Some of our favorite recent tax fraud cases.
Washington: Preparers and sisters-in-law Angela Miller and Lee Lynwood, of Georgia, have pleaded guilty to conspiring to defraud the federal government by filing false returns.
According to court documents, from at least January 2008 through at least March 2010, the pair operated a tax prep business and conspired to inflate clients’ federal refunds by manipulating the returns to reflect false business income or loss amounts and to claim undeserved deductions and credits such as the First-Time Homebuyer Credit.
Miller and Lynwood also took steps to continue their scheme by impeding IRS efforts to shut down their ability to e-file. In May 2008, the IRS notified Miller and Lynwood that the EFIN for their business, A&L Tax Services, was being revoked. The two then had an acquaintance apply for another EFIN in her name, which Miller and Lynwood used to continue to file fraudulent returns and conceal their preparation from the IRS. They also changed the name of their business to B&F Tax Services and set up a bank account for the business.
Their false returns claimed more than $130,000 in refunds. They each face a maximum of five years in prison and three years of supervised release and a fine of up to $250,000.
Jackson, Mich.: Preparer Richard Alan Williams has been found guilty of 20 counts of filing false returns.
Williams was found guilty of three counts of subscribing and filing false personal income tax returns for himself and 17 counts of assisting in the preparation and filing of false returns for clients.
Testimony and evidence established that Williams, who owned and operated Imperial Tax Service, prepared and filed false returns for individuals for the 2004, 2006 and 2007 tax years. These returns claimed false business expenses or losses without clients’ knowledge, the falsified items inflating refunds by either reducing clients’ taxable income with phony business expense losses or increasing the EITC they were entitled to by adding phony business income.
Williams also declared that his own income was only $1 in 2004, $2 in 2006 and $10 in 2007 when in fact he earned substantial tax preparation fees during those years.
A number of his clients have since been audited by the IRS and have been directed to pay back the excess refunds they received for those years, along with penalties and interest.
Sentencing is June 5. The maximum penalty for each offense is up to three years of imprisonment, a $250,000 fine and a year of supervised release.
Belleville, Ill.: Preparer Doressa Braggs, 46, has pleaded guilty to 10 counts of making false claims against the U.S. through the filing of federal returns and one count of aggravated ID theft.
As part of the plea, Braggs acknowledged that beginning in 2010 and continuing through the summer of 2012, she prepared and submitted false returns to obtain undeserved IRS refunds.
An IRS investigation based on IP addresses, wage amounts, federal withholdings, employers, occupations, EFINs and bank accounts revealed a refund scheme. The false returns prepared by Braggs utilized W-2s that claimed false wages and false federal withholdings.
In some cases, she falsified W-2s from her clients to overstate wages and federal income tax withholding. In other cases, she fabricated W-2s to report fictitious wages and federal withholding. Many of her returns also claimed false Schedule C expenses/losses. Braggs typically listed such professions as hairstylist or beautician, among similar professions, on the Schedule Cs that she filed with her clients’ returns. She also did not list herself in the paid preparer section of the returns.
Sentencing is May 8, when she faces a maximum of up to 50 years in prison for the false claims and a mandatory consecutive two-year sentence for the aggravated ID theft. Braggs also faces up to three years of supervised release, a $250,000 fine and repayment of restitution.
Dayton, Ohio: A federal court has entered a permanent injunction against preparer Rodger S. Thomas Sr. that requires him to sign tax returns and furnish his PTIN on returns he prepares, as well as retain a list or copy of each of the returns that he prepares.
The court also barred him from preparing documents that he knows will result in an understatement of clients’ tax liabilities.
According to the complaint, from 2006 through 2009 Thomas allegedly prepared returns that claimed false business deductions on Schedule Cs and phony deductions on Schedule As. He also allegedly prepared false 1099s to inflate clients’ income and maximize their EITCs.
The complaint further alleged that Thomas then reported these payments on the Schedule C of his own income tax returns as expenses incurred by his business, Ramjet Express, and that he failed to sign or affix a PTIN to many returns that he prepared, negotiated refund checks by filing false 1040s for clients and then deposited the funds into his personal bank account.
In 2012, Thomas pleaded guilty to one count of making a false statement on a return and one count of aiding and assisting in the filing of a false return. He was subsequently sentenced to 24 months in prison and released in March 2014.
The order requires Thomas to contact and notify all clients for whom he prepared a federal return or a claim for refund for since Jan. 1, 2006.
