Some of our favorite recent tax fraud cases.
Trenton, N.J.: Preparers Kamal J. James, a.k.a. Bro. Messiah Aziz El, 34, of Seaford, Del., and Crystal G. Hawkins, a.k.a. Sis. Crystal Gabri El, 39, of Laurel, Del., have been sentenced in connection with filing fraudulent returns on behalf of inmates at various New Jersey prisons.
James received 96 months in prison and Hawkins 48 months. They were previously charged in a superseding indictment with one count of conspiracy, 16 counts of making false claims and three counts of mail fraud.
According to the indictment and evidence, between October 2011 and October 2013, James and Hawkins operated Release Refunds, a purported tax prep business previously based in Brick, N.J., and in Seaford through which they solicited current and former New Jersey prison inmates as clients and then filed fraudulent returns on their behalf. (The company is no longer in business.)
James and Hawkins sent Release Refunds flyers to inmates at various prisons and halfway houses offering prep services; the pair asked inmates interested in Release Refunds’ services to provide basic ID information and to sign income tax returns and other IRS documents but not to include any information about their income or withholdings. James and Hawkins then filled in the missing income information on the return forms, fabricating the inmates’ earnings to trigger fraudulent and inflated refunds.
An undercover investigator posing as an inmate in a New Jersey prison submitted a completed Release Refunds form and sent it to James and Hawkins. They then sent back blank income tax forms and other IRS documents and instructions to sign the documents. James and Hawkins requested no financial information from the undercover agent before preparing three fraudulent returns to be filed on behalf of the agent for tax years 2010 through 2012. The fraudulent returns generated several thousand dollars in refunds and a $1,485 fee for the defendants.
In addition to the prison terms, both James and Hawkins were sentenced to three years of supervised release and ordered to pay $570,897 restitution.
Nashville, Tenn.: Preparer Tracey Brown has been charged with six counts of assisting in the preparation of false returns, two counts of filing false personal returns and one count of obstructing the due administration of the internal revenue laws.
According to the indictment, Brown operated the tax prep business Total Tax Services from her residence and allegedly between 2006 and 2010 filed false returns on behalf of her clients. On these returns, she claimed various fraudulent deductions including medical expenses, charitable contributions and unreimbursed employee expenses.
After one of her clients was audited, Brown provided false documentation to the IRS and is also alleged to have under-reported the gross receipts and sales figures on her personal income tax returns for 2008 and 2009.
If convicted, Brown faces a maximum of three years in prison for each count, as well as substantial monetary penalties, supervised release and restitution.
De Kalb, Miss.: The Justice Department seeks to permanently bar preparer Christopher Chamberlin from preparing returns for anyone other than himself.
According to the complaint, Chamberlin, sole proprietor of C&T Services LLC, allegedly prepared returns that fraudulently overstated refunds by reporting fictitious or exaggerated expenses on Schedules C and F. The falsely claimed expenses generated losses that purportedly qualified Chamberlin’s clients to receive or increase the EITC or to otherwise create or maximize refunds.
Based on audit adjustments the IRS made to returns prepared and filed by Chamberlin for tax years 2012 and 2013, the suit alleges that his conduct may have cost the government more than $1 million for those years alone.
Orlando, Fla.: The U.S. has filed to bar preparers Patrick Clarke, of Hallandale Beach, Fla., and Ruby Rodriguez from owning, operating or franchising a tax prep business and preparing returns for others.
According to the complaint, which also requests that the court order Clarke and Rodriguez to return fees they obtained through the alleged fraud, Clarke owns and operates Tax MD, a tax prep business with stores in Florida and North Carolina. Rodriguez allegedly manages one of Clarke’s stores located in Orlando.
According to the complaint, Clarke’s preparers, including Rodriguez, targeted primarily low- to moderate-income customers with misleading advertisements, prepared and filed fraudulent returns to inflate refunds, and profited through “unconscionable, exorbitant and often undisclosed fees.” The complaint alleges that Clarke’s preparers engaged in such activity as falsely claiming the EITC; claiming improper filing statuses; fabricating businesses and related business income and expenses; and fabricating Schedule A deductions, including for unreimbursed employee business expenses.
According to the complaint, Clarke was previously a franchisee of LBS Tax Services; this is one of 10 lawsuits that the Justice Department has filed in Florida against former LBS franchisees or related individuals.
Washington, D.C.: Preparer Joann Little, 59, of Suitland, Md., has been charged with 35 counts of aiding in the preparation of false returns.
According to the indictment, Little worked at Instant Tax Service, now operating under the name Speedy Tax Service. The indictment alleges that Little prepared false personal income tax returns for clients for tax years 2009 through 2014. She is alleged to have attached schedules that reported inflated or fictitious deductions, which resulted in fraudulently claimed income tax refunds.
If convicted, she faces a maximum of three years in prison and a fine of up to $250,000 on each count.
Memphis, Tenn.: Preparer Stephanie Edmond and her husband, preparer Kevin Williams, have been barred from the Tax Factory and the Tax Firm preparation businesses and face sanctions after a federal judge found that they violated previous court orders, according to news reports.
The court reportedly found that Edmond and the Tax Factory violated a previous court order by having Williams, using a third tax preparer’s EFIN, operate the Tax Firm. Other violations included not properly reporting to a monitor as ordered, reports added.
In addition to being barred from preparing federal returns, sanctions include paying to the U.S. government all fees collected since Jan. 15, 2016, for preparing returns, reports said.
Espanola, N.M.: Deborah Quintana, 58, has been indicted on 28 counts of tax fraud and eight counts of attempting to evade or defeat tax.
Quintana allegedly prepared 28 false personal income tax returns for clients. Between $14,000 and $70,000 is owed to the state of New Mexico for those false returns; she also owes $21,000 for failing to pay gross receipts tax on her prep business.
These charges carry a maximum sentence of 55-½ years in prison and a fine of $180,000.
Miami: The Justice Department is suing to stop tax preparer Rose M. Chazulle and her company, RMC Professional Services Corp., from preparing federal returns for others.
According to the complaint, Chazulle prepared federal income tax returns for clients that falsely claimed refundable credits, including the American Opportunity Tax Credit and the Lifetime Learning Credit. She included the false education credits for clients who did not incur educational costs and otherwise didn’t qualify for this credit, the complaint alleges.
In addition, the complaint states that Chazulle prepared returns that falsely claimed fuel tax credits for clients who had no businesses of any kind; business losses even though the clients didn’t have a business; and wages described as household help income to falsely claim a larger EITC.
The complaint estimates that Chazulle’s conduct cost the U.S. more than $14 million for the tax years 2011 to 2013.
