A roundup of our favorite recent tax fraud cases.
Russellville, Ky.: Former preparers Tara L. Mitchell and Mechelle Blankenship have pleaded guilty to conspiring to defraud the U.S. through preparing false tax returns and aiding in the preparation of the false returns.
The two were initially charged in a 21-count grand jury indictment in March. According to the plea agreement, they worked together at Triple J Tax, where Mitchell managed the office and, in 2012, hired and trained Blankenship to prepare returns.
The defendants admitted that between March 2012 and November 2014 they knowingly prepared and e-filed U.S. individual income tax returns, on behalf of themselves and clients of Triple J Tax, that contained statements that they knew were false and fraudulent. The loss to the government was more than $250,000.
The returns stated that clients incurred educational expenses when they had not and falsely claimed unjustified education-related credits.
Mitchell and Blankenship also included fraudulent education credits on their own returns. On or about Jan. 10, 2013, they prepared Mitchell’s 2012 return, fraudulently claiming education expenses of $3,500, resulting in a $950 American Opportunity Credit. On or about April 11, 2013, Mitchell and Blankenship prepared Blankenship’s 2012 return and fraudulently claimed education expenses of $4,000, resulting in a $371 AOC and a $557 education credit.
If convicted, Blankenship could receive up to 41 years in prison, be fined $1.45 million and be required to serve three years of supervised release. Mitchell could be sentenced to up to 29 years in prison, fined $1.05 million and also required to serve three years of supervised release.
Las Vegas: Preparer Roger Linares, 43, has been sentenced to 18 months in prison and three years of supervised release and been ordered to pay some $182,000 restitution for aiding and assisting in the preparation of multiple fraudulent individual income tax returns.
According to the plea agreement, in October 2004 Linares and his wife opened the prep business America Services. By 2010, the business had 11 locations, including seven in Las Vegas and other locations in Nevada and Utah. The couple registered the business in the name of Linares’s wife because Linares did not become a U.S. citizen until approximately 2009.
Linares actively participated in running the day-to-day operations of the business from 2004 to early 2010; the business established a large clientele consisting mostly of Hispanic individuals who spoke little or no English and possessed little tax knowledge.
Linares aided and assisted in the preparation of at least 18 false individual income tax returns without clients’ knowledge that the returns included false information that inflated refunds. Linares benefited from the large volume of customers because he was part-owner of the business and received a substantial portion of the proceeds. Other employees were paid commissions and the more returns they prepared, the more money they earned.
Tax loss to the government for the 2008 and 2009 returns prepared by the defendants was $181,818.
Another defendant charged in the scheme, Sergio Acosta, also pleaded guilty to one count of conspiracy to defraud the U.S, and was sentenced in September to five years of probation and six months of home confinement and was ordered to pay $182,000 restitution.
Mount Pocono, Pa.: Preparer Janice C. Bailey, 49, representing Tax Centers of America, has been arrested for allegedly misappropriating $40,000 from former clients.
Investigation determined that a local resident hired Bailey as her tax preparer in 2007; Bailey continued to prepare the client’s income tax returns through 2012. In July 2013, the client received an insurance cash settlement of $57,318.05 and soon consulted with Bailey about any tax implications. Authorities said Bailey told the client that she did not incur any tax obligations on the $57,318, then told the client that Bailey was investing in a Las Vegas property and asked if the client would give her $40,000 towards that property investment, promising to pay back $50,000 within 18 months.
In August 2013, a contract was signed by Janice Bailey and the client and spouse whereby Bailey received $40,000 for “valuable consideration.” A month later, according to police, the client gave Bailey $40,000 in cash.
From then until January 2015, Bailey allegedly provided the client with no updates or documentation on the investment, though she did promise the client would receive $50,000 by the end of that month. The client told police she didn’t hear from Bailey until June 2015, when the client met Bailey at her office and asked about her money. Authorities said Bailey responded angrily that she did not have the money. At a chance meeting a month later, police said, Bailey responded to the subject “with obscenities, threatening to use the information she had obtained preparing Vidalina's tax returns for nefarious purposes.” Police said Bailey also claimed at that time that she was filing bankruptcy and would not need to return the money.
Investigation determined that Bailey did not invest the funds on behalf of her client, police said.
Bailey has been charged with theft by deception, theft by failure to make required disposition of funds received and receiving stolen property, all third-degree felonies. She has been released on $2,500 bail, with the next hearing scheduled for Nov. 9.
West Palm Beach, Fla.: A federal court has permanently barred Renel Herard, individually and doing business as Herard Tax Services and Herard Security & Training Inc., from preparing federal returns for others.
In February, the government filed suit against Herard and alleged that returns prepared by Herard and his businesses unlawfully understated clients’ income tax liabilities by creating or inflating deductions or fabricating business losses for non-existent businesses, and overstated refunds by falsely claiming tax credits, including education credits, fuel tax credits and medical and child-care expenses.
The government alleged that, beginning with returns he prepared for the 2014 tax year, Herard prepared returns that falsely claimed the Premium Tax Credit.
In addition, the court ordered Herard to publish notice of the injunction in local media and to prominently post a copy of the final injunction in the front window of the defendants’ offices until April 30, 2017. Herard must also turn over to the U.S. a list of all customers for whom he or his businesses prepared returns after Jan. 1, 2015, and provide a copy of the injunction order to anyone with whom he worked to prepare or file returns for others.
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