Jones had operated tax preparation services under the names PMDD Services and Forever Grace. A  co-defendant, John Michael Smith Jr., has also pleaded guilty to one count of filing a false claim for a tax refund. Smith faces a maximum potential sentence of five years in prison and a $250,000 fine plus restitution to the IRS. Court records show Jones used the name Penny Lea Waldrop in her business. In 2010, a federal court barred Jones from preparing federal returns for others.

Jones did not contest the allegations that she was part of a scheme that resulted in the filing of false returns that requested more than $120 million in refunds for 80 clients from 30 states. The group filed more than 380 returns, most for 2008, which reported phony amounts of personal debt obligations as both income and as federal tax withholding, which were filed on form 1099-OID.

In 2009, Jones challenged government's pursuit of an injunction against her with arguments that have been made by others "tax rebels", for example stating that there is no law requiring her to pay income taxes that the court has the power to enforce, along with the form 1099-OID, original issue discount. She filed her claim under what she called a "Truth Affidavit", which attached a memorandum defending the use of the 1099-OID. The IRS said she continued filing returns even after notified they were frivolous.

Smith, a resident of Hidden Hills, Calif., and a former resident of Cincinnati, has admitted that he filed a false 2007 individual income tax return prepared by Jones. He sought a tax refund of $208,312, which the IRS mistakenly paid. Another PMDD Services client, Philip Butcher, formerly of Rogers, Ark., pleaded guilty to one count of filing a false claim for a refund. Butcher filed two tax returns reporting his loans as OID income and tax withholding, claiming tax refunds totaling $1,456,696.

Others who were indicted in December, along with Jones and Smith, were Michael D. Beiter Jr., formerly a resident of Coral Springs, Fla.; David Clum Jr. of Whites Creek, Tenn.; Dale Peters of San Mateo, Calif.; and Laura Barel of Lauderhill, Fla.

Barel and Butcher were indicated earlier last year for her involvement with the scheme. The Justice Department said Barel recruited clients for Jones' companies and received 1.5 percent of the refund amounts while 10 percent went to PMDD and Forever Grace.

The Justice Department is also taking legal action against some of Jones' clients. In May, a Knoxville, Tenn., couple, James and Beverly Beaver, both 67 years old, were indicted for their actions in utilizing Jones and the OID scheme to file their tax returns. The pair sought a $600,000 refund, and the amended tax returns allowed them to receive $193,056 and $202,625 in tax refunds.They paid Jones $59,405 for her services. The Beavers also allegedly tried to hide their assets from IRS collection efforts.