Some of our favorite recent tax fraud cases.
Riverdale, Ga.: Preparer Ethel Elaine Daniels, 46, has been sentenced to 16 years in prison to be followed by three years of supervised release and been ordered to pay $12 million restitution for filing false returns that claimed over $20 million in refunds, including filing false returns in the names of more than 1,000 stolen ID victims.
According to authorities, Daniels owned and operated two tax prep businesses in the Atlanta area: Elaine Taxes in College Park, Ga., and Elaine Taxes #2, in Riverdale. She carried out two schemes from both tax businesses.
From November 2010 through May 2013, Daniels and co-conspirators obtained personal ID information, including names and Social Security numbers, of thousands of individuals without their knowledge or consent by recruiting “runners” to bring in lists of the stolen ID information. Then she and her cohorts e-filed fraudulent returns in the victims’ names.
The returns contained fabricated information such as fake claimed-income amounts, business losses and refunds due. Daniels and her co-conspirators then split the fraudulent refunds, and also filed fraudulent returns on behalf of individuals who actually did visit Elaine Taxes’ offices.
Daniels trained new employees to prepare the returns with false information to ensure a refund.
In all, Daniels’ conspiracy obtained more than $20 million in fraudulent refunds. Daniels used the loot on a gambling trip to Biloxi, Miss., for her extended family, spending sprees for thousands of dollars in clothes and electronics, and on cars for family and friends.
She was convicted in May on charges of conspiracy to commit wire fraud, wire fraud and aggravated ID theft, after she pleaded guilty.
Glendale, Ariz.: Preparer Latoya Nivea Morehead, 33, has received 70 months of prison after being found guilty of 34 criminal counts, including five of wire fraud, 26 of making false statements to the IRS and three counts of aggravated ID theft. She was also ordered to pay $409,000 restitution to the federal government.
Evidence showed that Morehead, from 2006 through 2009, prepared and submitted more than 100 returns that contained false and fraudulent information, most reporting untruthful W-2 information, including false earnings and withholdings, that resulted in hundreds of thousands of dollars in fraudulent refunds.
In many instances, she fabricated the optimal amount of false earnings and withholdings, maximizing the EITC. In some instances, she prepared returns using the identities of taxpayers without their knowledge or consent.
Morehead committed these crimes while working another tax prep business in the Phoenix area and while doing business as Latoya’s Tax Service.
Morehead also failed to report business income on her own returns and lied about expenses associated with her businesses, creating a fictitious loss to offset her reported tax earnings and reduce her taxes.
Laredo, Texas: Preparer Maricela Hernandez has been arrested on charges of aiding and assisting in the preparation and presentation of false returns.
According to the indictment, Hernandez filed false returns on behalf of clients for tax years 2008 and 2009, allegedly placing false First-Time Homebuyer Credits on returns for 2008. For most taxpayers involved, the false credit resulted in an increase of $7,500 in the refund, according to the charges.
Other false entries alleged in the indictment include education credits, general business credits, residential energy efficiency property credits, and Schedule A deductions for unreimbursed employee expenses, vehicle expenses, child-care expenses and gambling losses, all of which resulted in exceptionally large refunds.
If convicted, Hernandez faces up to three years in prison on each count, as well as a possible $250,000 fine.
San Francisco: The San Francisco City Attorney has filed a lawsuit seeking to compensate victims of, and shut down the local offices of, Instant Tax Service, according to published reports.
Instant Tax clients in the Bay Area reportedly say the company pocketed large portions of their returns and deducted hidden fees. News outlets say that through commercials and marketing Instant Tax promised clients “fast cash and big refunds” and that some clients were given cash loans up front for anywhere from $100 to $500.
The civil lawsuit reportedly maintains that Instant Tax withheld “exorbitant fees from taxpayers’ refunds without the taxpayers’ knowledge or consent” and alleges that Instant Tax employees deposited clients’ refunds into an account the company controlled and then deducted fees and issued separate, smaller checks to clients.
The suit also accuses the local Instant Tax owner of targeting low-income neighborhoods in nine California areas, including San Francisco, Los Angeles and San Diego, among other claims, according to reports.
The civil litigation seeks refunds for all California customers, as well as civil penalties, and demands the shutdown of Instant Tax, reports said.
Late last year, a federal judge in Ohio ordered Instant Tax Service closed (Accounting Today) after a court found that ITS Financial LLC, the company’s formal name, engaged in abusive and fraudulent practices.
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