Tax Preparer Admits Preparing False Tax Returns for Expat Clients

A tax preparer who specializes in helping immigrants has pleaded guilty to willfully preparing false tax returns for clients.

Sharif Mahfouz, 49, the owner of Expat Focus Consulting in Brick, N.J., pleaded guilty Thursday to a one-count information charging him with aiding and assisting in the preparation of false tax returns. Mahfouz entered his plea in federal court before U.S. District Judge Joel A. Pisano. 

“While most return preparers provide excellent service to their clients, a few dishonest tax preparers file false and fraudulent returns to defraud the government, the taxpaying public and their own clients,” said Jonathan D. Larsen, acting special agent in charge of IRS-Criminal Investigation’s Newark Field Office, in a statement. “IRS-Criminal Investigation will continue to identify, investigate and recommend prosecution against abusive return preparers in order to protect the integrity of our nation’s tax system.”

Mahfouz was the sole owner and operator of Expat Focus Consulting, a tax prep business that he operated out of his own residence. His clients were primarily expatriated individuals who provided him with their financial information so he could prepare their individual income tax returns. Mahfouz admitted that he prepared false tax returns for some of his clients for tax years 2007 through 2012, by reporting either fabricated or inflated foreign earned income exclusion amounts and foreign tax credits.

He did not tell his clients these refunds were being generated and kept the money for his own personal use, according to prosecutors.

In order to carry out the refund fraud, when Mahfouz prepared and submitted false tax returns claiming refunds on behalf of clients to the IRS, he provided an EFC Bank of America bank account and a mailing address for EFC in Nanuet, N.Y. When the IRS issued refunds based on these false tax returns, the refunds were either directly deposited into the EFC bank account or a refund check was mailed directly to the EFC address in Nanuet, N.Y. Mahfouz had the mail forwarded from the Nanuet address to his residence in Brick, N.J. For the refunds issued by check, Mahfouz forged his clients’ signatures and deposited the checks into the EFC bank account. Mahfouz would then transfer the money from the EFC bank account to his personal bank account.

In some instances, Mahfouz also prepared accurate versions of his clients’ tax returns to show his clients, who reviewed and approved them, according to prosecutors. If the return showed a refund due, Mahfouz advised the client to apply the refund as a credit to the following year’s income taxes. If the return showed a tax due, Mahfouz instructed the client to write a check payable to EFC, which he was supposed to use to pay the IRS on behalf of the client. Instead, Mahfouz used the money for his own personal use.

In total, Mahfouz prepared and submitted to the IRS approximately 26 fraudulent tax returns on behalf of his clients, resulting in a tax loss to the IRS estimated at approximately $1,152,253.

Sentencing is scheduled for January. Mahfouz faces up to three years in prison on each charge and a statutory maximum fine equal to the greatest of either $250,000, twice the gross amount of any gain derived from the offense, or twice the gross amount of any pecuniary loss sustained by any victims of the offense.

“He pled guilty,” said one of Mahfouz’s defense attorneys, Richard Sapinski, vice chair of the Tax Litigation Practice Group at the law firm Sills Cummis & Gross P.C., in Newark, N.J. “He acknowledged that he did something wrong and he needs to make the best of a bad situation and move on with his life. There’s no defense and that’s why he pled guilty. It’s not that he walked away from it.  He said, ‘I did it, I have to cooperate with the government,’ which is what he did. This is a part of the process, and then there’s the sentencing. We hope that the judge will take into account his situation in the sentencing. He’s 49 years old. It’s an error in his judgment, to say the least, and he needs to move on from here. He has the rest of his life ahead of him.”

The investigation was conducted by IRS-Criminal Investigation’s Newark Field Office, under the direction of acting special agent in charge Jonathan D. Larsen and the U.S. Attorney’s Office, under the direction of U.S. Attorney Paul J. Fishman. The government was represented by Assistant U.S. Attorney Sarah Wolfe.

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