Some of our favorite recent tax fraud cases.
East St. Louis, Ill.: Five local preparers have been indicted for conspiring to submit false claims to the United States and preparing false federal income tax returns.
Charged in the 22-count indictment were Edric A. Russell, 34; Lakesha R. Wilson, 27; Melissa L. Wiley, 33; Tanesa L. Beverly, 31; and Pierre J. Carter, 32. Each worked as a preparer at a tax prep business known as Tax King; the false returns were for the 2011 and the 2012 tax years.
The indictment charges that these preparers falsified items on clients’ returns to inflate refunds, allegedly creating false business income and Schedule Cs and falsifying wages to qualify clients for larger EITCs; fabricating education expenses so clients qualified for an American Opportunity Education Credit; and falsifying information regarding fuel taxes to qualify clients for a federal fuel tax credit.
Tax King charged clients approximately $400 to $650; the five preparers typically also requested cash “tips” ranging from some $100 to $1,000.
The charge of conspiring to submit false claims carries a maximum of 10 years in prison and a $250,000 fine. Each charge of preparing false income tax returns carries a maximum of three years in prison and a fine of $250,000.
Silver Spring, Md.: The Justice Department has asked a federal court to permanently bar preparer Komi Gbotcho, d/b/a Eplanet, Eplanet LLP, Eplanet Corp., and Eplanete Corp., from preparing returns for others.
According to the complaint, the IRS estimates that Gbotcho, through Eplanet, prepared more than 1,300 returns for the 2010 through 2013 tax years. The suit alleges that Gbotcho prepared returns claiming such false or inflated deductions as deductions for personal property rental expenses, unreimbursed employee business expenses and home improvement expenses without some clients’ knowledge.
The suit contends that the phony deductions inflated refunds for Gbotcho’s clients and that the losses to the federal government could reach $3.4 million.
Cincinnati: Preparer Shacretta Williams, 38, has been sentenced to two years in prison and three years of supervisory release and been ordered to pay $748,843.80 in restitution to the IRS for conspiring to file false claims for income tax refunds.
According to court documents, between January 2011 and March 2011, Williams conspired with Ruth Benton with whom she previously worked at several tax prep businesses including Jackson Hewitt, Ohio Instant Tax and Your Tax Service to prepare and file false claims for refunds as employees at Jackson Hewitt. There they created fictitious W-2s and included non-qualifying children as dependents to maximize the EITC and the Additional Child Tax Credit.
At Ohio Instant Tax, they modified their scheme to include false self-employment income. At Your Tax Service, which Benton owned and where Williams worked, they prepared and filed false claims by not only including false dependents and self-employment income but also by claiming fictitious qualifying education expenses to receive the refundable education tax credits. In addition, Williams prepared false federal returns that contained fraudulent information that resulted in inflated refunds.
After the IRS accepted a return, Williams called clients to come to her office to pick up their refund checks. When the clients arrived, Williams or another employee at Your Tax Service escorted the clients to a local check-cashing business and after the check was cashed Williams or the employee took a portion of the refund in cash, even though the $310 tax prep fee had already been deducted from the client’s refund check. The remaining amount was then given to the clients.
As part of the conspiracy for the 2010 tax year, Williams, Benton and others prepared and filed at least 260 false claims for refunds with the IRS. Loss to the IRS associated with this conspiracy was $1,088,931 (for restitution, the loss to the IRS was calculated at $748,843.80).
On Oct. 7, Benton, 37, also of Cincinnati, received 27 months in prison and three years of supervised release and was ordered to pay $748,843.80 in restitution.
Long Beach, N.Y.: CPA James Lee, 63, has been arrested and charged with two counts of felony grand larceny, scheming to defraud, and three counts of offering a false instrument for filing.
Authorities said that since 2007, Lee handled all business-related taxes for a client’s three restaurants. In 2013, the IRS and state tax authorities contacted Lee’s client regarding underreporting of sales and underpayment of sales taxes. At this time, a new accountant was hired and obtained copies of what was filed with New York State. The new accountant discovered that copies of sales tax returns given to the client were correctly calculated and that the client’s checks for those tax amounts due were cashed by Lee and deposited into Lee’s corporate account.
The new accountant also discovered that the sales tax returns actually filed by Lee with the state indicated sales tax due in amounts that were tens of thousands of dollars lower than the amounts indicated on the copies of the returns provided by Lee to his client. Investigation further showed that Lee paid the lower sales tax amounts indicated on the false tax returns using his corporate checks.
Learning of the state audit, the client confronted Lee who then issued a check to the client for $71,000 from another one of Lee’s corporate accounts. When that check bounced, the client again confronted Lee and received three new checks totaling $39,574; the client did not cash these checks based on Lee’s prior conduct.
Upon comparison of the client’s negotiated checks to Lee and the monies received by New York state tax authorities by Lee, a discrepancy of $117,131.80 was discovered.
If convicted of the top charge, Lee faces a maximum 15 years in prison.
Worcester and Hyde Park, Mass.: Preparer Yaw Aboagye-Marfo, 42, has pleaded guilty to two counts of filing false claims with the IRS. He was charged in August with filing false returns that claimed refunds to which his clients were not entitled and, according to the indictment, filed false returns on his own behalf that claimed similar refunds.
According to the indictment, Aboagye-Marfo owned and operated People’s Choice Tax Service and National Taxpert, where he used other individuals to recruit taxpayers for their personal ID and related information so he could use the information to file false returns. In some cases, Aboagye-Marfo obtained only the personal ID information of individual taxpayers and filed returns claiming false Schedule C businesses regardless of the individual’s income or employment status. In some instances, he also reported false dependents.
Aboagye-Marfo charged a fee for his services and he also claimed a portion of the false tax refund proceeds for himself.
Sentencing is May 15, when Aboagye-Marfo faces a maximum of five years in prison and a $250,000 fine for each count.
