A roundup of some of our favorite recent tax fraud cases.
Minnetonka, Minn.: Preparer John Zastrow, 65, has pleaded guilty to a count of ID theft with eight or more victims in a scheme that netted him more than $25,000 and to six felony counts of failure to file taxes, which allowed him to evade at least $50,000 in Minnesota corporate and individual income taxes.
The investigation began when a couple told local police in October 2012 that they had learned that Zastrow prepared their return but then had the federal and state refunds sent to his house and never turned the money over to them. Further investigation revealed that Zastrow controlled an account for Arbordale Development Corp. and that records showed 92 deposits of refunds meant for other people deposited into the account.
According to the authorities, Zastrow used clients’ information to divert the refunds into his account and often changed their tax information to get a larger refund. One victim told investigators that she stopped using Zastrow after 2007, yet he managed to get a property tax refund in her name for 2008.
Authorities also said Zastrow did not file any tax returns for himself, Arbordale Development Co. or another of his businesses for at least the last six years.
Zastrow has continued to work as a tax preparer even though his license to perform public accounting was revoked in 1993 for an embezzlement scheme, which was resolved in civil court. In 1994, he was convicted of felony unlawful expenditure of charitable gambling funds for which he was placed on probation for three years.
Sentencing is June 12, when he faces an 18-month sentence on the failure to file charges and 105 months on the ID theft. Instead of serving the additional 105 months, he will be on probation for 10 years.
Hixson, Tenn.: Preparer Kevin Mendell Walker, 44, has been indicted on nine counts of aiding and assisting in the preparation and presentation of false federal income tax returns.
According to the indictment, from 2009 through 2012 Walker, owner of the tax prep business K&R Enterprises, allegedly helped file nine federal returns claiming undeserved deductions and false credits for education, business expenses, and hobby and investment expenses.
If convicted, he faces up to three years in prison and a fine of up to $250,000.
Philadelphia: Preparer David Nixon, 50, has been convicted of 63 counts of fraud related to the preparation of federal income tax returns.
Nixon, owner of Economy Tax Services, prepared false federal returns for his clients for tax years 2007 through 2009. These returns included credits for children, the EITC, tuition and fees and residential energy efficiency, as well as incorrect filing statuses and false or inflated Schedule A deductions for charitable contributions and employee business expenses.
The jury also heard a recorded meeting between Nixon and an undercover IRS agent during which Nixon said, “I cheated to get [other taxpayers] two, three thousand,” “I had a 99.9% record of people who’ve got refunds,” and “My rule of thumb, let me get you some money before I get mine.”
The scheme defrauded the IRS of more than $200,000.
Sentencing is July 7, when Nixon faces 33 to 41 months in prison, a fine of up to $21 million, up to one year of supervised release and a special assessment of $6,300.
Country Clubs Hills, Ill.: Preparer David A. Brown, 47, has been charged with 27 counts of wire fraud, 33 counts of filing false claims and four counts of filing false income tax returns.
Brown, who owned and operated the tax prep business Tax Professional Consultant Agency Inc., in Chicago, allegedly prepared and filed returns on behalf of clients that falsely claimed business losses, casualty and theft losses, and Schedule A deductions, in addition to false claims of entitlement to the EITC and education credits for the 2008 through 2012 tax years. He is also charged with filing false individual tax returns on his own behalf for tax years 2010 through 2013.
Each count of wire fraud carries a maximum of 20 years in prison, each count of filing a false claim a sentence of five years, each count of filing a false tax return a sentence of three years, and all counts carry a maximum fine of $250,000 or twice the gross gain to the defendant or loss to the government.
Trussville, Ala.: Preparer Lugenia L. “Gigi” Conner, 32, has been sentenced to six months in prison and six months of home confinement for preparing fraudulent returns for herself and others in a Tarrant, Ala., business that she ran with her sister.
Connor, who pleaded guilty in January, was sentenced on five counts of preparing fraudulent returns and one count of making a false return. She was also ordered to pay $56,908 restitution to the IRS. She reports to prison June 12.
Last year, a federal grand jury indicted Conner and her sister, Kaneshia L. “Kiki” Conner-Goodgame, 35, of Birmingham, Ala., on charges that they worked together to prepare fraudulent returns for the 2008 tax year.
Conner-Goodgame pleaded guilty in January to two counts of preparing fraudulent returns and one count of making a false return. Her sentencing is May 27.
Both owned and operated Taxes N More, where they inflated refunds for clients by falsifying information submitted on 2008 returns. The sisters claimed the First-Time Home Buyer's Credit, for instance, knowing that these credits were undeserved.
They prepared third-party returns claiming itemized deductions or business expenses that clients had neither provided information for nor were entitled to receive and assisted taxpayers with buying and selling dependents. The pair also created and submitted 2008 personal returns on which they claimed the homebuyers’ credit despite knowing they were ineligible.
Hillside, N.J.: Preparer Darlene Covington, 31, has been arrested after being indicted and charged with 24 counts of aiding and abetting in the filing of false returns.
According to case documents and statements in court, Covington worked as a preparer for KCJ Financial Corp., a tax prep business in Irvington, N.J., where during 2009 and 2010 she filed 24 returns for tax years 2008 and 2009 using false information and personal ID information without the knowledge of clients named on the returns.
Covington then applied for RALs from financial institutions for each of the fraudulent refunds and kept a portion of each loan she secured. The refunds were given to a third party.
The charges each carry a maximum of three years in prison and a $250,000 fine.
Lockport, Ill.: Preparer Tiffany Eichelberger-Myers, 32, formerly of Lockport, has been charged with two counts of willfully assisting in the preparation of false income tax returns.
Eichelberger-Myers worked as a preparer at Shelby Investment LLC, and managed a branch location that did business under the name Tiff’s Taxes, authorities said. Case papers allege that she fraudulently obtained over $1.1 million in refunds for clients for tax years 2010 through 2012 by falsely claiming, among other things, business losses and education expenses.
Each count carries a maximum of three years in prison and a maximum fine of $250,000 or twice the gross gain to the defendant or loss to the government.
