Some of our favorite recent tax fraud cases.
Aurora, Colo.: Preparer Keith G. Smith, 54, has been sentenced to nine months in prison and ordered to pay $128,893.87 restitution for filing and assisting in preparing false returns.
According to information in the indictment and plea agreement, beginning in 1987 Smith told some of his clients that he formerly worked for the IRS and conducted audits, seized assets and carried a weapon. In fact, for about four years Smith worked in an administrative position at the IRS; he was not a criminal investigator, did not conduct audits and did not seize assets.
In 2000, the IRS assessed Smith a civil penalty because of underreported tax liabilities on returns he prepared for clients. Smith continued to prepare returns but no longer signed them as preparer, instead indicating on the returns that the taxpayers had prepared them.
Among the returns that Smith prepared for the years 2006 through 2010 were 40 false returns requesting refunds of $715 to $7,124, all of which the IRS paid. Many of the returns falsely claimed deductions for medical and dental expenses, home mortgage interest payments, education expenses and charitable contributions. The false statements on the returns resulted in a tax loss totaling $138,148.
In addition, Smith falsified his personal income tax returns for years 2008 and 2009.
He was indicted in March and pled guilty in September.
Tracy, Calif.: The Justice Department has asked a federal court to permanently bar Vida Farley and AJV Bookkeeping Inc. from preparing returns for others.
According to the complaint, the government alleges that for the past several years the defendants engaged in a pattern of claiming false education credits and false or grossly inflated Schedule A deductions for charitable contributions, unreimbursed employee business expenses and other expenses on behalf of clients.
According to the suit, Farley has been a preparer for more than 20 years and since 2008 operated a tax prep service through AJV Bookkeeping Inc. The defendants’ claiming false deductions and education credits resulted in significant lost tax revenues as they understated liabilities and claimed improper refunds, according to the suit.
The suit alleges that the IRS examined more than 200 returns the defendants prepared between 2010 and 2014 and found that more than 96% of these returns resulted in adjustments to tax, with the proposed deficiencies averaging roughly $4,000 per return. The complaint also alleges that the defendants prepared more than 17,000 returns in those years.
Laughlin, Nev.: Preparer Maria Garcia, 51, has received 18 months in prison and one year of probation, and been ordered to pay $9,602 restitution to the IRS after pleading guilty to filing false returns.
According to the plea agreement, Garcia admitted to preparing a false return that claimed two nieces as dependents despite knowing that the client did not provide the financial support required to claim the dependents. She also admitted that if the case went to trial the government could prove that she was responsible for a tax loss of $109,906.
According to the indictment, Garcia used the EFINs and PTINs of other preparers to file clients’ returns after the IRS revoked her EFIN for filing multiple fraudulent returns. She also, according to the indictment, offered to pay other preparers for use of their EFINs and PTINs, and then sent to the IRS fraudulent 1040s for the calendar years 2007 through 2011; these returns claimed unjustified refunds.
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