Tax Fraud Blotter: Very Organized Crime


Some of our favorite recent tax fraud cases:

Atlanta: An ID-theft ring has reportedly stolen the identities of hundreds of area residents, chiefly by stealing computers from the offices of local preparers, and filed millions of dollars’ worth of phony returns, according to published reports. Three preparers’ offices were robbed before last tax season, according to reports, and returns later submitted from those offices were rejected, with many of the fraudulent returns having the new tax preparer listed with the same address -- a “flag” the IRS should have caught, according to one preparer interviewed, who added, “When a taxpayer's income suddenly drops from $200,000 to $30,000, they had no children last year but suddenly have several, or are getting big refunds instead of owing money, the IRS should flag the return before paying.”

Investigators have released several surveillance photos showing at least one man and one woman believed to be suspects. All of the fraudulent returns were tied back to a post office box in Marietta, which was opened using a fake identity, according to reports, and where investigators found evidence of three bank accounts, also opened with fake IDs, used to deposit the fraudulent refunds. Investigators said the multiple layers of fraud and phony IDs may make this case especially hard to break.

Ypsilanti, Mich.: Preparer Frank Sumpter, 42, has pleaded guilty to aiding and assisting in the preparation of false income tax returns. According to the indictment, Sumpter, who operated Maxsum Express Tax Services since approximately 2006, prepared federal returns for 2005 to 2008 that he knew were fraudulent and were to be filed in the name of various taxpayers and in his name. During this time Sumpter created for clients false Schedule A credits and created Schedule C businesses.

The government asserted that 25 false 1040s were prepared by Sumpter for his clients, resulting in a tax loss of approximately $104,000 in refunds ranging from $1,200 to more than $17,000 each. Also included in the plea agreement is that Sumpter filed his own false individual returns for 2007 and 2008 where he omitted his tax preparation business and the income it generated. He also falsely claimed the First-Time Home Buyer’s Credit on his 2008 return for a home he never owned or purchased. Sumpter’s false personal returns caused a tax loss of approximately $85,000.

Sentencing is set for November 21. The maximum penalty for aiding and assisting in the preparation of false returns is imprisonment of not more than three years and a $250,000 fine.

Long Beach, Calif.: Preparer and Enrolled Agent Rathana Ung, 41, former director and officer of Lim’s Income Tax and Lim’s Tax Inc., has reportedly pleaded guilty to aiding in the preparation of a false 2008 federal income tax return. Published reports said that according to the plea agreement, Ung filed 1040s containing false deductions and false business losses, knowing that the taxpayers for whom the returns were filed were not entitled to claim such deductions.

Between 2006 and 2010, the agreement continues, Ung filed federal returns for numerous clients claiming false deductions for mileage, M&E and other unreimbursed employee business expenses. Some of the returns also reportedly contained false Schedule Cs and at least one return contained a false deduction for tuition and fees. Ung admitted that she prepared false federal returns to obtain more clients by maintaining a reputation in the community as a preparer who would secure large refunds for her clients, reports said.

As part of the plea agreement, Ung agreed to make full restitution to the government, and reportedly agreed that the losses were at least $103,736. She faces a maximum sentence of three years of imprisonment at sentencing, which is scheduled for October 7.

Waterloo, Iowa: Preparer Victoria A. Jones has been charged for allegedly helping prepare a false return, according to published reports. She is charged with one count of aiding in the preparation of a fraudulent return after authorities reportedly alleged that she helped a couple identified only by the initials R.D. and L.D. submit a false return to the IRS for 2008. The return claimed the filers had $67,211 in itemized deductions when they had significantly less. Arraignment was scheduled for July 9, reports said.

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