Some of our favorite recent tax fraud cases.
Robert, La.: Preparer Hazel M. McGary, 46, a.k.a. Hazel M. Alexander and Hazel M. Kimble, has been sentenced to 87 months in prison for filing false returns, corruptly endeavoring to obstruct or impede the IRS, and aggravated ID theft. She was also ordered to serve two years of supervised release following her term and to pay $148,673 in restitution to the IRS.
According to court documents, from 2008 through November 2013, McGary owned and operated a series of tax prep businesses under different names, including Just for You Services, Just For Taxes and H&H Unlimited Services, in Hammond, Albany, Baton Rouge and Covington, La. In 2012, her location in Albany operated as a business where clients were permitted to drive to a window to have returns prepared.
As part of her plea agreement, McGary admitted that she prepared and filed false returns that claimed artificially high refunds, primarily by abusing the EITC. Court documents further show that she obtained e-filing numbers from the IRS using the names and Social Security numbers of other individuals to hide her fraud. McGary falsely listed these other individuals’ names and ID numbers on returns she filed, but did not identify herself as the preparer. She further filed at least one false return in her own name on which she failed to include tax prep fees as income.
Flint, Mich.: Preparer Charles Sanders III has received 10 months in prison followed by five months in custody in a community correctional facility and a year of supervised release, and been order to pay $242,052 of restitution to the IRS for preparing and filing of fraudulent returns.
Sanders, who pleaded guilty in June, admitted that he owned and operated SBC Tax Service Corp. and falsely held himself out to be a CPA. For tax years 2008 and 2009, he prepared and submitted to the IRS more than 200 individual income tax returns along with accompanying schedules. An IRS audit of at least 36 of the returns revealed false and fraudulent information regarding such matters as federal fuel tax payments, medical deductions, personal and real property tax deductions, mortgage interest, charitable contributions and unreimbursed employee expenses.
These false items resulted in higher refunds to his clients and a tax loss to the U.S. of some $200,000.
Phenix City, Ala.: Preparers Teresa Floyd and her daughter, Lasondra Davis Miles, have been indicted for involvement in a stolen ID refund-fraud scheme and charged with conspiracy to submit false claims, wire fraud and aggravated ID theft. Floyd was also charged with theft of public money.
According to case papers, Floyd and Davis operated several tax prep businesses, including T & L Tax Service and T & C Used Cars & Tax Service. Floyd and Davis obtained stolen IDs to file more than 900 federal returns that claimed more than $2.5 million in refunds.
The defendants applied for bank products from various financial institutions, which provided to the defendants blank check stock. The products allow a preparer to deduct fees directly from a refund and then print out the remainder of the refund as a check. Floyd and Davis created fictitious IDs and bills to provide to the institutions in an attempt to verify that the returns were filed in the names of legitimate customers.
The defendants caused the fraudulent checks to be cashed at several businesses in Alabama and Georgia. Floyd also deposited fraudulent refund checks into her bank account.
If convicted, the defendants face a maximum of 10 years in prison for the conspiracy to file false claims count, 20 years in prison for each wire fraud count, 10 years in prison for each theft of public money count and a mandatory two years in prison for the aggravated ID theft counts, as well as fines, forfeiture and restitution.
McAllen, Texas: A federal court has permanently barred preparer Melissa Alvarez from preparing returns for others.
The complaint alleged that Alvarez, who agreed to the ban, prepared returns that contained false, improper or inflated deductions or credits, such as the EITC. The complaint also alleged that these activities caused Alvarez’s clients to file returns that unlawfully understated income and tax liabilities and overstated refunds.
The order also requires Alvarez to turn over to the government a list of all clients for whom she prepared federal returns or claims for a refund for tax years 2011 through 2013, and to notify her clients for tax year 2013 of the permanent injunction.
Miramar, Fla.: Preparer Donald Claude, 34, has been sentenced to 40 months in prison to be followed by three years of supervised release, and been ordered to pay $210,120 restitution after pleading guilty to one count of wire fraud and one count of aggravated ID theft.
According to court documents, Claude was the CEO of J&D Tax Services, where he obtained an EFIN that permitted him and co-defendant James Jean-Baptiste to e-file returns in the names of other individuals. Claude also obtained a PTIN that permitted him to identify himself as the preparer on returns e-filed in the names of others.
Claude and Jean-Baptiste obtained the personal ID information of students from an employee of Miami-Dade County Public Schools and used the stolen IDs to file false and fraudulent returns to obtain refunds for their personal use.
Claude and his co-conspirators caused more than $200,000 in false refund claims to be submitted to the IRS from 2009 through 2011.
Jean-Baptiste was charged with one count of conspiracy to commit wire fraud, seven counts of wire fraud and seven counts of aggravated ID theft. He remains at large.
Martinsburg, W.Va.: Local resident Debra Myers, 52, has been convicted after admitting her role in a tax fraud and conspiring to defraud the IRS.
Investigation revealed that she signed five fraudulent returns at the direction of her boyfriend, who is a preparer, and allowed more than $30,000 in improper refunds to be deposited into her bank accounts.
She faces up to 10 years in prison and a fine of up to $250,000. As part of the plea agreement, she agreed to pay $38,843 in restitution.
Poplarville, Miss.: Preparer Emma Jean Raine, 50, has been indicted on charges of bankruptcy fraud, under-reporting her income and preparing false returns involving more than $150,000 in deductions that her clients were ineligible to claim, according to published reports.
Three bankruptcy counts reportedly allege that Raine failed to disclose her income and life insurance proceeds in a bankruptcy claim filed Oct. 23, 2009, and otherwise gave false information from then until Jan. 22, 2010. News reports said that bankruptcy records show that she and her husband claimed debts of more than $714,000 and $95,000 in debts that were in fact exempt; their losses reportedly included property valued at $290,000, a 2002 Lexus and a 2000 Cadillac Deville.
Her husband has not been charged in the related criminal case, reports said, adding that one count alleges that Raine impeded due administration of IRS laws since 2009 and continued to prepare false returns under a different business name after her federal ID number was revoked on April 5, 2011.
Raine reportedly faces 29 counts alleging she prepared returns for 2008, 2009 and 2010 using deductions, expenses and education credits she knew her clients were not entitled to. Two counts reportedly accuse her of falsifying her own returns by failing to report income from her tax prep business for 2010 and 2011.
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