to prevent recurrence of that conduct, and 

that injunctive relief limited to prohibiting such conduct would not be sufficient to prevent 

Dunham’s interference with the proper administration of the Internal Revenue Code; 

B. The Court find that Dunham has continually and repeatedly engaged in conduct 

subject to penalty under Code § 6695, that injunctive relief against him and anyone acting in 

concert with him is appropriate under Code § 7407 to prevent recurrence of that conduct, and 

that injunctive relief limited to prohibiting such conduct would not be sufficient to prevent 

Dunham’s interference with the proper administration of the Internal Revenue Code; 

C. The Court enter a permanent injunction prohibiting Dunham, and any entity through 

which he conducts business and all persons and entities in active concert or participation with 

him, from directly or indirectly: 

1. Preparing, filing, or assisting in the preparation or filing of any federal tax 

return, amended return, or other related document or form for any other 

person or entity; 

2. Providing any tax advice or services for compensation, including preparing or 

filing returns, representing or appearing on behalf of any person, other than 

himself, before the Internal Revenue Service; 

3. Guaranteeing any person the payment of a federal tax refund or the allowance 

of any tax credit, or engaging in conduct subject to penalty under 26 U.S.C. 

§ 6695, i.e., failing to exercise due diligence in determining eligibility for the 

Earned Income Tax Credit (“EITC”) or endorsing or otherwise negotiating, 

directly or through an agent, any check issued to a taxpayer and made in 

respect of taxes; and 

4. Engaging in any other conduct that substantially interferes with the proper 

administration and enforcement of the internal revenue laws through the 

preparation or filing of tax returns. 

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D. The Court allow the United States full post-judgment discovery to monitor compliance 

with the injunction; and 

 F. The Court grants the United States such other and further relief as the Court deems 

appropriate. 

Dated: June 20, 2014 

 Respectfully submitted, 

 TAMARA W. ASHFORD 

 Acting Assistant Attorney General 

 U.S. Department of Justice 

Tax Division 

 /s/ LaQuita Taylor-Phillips 

 LaQuita Taylor-Phillips 

Trial Attorney 

Tax Division 

U.S. Department of Justice 

Post Office Box 7238 

Ben Franklin Station 

 Washington, D.C. 20044 

Telephone: (202) 305-7945 

 Facsimile: (202) 514-6770 

 LaQuita.Taylor-Phillips@usdoj.gov

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