A roundup of our favorite recent tax fraud cases.
Davenport, Iowa: Preparer Gregory Scott Alcala, 43, has pleaded guilty to preparing and presenting a false return, wire fraud and making a bomb threat in and affecting interstate commerce.
According to the plea agreement, in about February 2010 Alcala began operating Alcala Tax Service and beginning two years later and continuing to at least March 2014 he devised a scheme to defraud by filing altered returns. Specifically, he prepared returns for clients and provided them with a copy of the prepared return and told them that he had filed that return with the IRS.
In reality, Alcala did not file that version but instead, unbeknownst to the client, altered the return to inflate the refund. Alcala then filed the unauthorized version of the return and directed the additional refund amount to his bank account. Alcala prepared at least 164 returns that included false or fraudulent information and directed at least a portion of 159 of those refunds to his account.
On or about Dec. 26, 2013, a switchboard operator for Badger Mutual Insurance in Milwaukee received a call from Alcala in Davenport during which Alcala said he was going to send the operator a bomb.
Sentencing is June 8. Preparing and presenting a false tax return is punishable with a maximum of three years of imprisonment and a $100,000 fine. Wire fraud carries a maximum of 20 years and up to a $250,000 fine. Alcala faces a maximum of 10 years and up to a $250,000 fine for making the bomb threat.
Aurora, Colo.: Preparer Kathy Jo Eads, 58, has pleaded guilty to preparing and filing a false income tax return.
Beginning in January 2010 and continuing through April 2013 and conducting business as Money Matters Financial Services, Eads prepared 33 false federal returns for 15 clients that included either a false Schedule C or a false Schedule C-EZ. All 33 returns requested refunds; the IRS paid 28 of them in full and the other five refunds were applied against previous taxes that the taxpayers owed. The 33 false returns resulted in a tax loss of $96,376.
Eads charged her clients varying fees. When one client requested her 2010 refund, Eads suggested that the client cash the check at a nearby check-cashing business; the client declined, and Eads asked, “Where’s my tip?” According to authorities, the client thought the question was a joke and walked out of the office, but Eads followed her into a parking lot and said, “The only reason I put the business on your tax return was because I wanted a thousand dollars out of it.”
Syracuse, N.Y.: Preparer Aundra Johnson, 46, has been charged with felony counts of grand larceny and attempted grand larceny and 18 counts of offering a false instrument for filing.
Johnson, who pleaded not guilty at his arraignment and was released on his own recognizance, is employed by the New York State Department of Motor Vehicles and is also a paid preparer, running Johnson’s Tax Service out of his home.
He is accused of filing false and fraudulent personal income tax returns claiming inflated refunds on behalf of numerous individuals for tax years 2010 through 2013. Johnson allegedly prepared phony returns using false income figures and fabricated income on Schedule Cs and made claims for unjustified claims for refundable credits.
If convicted, he faces up to seven years in prison or more than $20,000 in fines.
West Palm Beach, Fla.: The U.S. has asked a federal court to stop preparer Renel Herard and his companies, Herard Tax Services, a.k.a. Herard Security & Training, and Herard Multi Services Inc. from preparing federal income tax returns for others.
The complaint alleges that Herard has been preparing returns since approximately 2009 and has prepared more than 4,000 for clients since 2011. The complaint also alleges that Herard prepares returns that unlawfully understate tax liabilities and overstate refunds by fabricating or exaggerating deductions and tax credits.
His practices include fabricating Schedule C losses and falsely claiming fuel tax, child care and education credits for taxpayers who did not incur qualified expenses, according to the complaint. The complaint further alleges that beginning with returns he prepared for the 2014 tax year, Herard falsely claimed the Premium Tax Credit.
The government complaint alleges that the loss to the U.S. Treasury may be in the millions of dollars.
Houston: Preparer Felix Martin has been indicted on 18 counts of aiding and assisting in the preparation of false federal income tax returns. The indictment alleges that Martin prepared false and fraudulent individual returns for others for the tax years 2009 and 2010, allegedly using false education and American Opportunity credits as well as false statements regarding business income.
If convicted, he faces a maximum of three years in prison for each count of aiding and assisting in the preparation of false returns, as well as potential fines and restitution.
Dunmore, Pa.: Local resident Diego Rojas, 42, has been indicted for conspiracy to make false claims against the government.
Rojas owned and operated Dunmore Cash Checking, a tax preparation, check-cashing and money transfer business. In 2013, he deposited more than 350 U.S. Treasury checks, at least 250 of which were identified as coming from stolen ID refund fraud activities. The approximate value of these checks was $1.6 million, and each was deposited into a bank account that Rojas owned.
Annapolis, Md.: State comptroller Peter Franchot has suspended processing of electronic and paper returns from 22 private preparers at 28 locations due to a high volume of questionable returns.
The suspicious characteristics included business income reported when taxpayers did not own a business; refund amounts requested that were much higher than previous-year returns; inflated or undocumented business expenses; dependents claimed when taxpayer did not provide 50 percent of support or care; inflated wages and withholding information; and inflated itemized deductions.
The preparers or businesses were:
- In Baltimore, Fachel Tax Service; Phenomenal Tax Service Corp.; TA Income Tax Service; JMD Tax Service; Marcjeze Tax Services; Bodmars Tax Service; MK Tax Services and Investment; Neighborhood Tax Services (a.k.a. Royal Auto Sales N Neighborhood Tax or People Tax Services); Chimex Tax Service; Verita’s Efile Service (also in Greensboro, N.C.); and Jovan LLC.
- Charles Multi Services, Pocomoke City, Md.; Irene’s Taxes and Griffin Financial, both in Oxon Hill, Md.; Swift Pro Tax Service, in Nottingham, Md.; Tax Central USA, in Forest Heights, Md.; J & J Tax Service, in Accokeek, Md.; The Tax Store 101, in Bowie, Md.; and Broadview Advisors and Co., in Silver Spring, Md.
- Swift Tax Service, in Washington; Evaniel Francois, in Naples, Fla.; and Eskindes Accounting and Tax, in Douglasville, Ga.
The latest suspensions follow announcements in the past several weeks that the comptroller halted processing returns from 37 other preparers.