A roundup of our favorite recent tax fraud cases.
Nashville, Tenn.: Preparer Tracey Brown, 48, has pleaded guilty to assisting in the preparation of false returns.
According to court documents, Brown operated the prep business Total Tax Services from her residence and admitted that from at least January 2006 through December 2010 she routinely filed false returns on behalf of her clients to inflate their refunds without her clients’ knowledge or permission.
She further admitted that on these false returns she claimed a variety of false items, such as medical expenses, charitable contributions and business losses, with an intended tax loss of some $443,605.
Sentencing is Dec. 21, when Brown faces a maximum three years in prison, as well as a term of supervised release and monetary penalties.
Durham, N.C.: Preparer Reyna Nembiu Montes has received a year and a day in prison for aiding in the preparation of phony returns.
According to court documents, Montes operated the prep business Su Manu Amiga and admitted that she prepared multiple false individual income tax returns for clients, claiming false dependents to generate fraudulent refunds. She also admitted that she failed to disclose the existence of her prep business on her personal income tax returns.
She pleaded guilty on June 26. In addition to serving her prison sentence, Montes was ordered to serve one year of supervised release and to pay $115,287 restitution to the IRS.
San Francisco: Preparer Josiah Larkin, 40, has been convicted of conspiracy to file false claims and presenting false claims to the IRS.
Evidence at trial showed that Larkin set up a storefront in San Francisco in December of 2012 and, although not authorized to do so, identified the shop as a Colbert Ball Tax franchise. He also advertised “Get Up to $600 - Even if Unemployed, On SSA or SSI.”
Larkin prepared false returns for clients, reporting that they had no income and that they paid $4,000 in qualified education expenses to attend college to generate refunds based on the American Opportunity Tax Credit. Larkin took approximately half of the fraudulently obtained refunds and gave the remaining half to his clients.
He was indicted in January 2015 and charged with one count of conspiracy to file false federal income tax returns as well as multiple counts of filing false claims and aiding and abetting filing false claims. A jury found Larkin guilty of the conspiracy charge and five counts of filing false claims.
Sentencing is Jan. 13, 2017. The maximum for conspiracy to file false claims is 10 years of imprisonment and a fine of $250,000. The maximum for presenting false claims to an agency of the U.S. is five years in prison and a fine of $250,000, plus restitution if appropriate.
New Orleans: Former preparer Donald Stewart, 60, has been sentenced to three years in prison and a year of supervised release and been ordered to pay $577,202.97 restitution to the IRS.
According to case documents, Stewart previously pleaded guilty to one count of theft of public funds and one count of aggravated ID theft.
From approximately 2001 through 2008, Stewart acted as a preparer under the business names Stewart’s Tax Service and Stewart LTD before the IRS suspended his EFIN. From January 2011 through February 2012, Stewart admitted causing federal refunds in others’ names of others to be e-deposited into bank accounts that he controlled. Stewart also admitted to cashing or depositing U.S. Treasury checks made payable to others, which represented federal income tax refunds totaling approximately $539,393, at a bank in the New Orleans area.
In addition, Stewart obtained and used the means of identification of another individual, including their Social Security number, during and in relation to wire fraud, when he filed a false return using another individual’s name and stole the resulting refund.
LaVergne, Tenn.: Preparer Michelle Theus, 42, has pleaded guilty to assisting in the preparation of false returns.
According to court documents, Theus, operating under the name Cole Tax Services, admitted that from 2009 through 2012 she filed false returns on behalf of her clients for the 2008 through 2011 tax years. Without her clients’ knowledge she routinely reported false items on the returns, such as false dependents and false education and childcare credits, to inflate refunds.
Theus further admitted that she often prepared and provided the client with an accurate return and then prepared and filed a false return in the client’s name. In most cases, Theus directed the IRS to split the fraudulently inflated refunds into separate bank accounts, having the portion expected by the client deposited into the clients’ bank accounts and having the inflated portion of the refund deposited into one of her or her family members’ accounts.
She concealed her wrongdoing from the IRS and her clients by not signing the tax returns she prepared, which gave the IRS the impression that the clients prepared the returns themselves, and by listing her and her family members’ addresses on the returns to divert IRS correspondence away from the clients.
Theus admitted that she prepared some 206 returns with an intended tax loss of about $450,959.
She also admitted that she prepared and filed false 2009 and 2010 income tax returns for herself that underreported income from her prep business; Theus failed to report more than $95,000 in income for 2009 and 2010, which resulted in additional tax loss of $37,275.
Sentencing is Jan. 11, when she faces a maximum of three years in prison, as well as a term of supervised release and monetary penalties.
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