Some of our favorite recent cases of tax fraud.
Hacienda Heights, Calif.: Preparer Adel Alsibydes Cotton, 61, has been sentenced to 27 months in prison and three years of supervised release following imprisonment for preparing false returns that claimed more than $2.3 million in false refunds with the IRS.
In a related case, taxpayer Fernando Tavares-Hernandez, 45, of Riverside, Calif., was sentenced to 21 months in custody (15 months in prison and six months in a half-way house) and two years of supervised release for filing two false claims for federal refunds totaling over $1 million.
According to court records, Adel Cotton pleaded guilty to filing four false claims for false refunds last June 11, the date his trial was to begin. Fernando Tavares-Hernandez was found guilty of filing a false claim for a false refund on September 5. Both Adel Cotton, who filed some 10 false OID-based tax returns, and Fernando Tavares-Hernandez, who filed false returns for himself, were involved in the widespread Old Quest Tax scheme, which sought over $250 million in false refunds.
From 2005 to 2007, Fernando Tavares-Hernandez reported an income of $15,000 to $22,000 to the IRS on his returns, yet fraudulently purchased a $500,000 home in Riverside County, California.
Subsequent to foreclosure on that house, Fernando Tavares-Hernandez turned to tax fraud with the Old Quest Scheme after learning that a relative had filed a similar fraudulent return requesting a refund of more than $700,000. Evidence at trial proved that Tavares-Hernandez filed a false 2008 federal income tax return and an amended 2008 false federal return together claiming refunds totaling $1,049,323.
At the same time, Cotton was also orchestrating a separate fraud where he used stolen Social Security numbers to file false returns claiming refunds that he then kept. Additionally, the government presented evidence that with his credit application to purchase a new Mercedes-Benz, Cotton attached a fake pay stub showing that he made approximately $15,000 per month, when in fact he never worked for the company stated.
Chattanoga, Tenn.: Dedric Landrum, 40, has been sentenced to 18 months in prison for preparing a false and fraudulent income tax return. According to case documents, Landrum fraudulently obtained refunds by inflating deductions and credits on returns he prepared. Upon release from prison, he will be subject to a year of supervised release. He was also ordered to pay $148,678 in restitution to the IRS.
Riverside, Calif.: Authorities have arrested six of 10 area preparers and their associates who are charged with fraudulently seeking millions of dollars in tax refunds, according to published reports. According to reports, named in the indictments are: Nancy L. Hilton, 68, owner and operator of the two tax businesses; Denise Gray, 53, a preparer and manager for the Hilton tax prep business; Barbara J. Connor, 56, a preparer for Hilton; Curtis D. Lowe, 27, and Kawaski D. Morris, 34, who both worked with Nancy Hilton to allegedly file false returns; and Michael J. White, 54, Staff Voundy II, 51, and Vincent Voundy, 46, who all allegedly filed false returns in their own names. Three others linked to the scheme pleaded guilty last fall to federal tax fraud violations, according to reports.
Minneapolis: Preparer John William Zastrow, 64, has been charged with 28 tax-related felonies, including four counts of ID theft and 24 counts of filing a false return.
According to the criminal complaint, Zastrow was working as a preparer when 92 deposits containing clients’ refunds were issued to a bank account he controlled. Zastrow allegedly listed his own address and account number on the returns of clients without their knowledge or consent. The returns also included false information to inflate refunds.
Investigators said that between 2008 and 2012, Zastrow kept more than $31,000 of clients’ refund money.
Each false tax return charge carries a maximum five years in prison and up to a $10,000 fine. The ID theft charges each carry a maximum 10 years in prison and up to a $20,000 fine.
Wilmington, Del.: The Department of Justice has filed to enjoin preparer Carmen J. Martinez and her business, CJM Bookkeeping and Taxes LLC, from preparing federal returns.
According to the complaint, Martinez and her business have prepared more than 7,800 tax returns since 2010 and allegedly understated clients’ tax liabilities using false deductions, including unqualified dependents, the Child Tax Credit, the Additional Child Tax Credit and tax rate benefits derived from improper filing status as head of household or married filing jointly. Martinez’s clients improperly received average refunds of $5,000 each year.
The complaint alleges that Martinez’s activities between 2010 and 2013 cost as much as $25 million in lost revenue.
Chicago: The federal government has filed to bar preparer Barbara L. Garrett from preparing federal returns for others.
The civil injunction suit alleges that Garrett, while working at multiple tax prep businesses including Instant Tax Service, Preferred Financial and Income Tax Solutions, claimed fraudulent deductions and credits on clients’ federal returns. According to the complaint, she prepared returns that falsely claimed deductions from fake businesses and in one case she allegedly prepared two returns for a Chicago Transit Authority bus driver that reported over $25,000 in combined losses from a non-existent transportation company.
Garrett also allegedly prepared returns that included other false or improper deductions for unreimbursed employee expenses, charitable contributions, medical expenses, childcare expenses, property taxes and education expenses. One example cited includes a fake claim for childcare expenses which falsely identified Garrett as the childcare provider. In another example she allegedly claimed more than $13,000 in fictitious medical expenses and more than $2,200 in bogus property tax deductions on the same return.