A roundup of our favorite recent tax fraud cases.
Lakewood, Colo.: Preparer Hieu Mattison, 52, has been indicted for allegedly preparing and filing false income tax returns. From February 2010 through May 2012, Mattison falsely prepared and filed with the IRS two dozen 1040s for various taxpayers that were allegedly materially false and fraudulent, including false income and tax credits to inflate refunds.
Glen Burnie, Md.: Preparer Christine Little, 43, has been sentenced to a year and a day in prison, followed by one year of supervised release, for aiding in the preparation of false tax returns.
According to her plea agreement, Little identified herself as the CEO of TNT Taxes. From February to June 2011, she recruited clients, purporting to specialize in business and individual taxes and “amendments.”
Little admitted that she prepared 29 false federal returns; she placed information on the returns that did not reflect the information from clients, falsely inflated withholdings and real estate taxes; and caused the returns to contain false personal property taxes, home mortgage interest and charitable deductions.
In April 2011, an undercover federal agent requested that Little prepare his federal return. The return prepared by Little did not accurately reflect the information the agent supplied, but instead included false deductions and inflated withholding amounts, resulting in a fraudulent refund claim of more than $11,000.
Little admitted that the loss resulting from the false returns she filed exceeded $330,000.
Charlotte, N.C.: Preparer Malik Shropshire, 43, has been sentenced to 51 months in prison for filing false returns and lying on a loan application. He was also ordered to serve three years under court supervision following his prison term, and to pay $582,933 restitution to the IRS and $7,749.24 to a credit union he defrauded.
According to court documents, Shropshire aided and assisted in the preparation of hundreds of false tax returns that were filed with the IRS. Records show that his sister, Nkhenge Shropshire, owned the tax prep firm Tax Connections and that from 2010 through 2012, Malik Shropshire conspired with his sister and others to execute a fraud scheme involving filing of fraudulent returns.
Records indicate that Malik Shropshire recruited individuals to have their returns prepared and filed through his sister’s business and elsewhere, promising large refunds. He obtained the fraudulent refunds by filing returns that contained fraudulent information, including false Schedule C businesses, false dependents and false refundable education credits.
According to court records, the tax loss associated with the fraudulent returns is $582,933.
In addition, Shropshire, assisted by his sister, lied on loan applications and was able to obtain a credit card and a car loan using fake Social Security numbers, false income information and false employment information. Subsequently, he defaulted both on the auto loan and the credit card, after he maxed out its $10,000 limit. Last June, Malik Shropshire pleaded guilty to conspiracy to defraud the IRS and to making false statements on a loan application.
Rosenhayn, N.J.: Preparer Noemi Pender, 57, has admitted her role in a conspiracy to prepare bogus income tax returns for her clients.
According to documents filed in this case and statements in court, Pender operated Pender Tax Services, and for the tax years 2007 through 2011 she and Grace Garrett, 63, of Pittsgrove, N.J., sought to increase referrals, enhance their business and make money preparing and filing income tax returns based on false information.
They used a number of fraudulent practices, including falsely claiming a filer was a “head of household,” inventing and inflating deductions, creating fictitious dependents and creating false credits for education and childcare. The bogus returns cost the government more than $340,000.
The conspiracy charge to which Pender pleaded guilty carries a maximum of five years in prison and a $250,000 fine. Sentencing is June 10. Last May, Garrett pleaded guilty to her role; her sentencing is March 22.
Denver: A federal judge has ordered preparer Gerardo Herrera held in custody until the latter closes his tax prep business.
Herrera was found in contempt for violating an order that permanently barred him from professional tax preparation. The U.S. alleged last fall that for at least three years Herrera and his firm systematically and repeatedly submitted false income tax returns by reporting extra dependents, claiming bogus deductions, and using improper tactics to understate tax liability. In January, a judge issued an order of permanent injunction against Herrera, prohibiting him from preparing tax returns.
The injunction also directed Herrera to provide a list of his customers to the federal government, notify his customers of the injunction and file a sworn statement attesting that he had complied within 45 days of the injunction. The U.S. asked the court to hold Herrera in contempt for his failure to comply with these provisions and alleged that he continued to operate two tax prep offices.
After hearing testimony from two IRS witnesses who visited Herrera’s offices, the judge found Herrera in contempt and ordered him held in custody until he purges his contempt by, among other things, notifying all his prior customers of the injunction, providing a list of his customers to the U.S., surrendering his PTIN and posting a copy of the injunction in his place of business.
Indianapolis: Preparer David R. Franklin, 43, has pleaded guilty to three counts of procuring the preparation of false federal income tax returns.
Franklin owned and operated more than 20 Instant Tax Service stores and in August 2013 a U.S. district judge granted a permanent injunction against Franklin and ITS that prohibited both from preparing, filing or assisting in the preparation or filing of any federal return.
IRS investigation revealed that Franklin trained and directed his employee preparers regarding the preparation of federal returns, advising employees to prepare fraudulent federal returns for multiple clients from 2010 through 2012. Franklin directed employees to prepare Schedule Cs reporting inflated business income or losses for unauthorized earned income credits and refunds for clients.
More than 2,300 false federal income tax returns were filed by ITS between 2010 and 2012 for a tax loss of $1,501,000. As part of Franklin’s plea agreement, he will be ordered to pay full restitution.
Each offense is punishable by a maximum of three years of imprisonment, a $250,000 fine and one year of supervised release following any term of imprisonment. Sentencing is scheduled for Oct. 14, 2016.
New York: Peter Cisyk, 48, of Staten Island, has been charged with five felony counts of offering a false instrument for filing, five felony counts of grand larceny and five felony counts of criminal tax fraud.
Cisyk, who pleaded not guilty, is charged in connection with filing fraudulent returns for fellow New York City Department of Sanitation employees while working as a supervisor for the agency.
Cisyk was a New York City employee from 1995 to 2015 and also worked as a paid tax preparer from 2009 to 2015. He prepared returns from a location on Staten Island and also allegedly prepared returns for several of his coworkers at his Department of Sanitation work location.
A New York State investigation alleges that from 2010 to 2015, Cisyk violated criminal tax fraud statutes by filing returns with exaggerated deductions, unsubstantiated gifts to charities and undocumented business expenses.
If convicted, Cisyk could be sentenced to up to seven years in prison on the grand larceny and criminal tax fraud charges and up to four years on the other charges. He also faces fines of up to $5,000 per return.